The Amazon flywheel is a self-sustaining business model revolving around the customer that has led to the e-commerce giant’s enormous success. Each facet helps drive the growth of the other.
It’s this flywheel model that has driven sellers to flock to the platform in hopes of duplicating similar results for their own businesses. But for many it remains elusive.
The truth about the flywheel for sellers is the same as for any flywheel.
Starting out is hard but once you have all parts in place the flywheel begins to sustain itself. Each sale leads to another, helping spin the flywheel and increasing your growth on Amazon.
What we’ll cover:
- What is the Amazon Flywheel?
- Customer Obsession and the Flywheel
- The Amazon Sales Flywheel for Sellers
- Start with a Quality Listing
- Listing Quality Means a Better Conversion Rate
- A High Conversion Rate Leads to Better Ranking
- Higher Ranking Leads to More Traffic
- More Traffic Leads to More Sales
- Sales Lead to Reviews
- Growth = Lower Cost Structure -> Lower Price -> Listing Quality
- Conversion Rate -> Lower ACoS -> Traffic
- Key Takeaways
What is the Amazon Flywheel?
The Amazon Flywheel (known internally as the virtuous cycle) is a customer-centric, self-sustaining business model where every aspect improves and grows all others linked to it.
The idea originates from the mechanical flywheel, a large mechanical battery that relies on mass rotating around an axis to keep it spinning.
It takes a lot of initial effort to get it moving but once it starts spinning it gains momentum and has the potential to spin itself, eventually becoming self-sustaining.
The Amazon flywheel revolves around the same idea. The initial effort required is great but once all aspects of the wheel begin moving, each facet aids in overall growth. Here’s an example of what it looks like:
Can you see how the whole structure drives itself?
For Amazon to grow, they need sellers. How do they attract sellers? The promise of traffic and customers that will buy their products. How do they attract customers? With low unbeatable prices, endless selection and a customer-focused experience. And so the wheel spins and spins, growing exponentially (as you well know).
Customer Obsession and the Flywheel
Amazon’s business bases itself around the customer. Even on their list of leadership principles – which drives how they do business – “customer obsession” appears at the top.
Although leaders pay attention to competitors, they obsess over customers.-Amazon leadership principles
Have you ever wondered why Amazon is the largest e-commerce company on the planet? It’s because of this customer obsession. By offering a large selection, economical pricing and shipping almost no one else has access to, they dominate the market. They take the idea of “the customer is always right” to another galaxy.
Take a page out of Amazon’s book by focusing on the customer and you’ll be closer to reproducing a flywheel for your own business as a seller.
The Amazon Sales Flywheel for Sellers
As an Amazon seller your focus won’t be on the Amazon flywheel but on your own sales flywheel.
To succeed on Amazon, you must be prepared to put in a lot of hard work at the beginning. Most people don’t understand this. They believe that Amazon is simple – upload your product and watch the sales come in.
But that is not the case. The harder you work to begin the process the better your results will be once the flywheel begins to spin. and
Let’s look at the Amazon sales flywheel and how it differs from the original. As an Amazon seller, you’ll work to create a flywheel by focusing on producing a quality listing and drawing in customers to set everything in motion. It will look something like this:
Start with a high-quality listing (Amazon calls it “retail readiness”). This ensures that Amazon can present your product to those who search for it and that those who find it will want to buy it.
When your product converts well for specific keywords and phrases the conversion rate goes up, increasing the product’s ranking.
Higher ranking leads to more traffic, more sales and more reviews.
More reviews (good reviews) lead to a higher quality listing which in term increases conversion and so on and so on.
This is how you grow, and growth leads to even more benefits.
When you grow you can place bigger orders and spread out fixed costs. This lowering of your costs relative to sales is commonly referred to as “Economies of Scale” which helps you offer a more competitive (lower) price.
Since price is the most important conversion factor on Amazon, a lower price with improve your listing quality and increase conversion.
Start with a Quality Listing
The best place to start spinning the flywheel is from a solid foundation. Your product listing is the thing that you’ll have most control over when you’re just starting out.
To succeed, you’ll need to fully optimize your listing so that your products:
- Are searchable and show up on the search engine results page (SEO)
- Convince your customers that the product will solve their problem (CRO)
SEO (search engine optimization) works with the Amazon algorithm side, making sure that you show up for relevant searches. The CRO (conversion rate optimization) is about ensuring high listing quality so that you can convert customers and make sales.
Optimizing Your Listing for Amazon and the Algorithm for SEO purposes
A quality, well-optimized listing from the Amazon side involves researching your competitors, finding the right keywords for your products and including them within all parts of your listing (title, bullet points, search terms, description). We go into more detail about this in our SEO Guide.
A quality listing should include high-volume, relevant keywords and phrases that the customer may type into the search box to make your product appear. When a customer sees the product title and it says exactly what they’re looking for, they’ll click through to learn more.
Only in this way will the algorithm be able to pick up clues about your product and set it in front of the right customers when they’re searching for it.
When the keywords and phrases related to your product result in customers buying your product for those specific keywords and phrases your conversion rate increases.
Optimizing Your Listing for the Customer for CRO Purposes
What about the customer side? How can you create a quality listing with the customer in mind? This is where a lot of the initial heavy work comes in.
A quality Amazon product listing means understanding the customer and their intent. When you speak directly to the customer, they feel understood and more trusting of your brand and product. This is the conversion rate optimization (CRO) we’re going for here.
Some of the ways to create a quality listing that will wow browsers and turn them into buyers:
- Beautiful images that make an emotional connection
- Bullet points that focus on the benefits the customer will receive
- A product description that goes into more detail about the product and answers customer objections
- A+ content (if available) that wows the customer and builds trust
Many customers rely on a product’s images to decide whether the product is for them. Many prefer to simply swipe through images to get an idea of what the product is about. This is why your images are so important in helping convert customers. When you’ve taken the time to tell your product’s story, connect with the customer on an emotional level, and help them imagine their life with your product in it, they are more likely to buy. Infographics also make up part of the Amazon listing optimization process and are very important for the CRO aspect.
It’s also important to keep in mind that many customers are now shopping on mobile where the images are front and center.
Once the customer has looked through images, they’ll want to know whether they should buy your product or not. This is where the bullet points come in.
Your bullet points are essentially your salespeople. Customers usually prefer the long story short version. Your five bullet points should convince your customer that they’re in the right place and this is the product for them. You’ll want to highlight benefits and anything else important about your product they should know. Check out this post to write better bullet points.
If you’re a registered brand, you have access to a variety of advertising and promotional tools. One of them is A+ Content (formerly Enhanced Brand Content). When done right A+ Content can look like a magazine or advertorial that helps build trust, goes into detail about your product, offers examples of how to use the product, and more. To learn more about why you need A+ content on Amazon, check out this post.
Your product description is where you can provide more details for the customers who like to find out everything about a product before they decide to make a purchase. It’s also a great place to break down what’s in a bundle or provide more technical details required by the customer.
Listing Quality Means a Better Conversion Rate
If you worked on optimizing your listing and made sure that the keywords and phrases you used are relevant, this should help your conversion rate.
For the Amazon sales flywheel to work, you need to drive traffic to your listings. More importantly, you need to drive relevant traffic.
The worst listings deceive people and make them think they’re buying something else when they click through.
Imagine typing “self-adhesive removable wallpaper” into your search bar. After scanning through the results, you click through one with a nice image and the title that includes the keywords self-adhesive, removable, wallpaper. Everything that you are looking for.
When you check out the product page though – you see that the wallpaper is not actually self-adhesive and you need glue to hang it. Not exactly what you were looking for, is it? If someone is looking for something specific and you lure them to your listing with the promise of something else, they will run away. Conversion rate goes down.
Be as specific and honest in your product listing description as possible so that you don’t just attract customers, but the right customers. You can’t please everyone with your product.
A High Conversion Rate Leads to Better Ranking
Let’s remember Amazon’s customer obsession. Amazon wants its customers to be happy. And it wants to make sales. The high-ranking products are the ones that convert customers.
You’ve worked on creating a high-quality listing, customers are searching for something, you’re providing. Amazon notices that whenever someone types in “organic protein powder plant based”, they’re clicking through to your product page and end up buying what you sell. Your conversion rate is looking great!
The more your customers trust your product, the more Amazon trusts it. Amazon tips its hat to you. It’s ranking you higher up on the SERP (search engine results page) because it knows that your listing has a higher chance of converting its customers. Thanks, Amazon.
You see how the sales flywheel is focusing on the customer? You treat the customer well; Amazon treats you well. It’s a tradeoff that benefits you both.
Higher Ranking Leads to More Traffic
So what happens once you start appearing at the top of the search results page?
- More traffic.
- More eyeballs.
- More customers.
The higher your product ranks on Amazon, the higher up on the search results page it appears.
Most customers don’t want to waste time scrolling through hundreds of products. They’ll go for the ones that appear at the top.
There’s a well-known joke from SEO marketers that says: the best place to hide a dead body is page 2 of Google. Okay we’re talking about two different search engines, but the idea is the same. No one is going to scroll past page 1, especially not on mobile where a customer only sees one product per line.
Being higher up in the search results means more traffic for you. If you’re lucky enough to snag the highly coveted Best Seller or Amazon’s Choice badges, even better.
When a customer sees these badges on a certain product, they not only help the product stand out among the other options, but they also help create trust. If it’s Amazon’s choice or a best seller it must be a good product, right? Badges help bring more traffic to the listing and since everything is already optimized, results in more sales too.
More Traffic Leads to More Sales
Next up in your Amazon sales flywheel: sales.
Obviously when you rank higher and appear nearer to the top of the page, more people will be clicking through to your product.
The more eyes on your listings the more likely it is for you to make a sale. It’s a numbers game. Because you’ve already optimized and created a quality listing, making sales from the traffic coming in should be easy. Beautiful images, tight copy, pretty A+ content. What’s not to love?
Do you see now why listing quality is where everything begins?
Sales Lead to Reviews
You’ve got the sales coming in. What’s next?
If all goes well following this Amazon sales flywheel, more sales means more customers.
And because you’ve focused on creating quality listing and a great product your customers are over the moon. You solved their problem. A positive customer experience means more chances of them leaving a positive review. They may feel compelled to tell other customers just how much they love the product, the delivery process, that the product came just as described.
The more happy customers you have, the more positive reviews you receive.
When a customer is browsing through products that appear on the results page, they’re looking at the product titles, images and reviews too. Reviews on Amazon are a form of social proof.
What are you more likely to purchase? A product with a hundred reviews or one that has none? The more reviews (and the more positive), the easier it is to sell the product.
If you have a good product, traffic, sales and positive customer reviews, the quality of your listing increases even more.
Back where we started!
Growth = Lower Cost Structure -> Lower Price -> Listing Quality
The better your products perform on Amazon the more your business grows.
One of the benefits is that once you see the sales flywheel working for you, you’ll notice your cost structure go down.
With more sales under your belt you’ll have more money to spend on product. The more money you have to spend on product, warehousing and fulfilment, the larger the discounts. When your costs lower you can also lower the prices of your products.
Part of Amazon’s flywheel is low prices – customers love them. When you offer lower prices, you improve your listing quality too. A customer is more likely to buy your product when they see it nearer the top of the search results with a great price and plenty of positive reviews. Everyone wins.
Conversion Rate -> Lower ACoS -> Traffic
To grow on Amazon you need to not only ensure a positive customer experience, but also contribute to Amazon’s ecosystem. Spending money on advertising is one way to do this.
Advertising helps spin your Amazon sales flywheel too.
Once you establish a decent conversion rate on your products your ACoS decreases. ACoS (advertising cost of sales) is the amount you spend on advertising to generate $1 in revenue from that spend. When you have a lower ACoS, your budget goes further to drive more traffic to your listing. You are spending the same amount of money but bringing in more traffic.
Amazon is more likely to show products with high conversion rates in their sponsored (advertising) spaces because it already knows that these products are successful.
This means that the CPC (cost per click) for products with high conversion rate will be much lower than for those that aren’t selling as well as Amazon considers relevance and listing quality in the PPC auction.
Although ad cost may be expensive initially, once you get the sales flywheel going by drawing in traffic, making sales and increasing reviews, your ad cost will decrease.
Here are the main points to take away from this post:
- Focus on the customer experience
- Start with a quality product that people want to buy and love
- Create a fully-optimized, high-quality product listing. This gets you to rank on the search results page (SEO) and wow browsers to convert them into customers (CRO)
- As your business on Amazon grows your cost sturcture lowers, allowing you to lower your prices and attract even more customers
- Having a high-quality listing increases your conversion rate, which in turn helps lower your ad cost and bring in more traffic – true flywheel power