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Sunday, Jan. 6, 2008 at 7:06 pm

Should You Cancel All Your Advertising?

By Jeffrey Eisenberg
January 6th, 2008

Jeff BezosIn February 2003, Amazon.com canceled all their advertising and put that money towards free shipping as a word of mouth strategy. Many thought Jeff Bezos was crazy and that Amazon.com would never turn a profit. In 2007 they were solidly profitable with over $15 billion in revenues. Bezos knew that marketers used to get paid to make promises the business had no intention of keeping.

He understood that, in an increasingly transparent environment, being truly customer focused would matter more than telling customers about how great your service was.

Recently, Joe Nocera of The New York Times told millions of people that Amazon puts customers first in his part article, part testimonial, part morality tale, “Put Buyers First? What A Concept.” You should read it in full but here are a few excerpts:

“They care about having the lowest prices, having vast selection, so they have choice, and getting the products to customers fast,” [Mr. Bezos] said. “And the reason I’m so obsessed with these drivers of the customer experience is that I believe that the success we have had over the past 12 years has been driven exclusively by that customer experience. We are not great advertisers. So we start with customers, figure out what they want, and figure out how to get it to them.”

Anybody who has spent any time around Mr. Bezos knows that this is not just some line he throws out for public consumption. It has been the guiding principle behind Amazon since it began.

[...] Amazon says it has somewhere on the order of 72 million active customers, who, in the last quarter, were spending an average of $184 a year on the site. That’s up from $150 or so the year before. Amazon’s return customer business is off the charts. According to Forrester Research, 52 percent of people who shop online say they do their product research on Amazon. That is an astounding number.

[...] Indeed, in a presentation to analysts in late November, the company’s chief financial officer, Thomas J. Szkutak, showed one slide that read, “Over $600 Million in Forgone Shipping Revenue.” And that was just for one year.

Wall Street, however, has never placed much value in Mr. Bezos’ emphasis on customers. What he has viewed as money well spent — building customer loyalty — many investors saw as giving away money that should have gone to the bottom line.

[...] There is simply no question that Mr. Bezos’s obsession with his customers — and the long term — has paid off, even if he had to take some hits to the stock price along the way. Surely, it was worth it. As for me, the $500 favor the company did for me this Christmas will surely rebound in additional business down the line. Why would I ever shop anywhere else online?

Clearly, it was worthwhile for Amazon to cancel its advertising.

Am I advocating that you cancel your ad budget? Perhaps. How are your products, service and customer experience doing?

Your customers’ delight matters even more tomorrow than it did yesterday, especially online.

When a visitor comes to your website, will they brag to their friends about what they bought and who they bought it from, or will it be somebody else they rave about?

Can you tell me why they shouldn’t brag about you, your products, and your service? After all, it’s the customer experience that matters. So why aren’t they buying?

Do you need help figuring out why they don’t buy from you? We can’t fix your products or services but we can help you improve your online customer experience, increase your conversion rates and help you understand your customers better.

Add Your Comments

Comments (26)

  1. Great post Jeffrey. back to basics. There are rules we have to remember.

    -Marketing is not advertising. It may include advertising but its not advertising.
    -Everything your customers see, hear or read from you, about you, and about them in relation to you is marketing. Every interaction relating to your relationship, no matter how small is marketing.

    New advertising bridges advertising & entertainment. It’s not ‘we’ll be back with more soap operas after these ads’ so watch the ads and you can have some more entertainment. If you stick to the corporate line, you lose your permission to speak. If you speak back to customers you get positive exposure. It doesn’t matter if you paid for it directly or generated it some other way.

    I just read a post by a happy father that got excellent service from Amazon after a $500 package got lost- all before christmas. How much would you pay for that kind of exposure? Where would you go to get it?

  2. [...] was a great case study shared by Jeffery Eisenberg yesterday in his post “Should You Cancel All Your Advertising?”. In 2003, Jeff Bezos pulled all of Amazon’s advertising and chose to reinvest those dollars [...]

  3. Another great post Jeffrey. Made me think.

  4. This was a very good post, I like how it shows specific examples, real hard data, numbers, etc. of how this type of decision had an actual impact on the success of Amazon.

    Another great post would be how to focus on the customer more [especially on a website/online presence perspective]!

  5. The title of the artice should have been “Should a really BIG company with over 50% return customers and a household brand name cancel all advertizing?”

    In that case, this makes for some very intersting reading. We know that pulling advertising dollars off would be suicidal for companies that:
    a) have no brand name
    b) have one-time customers
    c) are small and in a competitive environment

    Gari

  6. [...] out Jeffrey Eisenberg’s post, Should You Cancel All Your Advertising? in which he talks about Amazon. Here’s a money quote from Jeff Bezos: “So we start with [...]

  7. Excellent post! That said, a couple additional observations:

    1) In 2003, Amazon was already well-known and had an established brand

    2) Advertising has much more impact with those who aren’t already aware of your products/services. It’s much cheaper to reach existing prospects (through direct marketing) and customers (experience with your products/services) directly than through broadcast media.

    3) Amazon has done well what all businesses should do. Use what they learned from existing customers to better hone their product, messages, etc. to sustain their competitive advantage. As you note, they’ve done this through a series of offers, “other products you’d enjoy based on past purchases”, “listmania” plays off on the fact that everyone goes there for research, free shipping for larger spenders, etc.

    4. Advertising is very expensive unless you can find highly targeted small publications. Amazon continues to advertise online so they haven’t totally canceled their advertising…

  8. You should also take a look at Amazon Web Services and their 220,000 developers. Don’t recall any print advertising which probably explains why many of the trade magazines are starting to look like pamphlets.

    …Bruce…

  9. #5 & #7.

    I think the point of the case study is a question ‘If you pulled the plug on your (high) advertising budget, where would you put it?’ Regardless of who/when/where you are. Maybe you cannot pull it off. Most cannot. But what if you could? Amazon was also predicted to fail- suicidal. But it worked.

    The concept is not new. from Aldi Foodstores to Warren Buffet’s discount retailer from the 50s (“Charlie says your customers will find you at the bottom of a lake if your prices are the lowest”).

    It’s definitely not a question of being a ‘household name.’ Its a question of thinking differently & taking a chance: If I ask my customers what they want, I know they will not say ‘special promotions, $10m sale ads, & a team of $200k p/a brand managers’ they may react to these things, they may buy and talk and want because of these, but they won’t ask for them.

    They will ask for lower prices or better service or better products. They may want to support a local business, or be greener or support their local community or something. They will not ask for more ads.

    Listening to them (your customers) is suicidal because every marketer knows that what people say they ‘would buy because…’ is not the same as what makes them pull the old wallet out. But.. it might work. maybe.

    You probably shouldn’t try it at home…with your business…or your reputation. Definitely not. Its suicidal.

  10. Giving fantastic customer service is always a good strategy.

    I think a large part of the reason stopping it’s advertising worked for Amazon could be most of that advertising wasn’t being tracked.

    You know 100% which advertising sources you should cancel if you’re tracking sales from advertising effectively.

    Cancel those that don’t make a profit.

    This whole “is my advertising making a profit” is a really frightening question because it points out that you’re simply not tracking.

    Kindest regards,
    Andrew Cavanagh

  11. I disagree, to an extent. This ‘thought expirement’ has really grabbed my attention (cheers Jeffry). I think this is more profound then simply moving costs around and shopping for the best marketing ‘bang for your buck.’

    Its not a question of whether you advertising works. It’s a question of how you canput that money towards benefiting your (fewer) customers.

    It’s not an apples to apples situation. Comparing the acquisition of new customers (with advertising) to the potential of word-of-mouth generating by re-investing the same budget is virtually impossible. Regardless of analytics expertise and dedication. I agree. Measure whatever you can. Make informed desicion. But sometimes a risk is a risk.

    The latter option (that amazon chose) is a risk (the benefits cannot be directly attributed to the costs & they cannot be accurtely measured or estimated). You are betting on customer loyalty an appreciation for the best deal.

  12. [...] more about Jeff Bezos’ genius strategy of giving away 600million in free shipping to its 72 [...]

  13. I agree with barbara. I think amazon is very different story to the small businesses. But I would say sometimes everybody needs to do these kind of things and test.

  14. [...] Should You Cancel All Your Advertising? – I really enjoyed this one. Word of mouth is extremely powerful and I would argue that it is the best way to market a product in the entire world. [...]

  15. [...] anyone today isn’t fair. Part of what helped these companies to become who they are is their commitment to the customer experience. They each had significant competitors but Amazon and eBay just kept pushing the bar higher. In the [...]

  16. [...] the full article about being customer-focused here, and the original story in the NY Times from 2003 about Amazon’s free shipping policy [...]

  17. Andrew Cavanagh–what methods do you use to track each advertising source? I agree in tracking your sources to sales, but something needs to be said about the emphasis of multiple impressions leading to direct responses. To simply pull a source because it cannot be directly tracked doesn’t mean you should pull it. Supplementary sources are the vehicles needed to create an effective call to action.

  18. marketing is a place where creating awareness in the minds of customers . however advertising is entirely different .

    thanks ,

    james

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  20. Well Amazon certainly did the right think but it isn’t something that works for all businesses. I think perhaps if an advertising campaign is not working then a change to something more varied and traceable is a better choice but way to go Amazon!
    Henal

  21. I agree with you. good article.

  22. Amazon.. it has own stabilized place in the present market with the products. Yes, instead of telling customers about how great your service is/was… its better to go with more creatively to attract.

  23. Customer focused is nothing better. You have to keep the word of mouth out there.

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  25. Sometimes going back to basics is an important strategy. Going quiet can actually raise your profile. Clever risk taking!

  26. I just do not want to have pop up ads nor any other kind of ads on my pc. I pay for a service and should be able to ask to not have such ads placed for my viewing displeasure.

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Jeffrey Eisenberg, founder of FutureNow, is a professional marketing speaker and the co-author of New York Times and Wall Street Journal bestselling books Call to Action and Waiting For Your Cat to Bark. You can friend him on Facebook.

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