MEMORANDUM

To: Dr. Victor J. Piscitello

From: Jack Coles, Ryan Egan, Molly Foster, Donny Heykoop, Cole Martin, Nick Peabody
Date: April 19, 2018
Subject: AmazonFresh Marketing Solutions

Company and Industry Description (Appendix #1)

AmazonFresh provides attended or doorstep delivery of groceries to preset locations at times set
by Fresh users. The grocery delivery market and AmazonFresh are in the growth stage of their
life cycles. The online grocery shopping industry is growing rapidly, as the average annual
market growth rate was 19.4% annually from 2013-2017. This rate is expected to increase to
27% over each of the next four years. This is good news for the short term as AmazonFresh
currently occupies a pedestrian 2.2% of market share compared to 6.8% and 4.9% from its
biggest competition, Peapod and Fresh Direct. Because this industry lacks seasonal trends, it is
important to find long-term trends. As millennials and Generation Z drive the shift to online
grocery shopping, Fresh has the potential to significantly increase sales in the next five to ten
years (Mintel Academic, 2017).

SWOTT Analysis (Appendix #2)

AmazonFresh is the third largest online grocery retailer in the U.S., which is attributed to
Amazon’s strong brand recognition among consumers. However, AmazonFresh has been
ridiculed in the past for lack of quality in the delivery process. Going forward, the online grocery
delivery industry is projected to grow by more than 25% in the next four years, giving
AmazonFresh the opportunity to dominate this industry if major changes are made. This is the
long-term trend that AmazonFresh hopes to capitalize on in the future. But, in order for
AmazonFresh to increase their market share, they must be able to differentiate and therefore
outperform companies like Peapod in order to successfully dominate the industry. Amazon’s
unique selling proposition is the fact that we are the largest e-commerce delivery service in the
world. AmazonFresh will be able to utilize the quality and speed of Amazon’s delivery service.

Target Markets: (Appendix #3, #4)

AmazonFresh only sells B2C, therefore we have identified three target markets for this segment.
Dual income households with occupants aged 25-44 make up our primary market. Single
individuals working over 50 hours per week are our secondary market. And women raising two
or more children aged 25-44 compromise our tertiary market. To identify and calculate the size
and value of these markets, we have further segmented our target markets using three key
descriptors which we chose based on their significant correlation with online grocery shopping.
We calculated these market sizes by referencing the US census to identify the size of each
demographic and descriptor group within the U.S. Finally, to calculate the market values, we
cross-referenced these numbers with the data from Deschamps’ Packaged Facts 2017
publication that included the percentage of consumers that are online shoppers from each
demographic and average yearly online shopping expenditures.
Problems and Solutions: (Appendix #5)
E-Grocery is a new industry and in its current state there is simply not much revenue to be had.
The three key issues we must address in order to gain success in this growing industry includes:
increase volume, awareness, and create a competitive advantage. We developed three solutions
in order to address the issues facing our company and the industry as a whole. Since this is a
brand-new industry we must focus our objectives on attracting new customers and growing our
market share. We must convince the public to use online grocery services and shop through us.

Analysis of Solutions 1: Insufficient Revenue/Volume

To address our first issue of generating more sales volume, our solution is to develop a
promotion such as limited time offers and/or bundle deals that will attract more customers and
encourage them to consistently use our services. Alternatively, our second solution includes
implementing the Whole Foods’ process of quantity-based pricing in order to demonstrate the
consistency of product quality and satisfactory shopping experience. Our third solution to
increase sales volume is a loyalty promotion to reward repeat customers for their purchases with
AmazonFresh.

Analysis of Solutions 2: Lack of Awareness

Our first recommended solution is to launch our ad campaign through Facebook. Facebook best
matches our target markets of the three entities. Secondly, Pandora would be the most effective
online music site to advertise through because it best reflects the market we are trying to reach.
Lastly, our contingency recommendation is billboard advertising in urban centers. This strategy
is more cost effective than the others, and still has the ability to reach many of our primary
consumers.

Analysis of Solutions 3: Competitive Advantage

Three solutions to address this issue include focusing our marketing campaigns to highlight our
strengths and aspects that are important to customers. We could also introduce a free one month
trial subscription for the AmazonFresh service to encourage consumers to give Amazon a
chance. And lastly, we could focus our marketing campaigns towards convincing current brick
and mortar grocery shoppers that the switch to online grocery shopping is convenient and better.

Recommended Solutions:
Addressing our first issue, Lack of Volume, we recommend introducing promotions to increase
customer and sales volume to incentivize repeat and new customers. To address our second issue
of Lack of Awareness, we recommend utilizing Facebook as our main social media to reach our
target market and advertise to segmented markets. To address our third issue of Competitive
Advantage, we will implement a one month free trial to attract new customers to set us apart
from our competitors, as well as assist us in our previous solutions.

Plan of Action (Appendix #6, #7)

As specified in the GANTT chart, we will present these ideas to the board as an increased budget
to raise awareness in order to increase sales and service usage through several promotions. These
solutions will all be presented and negotiated at the same time starting at the end of May and
approved by the end of 2018. We plan to be implement these solutions by the beginning of 2019
with annual progress reports until the end of 2021.
 Appendices
Appendix 1

NAICS Code 454110

Micro ● AmazonFresh is currently attempting to brand itself through various

Factors marketing efforts, as the best option in the grocery delivery market
● With Amazon’s new acquisition of Whole Foods, the company plans to utilize
AmazonFresh to offer inexpensive and efficient delivery of organic groceries
to consumers

Macro ● The online grocery market and AmazonFresh are in the growth stage of their
Factors life cycles
● The grocery delivery service industry is relatively new to the public and is
only recently becoming popular
● AmazonFresh and other services in the market are trying to spread awareness
of online grocery shopping to the general population

Growth Rate ● According to Online Grocery Shopping in the U.S. by Norman Deschamps,
the average annual market growth rate from 2013 to 2017 was 19.4%
● Growth is expected to climb to 27.1% between 2018 and 2022

Competitors ● Currently AmazonFresh is competing with Peapod (6.8%), Fresh Direct

(market (4.9%), Safeway (1.9%), Walmart Delivery (1.1%)
share)

Trend ● Millennials and Generation Z are continuing to drive the shift to online
Affecting grocery shopping
Growth Rate ● This trend will continue for the next 5-10 years, creating great potential for
growth in this industry
● This industry also has the potential to cater to many people in urban areas, as
well as busy middle to upper-middle class families with working parents

Market ● AmazonFresh currently holds a 2.2% market share, making it the third most
Share grossing grocery delivery service

Appendix 2
 Strengths
● Strong brand recognition for only
acquiring Whole Foods in August of
2017,
● Already third largest online grocery
retailer in the U.S. (Alvarez 2017).
Weaknesses
● Not known for grocery service, we are not as trusted
by consumers in comparison to many of our
competitors.
● AmazonFresh has had average reviews in the past
without the acquisition of Whole Foods. (Figure B)

Opportunities
● 5% of grocery spending in the U.S. is
online, AmazonFresh can be the first
for many (Seifert, 2017).
● In addition, there is a 27.1% expected
growth rate from 2018-2022
(Deschamps).
Threats
● Peapod is currently the largest online grocery delivery
service in the U.S., holding a strong reputation,
expanding in the same cities as AmazonFresh.
● Additionally, there are other existing grocery delivery
services such as Instacart.
● Lastly, U.S. consumers are accustomed to shopping in
store rather than online and may prefer it.

Trends
● People from the Millennial Generation and Generation Z are gradually entering the online grocery market
as more of them become independent.

Appendix 3
Primary Target Secondary Target Tertiary Target
Attributes
Market Market Market

Dual Income homes Single people Women ages 25-44,

Target Description
with adults aged working > 50 hrs. raising 2 or more
25-44 per week children in household
Initial Market Value $3,949,397,637 $5,864,005,573 $3,561,200,961

Household Income > $60,000

$3,918,384,890 $3,117,848,276 $1,893,464,141

Urban Center
$786,394,539 $1,221,054,546 $741,544,422

Education ≥ College Grad

$1,182,369,653 $1,835,895,047 $1,114,936,049
Final Market Value $311,512,883 $237,024,278 $143,944,455

Appendix 4
 Primary Target Secondary Target Tertiary Target
Attributes
Market Market Market

Dual Income homes Single people Women ages 25-44,

Target Description with adults aged working > 50 hrs. raising 2 or more
25-44 per week children in household

Initial (N) 30,316,000.00 47,072,414.38 14,293,500.00

Household Income > $60,000

(46% of Households)
27,213,000.00 21,653,310.61 6,575,010.00
Urban Center
(29% of population) 8,791,640.00 13,651,000.17 4,145,115.00
Education ≥ College Grad
(30.3% of population) 9,185,748.00 14,262,941.56 4,330,930.50
Final N 2,391,206.31 1,902,676.40 577,746.13

Appendix 5

Problems Insufficient Lack of Awareness Competitive Advantage

Revenue/Volume

Solution 1 Users will be given a formal
guarantee stating that their
personal information will
remain secure. We will also
guarantee quality and
accuracy with each order
made.
Promote AmazonFresh on
Facebook because Facebook
is the largest social media
outlet for our target market.
84% of adults with internet
access aged 30-49 use
Facebook (York, 2017).
Marketing campaign that
would reach our target
market, demonstrating our
versatility of combining the
best aspects of Amazon and
Whole Foods into
AmazonFresh.

Solution 2 We will provide product
promotions to incentivize
new customers to use our
service. Also, we will grant
repeat customers additional
promotions based on their
loyalty to incentivize repeat
purchases.
Pandora is the best option
amongst music-streaming
services because it fits our
target market best. 48% of
Pandora listeners have
children, compared to 30%
of Spotify Listeners.
One free month AmazonFresh
trial to provide a sample to
potential new customers in
hopes to grow our customer
base.

Solution 3 Quality “quality-based Using a large Billboard Convert customers from

pricing” system used by
Whole Foods implemented
into AmazonFresh in order
to assure AmazonFresh
customers that they will be
receiving the same quality
product as displayed when
placing their order.
promoting AmazonFresh is
a cheap option to get the
name out there to be seen. It
is not as directly impactful
as the first two solutions;
however, it would be much
cheaper and would be seen
by a large range of people.
traditional brick and mortar
grocery stores to online
delivery services and push
AmazonFresh as a leader in
the industry.
Recommended We recommend that we
Solution introduce promotions such
as limited-time offers and
bundle deals to solve our
problem of lack of volume
in the grocery delivery
market. This is the best
solution to the problem
because the promotions will
bring awareness and
urgency to buy groceries
from our delivery service.
We want to incentivize
repeat and new customers to
buy from us more often.
Contingency We want to implement
Solution Whole Foods’ system of
Quality-Based Pricing to
appeal to Whole Foods
customers and satisfy repeat
buyers. In this system, a
bruised banana will cost less
than a ripe banana, so
AmazonFresh employees
are not incentivized to pick
bruised bananas over ripe
ones. This solution will
allow us to be up front with
customers about what we
offer.
We will utilize Facebook as
our main social media. We
believe that Facebook is the
best vehicle to reach our
target market because our
target market is well
represented on Facebook.
Facebook also allows
companies to target
advertising to specific
groups of people.
Pandora is the best option
amongst music-streaming
services because it fits our
target market better than the
next best option, Spotify.
Spotify users are 16% more
likely to be ages 18-30 than
Pandora listeners
(Civicscience.com, 2015).
Along with this, 48% of
Pandora listeners have
children, compared to 30%
of Spotify Listeners.
A 1 Month Free Trial with
AmazonFresh would
incentivize new customers to
try our service, which is a
better incentive for paying for
their first month of trial with
another grocery-delivery
service. This would set us
apart of our competitors and
hopefully assist in our other
solutions as well.
A Marketing Campaign
would allow us to
demonstrate AmazonFresh
how we want our customers
and competition to perceive
us. This would give us the
opportunity to directly
communicate with the public
what sets us apart from our
competition.
Appendix 6

Appendix 7

Problem Start Date End Date

Development/Approval:
(May 2018)
Insufficient Revenue/Volume
Develop Sales Promotions:
(January 2019)
Development/Approval:
(January 2019)
Implement Sales Promotions:
(December 2021)

Development/Approval: Development/Approval:
(May 2018) (January 2019)
Lack of Awareness Create Facebook Advertisement Implement Facebook
Campaign: Advertisement Campaign:
(January 2019) (December 2021)

Development/Approval: Development/Approval:
(May 2018) (January 2019)
Competitive Advantage Design One-Month Free Trial: Implement One-Month Free
(January 2019) Trial:
(December 2021)

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