The Biz of Coding

Amazon’s Success as an Online Store — Marketing & Branding in Information Economy

by Ujwal Tickoo on May 10th, 2006

This is my second post examining Rules for the Information Economy. In my previous post I covered 2 rules: 1) Information is costly to produce but easy/cheap to copy and distribute. and 2) Focus on maximizing the value of IP not its protection. The third important take away from Shapiro’s & Varian’s book is:

3) Information is an Experience Good, therefore Marketing & Branding Information/Experience oriented goods requires special strategies.

This rule is very relevant to Web Sites in general and Online Content providers and Software Providers in particular – because they are at the very center of the Information / Experience goods business. It also explains the success of Amazon.com.

Amazon realized that it was not merely selling material good but primarily information about those good on Amazon.com. The realization that information was the experience good part of the material good that a consumer was purchasing — lies at the core of Amazon’s strategy of building a successful brand and reputation as an online store for books, electronic items, shoes etc (32 product categories on the writing of this post).

What does an Experience Good mean? Shapiro and Varian explain:

Economists say that a good is an experience good if consumers must experience it to value it. Virtually any new product is an experience good…But information is an experience good every time it’s consumed. How do you know whether today’s Wall Street Journal is worth 75 cents until you’ve read it? Answer: you don’t

Three strategies Information businesses employ to help reluctant consumers to evaluate information goods for purchase – before they can experience the good actually are: (A) Browsing, (B) Branding & Reputation, and (C) Inducing Trial through free offerrings

To continue… Amazon and the Third Rule of Information Economy

POSTED IN: Amazon, Business Books, Information Economy, Network Economy, Strategy