Amazon is making use of its incredible wealth of customer data to innovate and disrupt the advertising / product promotion space: it is launching a pilot to send targeted product samples to its customers.
In this new program, Amazon is using machine learning to identify and segment customers based on the likelihood of them purchasing a specific product. As with Amazon Vine, the targeted product sampling program is funded by brands and Amazon will handle all the logistics through their fulfilment capabilities to send selected customers sample products, for free.
The predictive algorithm is supported by machine learning and Amazon’s first party consumer behavior data, such as data on previous purchases and keyword search. A job description for an engineering position on the Sampling team states that “using machine learning will ensure a higher likelihood of conversion than display ads,”.
However, when it comes to comparing targeted product sampling to a display ad program, some points need to be taken into consideration:
- The sample product is free so there are no real « conversions » attributed, only a ripple effect.
- Customers might want to send sample products back, which could result in an expensive logistical exercise.
- In some cases, a customer could leave bad reviews which could then damage future conversion. However, this could also have a positive effect of natural selection of good products.
BUT WHY IS AMAZON CALLING ‘SAMPLING’ AN ADVERTISING PRODUCT?
Although the funding for sampling doesn’t originate from traditional media budgets and ad teams won’t be handling the logistics, Amazon is categorizing this program under its ‘advertising offer’. From our perspective, this is a strategic decision which makes sense in terms of industry benchmarking; the new program is a killer to Google ads and Facebook ads, neither of which can offer a similar kind of service due their lack of consumer data. In classifying targeted product sampling as an advertising product, Amazon is effectively extending its Retail Digital Media offer beyond traditional display, video and retail search advertising, and raising the bar on the industry benchmark.
We asked our expert partner from Amazon Made Simple to share his opinion on this innovation:
- The target for Amazon is presumably threefold:
- To grow sales – especially of new products: in addition to offering online shoppers a great online experience through best-in-class eContent on Amazon A+ pages, sampling enables to also physically handle a product which can push a shopper from the considering a product to purchasing it.
- To generate more customer reviews, which in turn can improve conversion rate and increase sales
- To extend their A.I. experience, making use of the wealth of consumer data they have, and go on disrupting the online sales business – keeping two steps ahead of other players
- On the brand side, this program also has the potential to significantly help new consumer brands / new products in their market launch
- The program will probably be run by the retail or the market place teams rather than the ad team
- Amazon is a customer-data company which has spent considerable amounts of time and money in aggregating data on customers and is now seeing a ROI. We can therefore expect more initiatives from the digital giant in the future as they make use of their A.I. and customer data.
- Finally, as always with Amazon, their testing is a big part of the game and the end product might be very different to the pilot. We know one thing for sure, they will never stop testing new things!
Authors: Jérôme De Guigné – Amazon Expert at Amazon Made Simple, Jordane Beller Retail Digital Media Consultant.
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