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I suspect that if I asked you to take a moment and feel sorry for the product managers who work for Amazon, you probably would not. For that matter, if I asked you to take a moment and feel bad for the product managers who work for Amazon, you probably would also find that hard to do. However, it turns out that being one of these types of product managers is quite difficult. The reason that it is so hard is because although your company is already very large, you are still under a great deal of pressure to keep growing your product lines. What’s a product manager to do?
Amazon’s New Plan
So what’s going on? Well on the surface, it’s all pretty simple. What Amazon has decided to do is to make their popular Prime service available to more people who previously may not have been able to afford it. Just in case you don’t know, Prime is a service that Amazon offers that for $99 per year. Subscribing to it means that everything that you order from Amazon will come with free shipping – you don’t have to pay a thing. Additionally, there are steaming TV channels with unique Amazon content that you gain access to by becoming a Prime member along with a number of discounts and special promotions throughout the year.
In the past Amazon already discounted its Prime program for some customers. However, their latest move has been to expand their discounts to even more customers. Since the customers that they are targeting are generally lower income customers, this is being seen as a direct attack on Walmart. What Amazon has said that they will do is that they will change their product development definition and expand their discounted $5.99 / month Prime fee to now include all of those customers who are currently signed up for the U.S. government’s Medicaid program. What is Medicaid you ask? In all states, Medicaid provides coverage for some low-income people, families and children, pregnant women, the elderly, and people with disabilities. In some states, Medicaid has been expanded to cover all adults below a certain income level. Currently roughly 20% of the U.S. population is signed up for Medicaid.
To join the Prime program from Amazon traditionally costs a customer $12.99 / month or $99 / year. Amazon started offering Prime at a discount to people who were receiving government assistance. They offered it to people who had the cards that are traditionally associated with the food stamp program. The name of this program is the Supplemental Nutritional Assistance Program (SNAP). When anyone joins the Prime program they get free shipping and free 2-day shipping. They also get access to Amazon’s Prime music and video streaming services. The reason that the Amazon Prime product managers are going after this new market segment is because they’ve run out of customers. Prime membership has reached more than half of all U.S. homes that have internet access and has basically saturated the wealthier segment.
How Walmart Will React
As more and more of the shopping that customers do starts to shift online, many of the low-income shoppers continue to visit bricks-and-mortar stores. The reason for this is because at these stores they can pay for their purchases with either cash or by using their SNAP card. Walmart has traditionally targeted these shoppers and they have over 4,600 stores in the U.S. Walmart is undergoing changes as they attempt to gain wealthier customers and do a better job of competing with Amazon’s Prime service. Walmart has been going after premium brands in order to entice them to offer their products through Walmart’s online walmart.com site.
As part of their upscale push, Walmart has convinced Lord & Taylor to allow them to carry their products. They are also in the process of replacing some of their private label brands with fashion forward brands. All of this might look good on a product manager resume if the Walmart product managers could only come up with a way to deal with their Amazon problem. The Amazon offer doesn’t last forever. Instead, people who sign up for the discounted program are only allowed to do so for four years. Since they started offering this program, Amazon has seen increased in orders for baby food, toys, and diapers. They have also discovered that their new customers are making use of the one and two hour shipping options. New low-income customers are coming for the free shipping and they are staying for the free digital content – video and music.
Amazon is also discovering that their new low-income customers are becoming frequent purchasers of electronic equipment that allows them to consume Amazon content such as their Fire TV streaming sticks and their Fire tablets. Lower-income shoppers have been one of the fastest growing segments of shoppers. They may lack resources such as internet access and credit cards – SNAP cards cannot be used to make online purchases. Additionally, they may not have a safe place for packages to be delivered. However, things are changing for these consumers. Most now have a mobile phone. Both UPS and Amazon have been adding lockers to allow for the safe delivery of packages. Amazon has also added the option of reloading account balances with cash at convenience stores and other locations.
What All Of This Means For You
Having a product manager job at either Amazon or Walmart sure sounds like fun – who wouldn’t want to work for a large successful firm? However, it turns out that there are some real challenges associated with working for these firms. One of the biggest is that you always need to be searching for ways to help the company keep growing. Over at Amazon they have taken a look at their product manager job description and they have come up with a plan and it’s going to end up putting them on a collision course with Walmart!
What Amazon is planning on doing is offering their very popular Prime membership program to more people. Prime is an Amazon program that provides free shipping on everything purchased from Amazon along with access to streaming video and music services. What Amazon has said that they will do is that they will expand their discounted $5.99 / month Prime fee to now include all of those customers who are currently signed up for the U.S. government’s Medicaid program. This means that Amazon is going after the lower-income shoppers who make up the bulk of people who shop at Walmart. The reason that the Amazon Prime product managers are willing to do this is because Prime membership has reached more than half of all U.S. homes that have internet access and has basically saturated the wealthier segment. Walmart’s focus has been shifting towards more wealthy customers as they beef up their products lines to appeal to them. Amazon has discovered that lower-income customers are coming for the free shipping and then staying to take advantage of the streaming video and music services. There are a number of things that can hold lower-income customers back from making purchases online; however, over time each of these issues is being solved.
As product managers it can always be both interesting and informative when we see titans clash. As the Amazon product managers search for ways to keep their firm growing and do so by expanding into Walmart’s territory, the interesting question is how will the Walmart product managers respond? As we watch this drama unfold, there will be much that we can learn from it. Keep your eyes open and prepare to start taking notes. There will be lessons in this for all of us
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: If you were a Walmart product manager and Amazon started to expand into your territory, how would you react?
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What We’ll Be Talking About Next Time
So here’s an interesting question to kick things off: do you wear a watch? Not all that long ago, the answer to this question would have been pretty much “yes” for everyone. I mean, how else were you going to be able to tell what time it was? However, as with all such things in life, things have changed. Now when people want to know what time it is, they whip out their mobile phones and glance at them. Kids these days just don’t think about purchasing the fancy watches that their parents used to buy. What can watch product managers do to change things?