Consumers are always looking for the best price for the products they want, but they are also looking for a convenient purchase. Amazon offers consumers the unique opportunity to purchase a multitude of products from the comfort of their home, while often offering an extremely competitive price. Pricing changes, sales strategy, and behavioral economics have helped Amazon create a dominant presence in the world of e-commerce. These key areas have helped the company not only succeed, but also made its competitors wonder how to keep up. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Amazon Pricing Strategy: Amazon offers very competitive prices. Shoppers, like me, believe that Amazon has the best possible prices (or very close to the best). An analysis by Boomerang Commerce, a pricing company founded by a former Amazon employee, found that Amazon offers the deepest discounts on its most popular products and accepts lower profits on less popular products. One example found by Boomerang Commerce involved a $350 Samsung TV. Amazon dropped the price of the TV to $250 on Black Friday. This discounted price allowed them to access a better price than their competitors, but Amazon was very lucrative with its prices, as it increased the price of an HDMI cable that consumers would want to purchase with the TV (D’Onfro). This is a very smart way to sell products. Consumers will watch television and believe they are getting a great deal because they have higher demand for the more popular product (television) at the lower price and would be more willing to pay a higher price for the lower priced product. less popular (television). HDMI cable). Amazon beat its competitors' prices with this strategy because they maintained a higher profit by selling the less popular product at a higher rate. Amazon uses various products to support its unique pricing strategy. The company has listed an Asus dual-band wireless router for 20% less than its competitor Walmart's price. Despite offering this 20% discount to consumers, Amazon listed a less popular model at a price 29% higher than Walmart's list price (D'Onfro). Amazon's pricing strategy can be described as dynamic in that it approaches the sale of items differently than its competitors. During the Christmas period, Amazon changes prices on around 80 million products in a single day. Internet Retailer Magazine reported in 2013 that Amazon was changing prices on its website for approximately 40 million products per day (Loeb). An HP printer was on sale in April 2013 at Sears for about $160, but Amazon had it listed for $120. At 9 a.m. on the day of the sale, Sears raised the price to $190, then lowered it to $155, before raising it again to $190. At that time, Amazon had increased its price to $130. Office Depot and other competitors have seen their prices remain constant, but Sears and Amazon have changed their prices several times. In the end, the cheapest seller was Amazon at $105 (Loeb). Amazon has changed the prices displayed on its products to stay ahead of its competitors. This puts competitors in a very difficult position. Retail stores that sell products online seem unable to keep up with the price changes implemented by Amazon. This makes profit and inventory a concernmajor for competitors such as Sears. Amazon may be eliminating competition from stores like Sears with the way they are approaching these price changes at an amplified pace. The image above shows how often Amazon changes its product prices compared to its competitors. Even though their competitors offer lower cost products, Amazon's changes outperform the competition on a daily basis. Even with big competitors like Walmart and Target, Amazon makes more than triple the number of changes Walmart does during Black Friday and weeks after Black Friday. Black Friday, being a prime online shopping time for most consumers, provides Amazon with the opportunity to achieve a large number of sales and beat its competitors in terms of pricing opportunities. As we've already seen, Amazon has an advantage over retail stores. Combine this advantage with competitive outperformance through an online pricing strategy and you have a winning recipe for Amazon. What Makes Amazon Successful In 2016, CEO Jeff Bezos discussed Type 1 and Type 2 decisions in a letter to shareholders. Type 1 decisions cannot be reversed, while Type 2 decisions can be reversed and must be made quickly. Following the Type 2 decision-making path has allowed Amazon to create lasting success, according to Scott Galloway, clinical professor of marketing at the NYU Stern School of Business (Lebowitz). Galloway says Amazon doesn't hesitate to cut investments that aren't profitable so the company has money to invest elsewhere. With this strategy of killing investments that don't work, Amazon has created some great winning investments. For example, Amazon Prime and Amazon Web Services. Amazon is extremely careful not to embark on a project until it is completely sure that the project will work. Galloway also notes that most CEOs "will not take risks with less than a 50% chance of success, regardless of the magnitude of the potential gains." » Amazon CEO Jeff Bezos said in 1997: "Given a 10% chance of a hundred times the payoff, you should take that bet every time." » (Lebowitz). Access to capital gives Amazon the opportunity to invest in areas it wants to see work. Being able to walk away from one investment and move on to the next allows the company to not waste time on projects that do not maximize profits and try to find a better scenario. Additionally, having a CEO, much like Jeff Bezos, willing to take risks to allow the company to grow should be greatly appreciated. Leadership must be able to accept flaws and create better situations for the company. It is clear that Bezos can take risks, accept mistakes, and try to create profit-maximizing plans based solely on his 1997 quote. Behavioral Economics and Decision Making Behavioral economics has been called the science of decision-making. decision. Marketers find behavioral economics extremely valuable because it can explain how emotional or rational consumer decision-making is, how much information consumers can absorb, and how quickly the consumer makes their decision ( Saunders). Daniel Kahneman, known as the father of behavioral economics, believed that we have a two-system brain; divided into system 1 and system 2. System 1 is composed of perception and intuition. This part of the brain helps detect when something is wrong. System 2 represents reflective thinking and in this system you..