Amazon’s marketing worked: Here’s why

Want to gain customer input as you design a product? Some managers convene focus groups to find out what customers want.

Not so fast, says Bernhard Schroeder, a San Diego-based marketing expert. He thinks focus groups are overrated.

“In my 20 years’ experience, I cannot recall a time when focus groups or customer surveys were used to design or determine final products,” he says. “Can 12 people really determine the fate of a product or service?”

In the mid-1990s, Amazon hired Schroeder’s firm to provide marketing expertise. Rather than use a focus group, Schroeder researched the early adopters who were buying books online via Amazon’s website.

Then he explored how the core user base could expand outward in concentric circles to include a broader range of customers. He concluded that the next wave of customers who would flock to Amazon enjoyed reading daily newspapers and books. They traveled frequently, lived mostly on the coasts and generated above-average household income.

Schroeder recommended to Jeff Bezos, Amazon’s founder, that the company invest in heavy print advertising and launch a public relations campaign to foster word-of-mouth interest. Schroeder told Bezos online advertising wasn’t the best way to reach the next level of customer.

Schroeder devised a marketing strategy by getting to know Amazon’s existing customers and predicting who would constitute its future customers. This worked out better than asking for advice from a sampling of Amazon fans.

— Adapted from Fail Fast or Win Big, Bernhard Schroeder, AMACOM.