What Jeff Bezos thinks…
About three years ago we stopped doing television advertising. We did a 15-month-long test of TV advertising in two markets – Portland, Oregon, and Minneapolis – to see how much it drove our sales. And it worked, but not as much as the kind of price elasticity we knew we could get from taking those ad dollars and giving them back to consumers. So we put all that money into lower product prices and free shipping. That has significantly accelerated the growth of our business.
Is this a trend?
Yes, more and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.
In the magazine world, we rely on ads. Should we be terrified?
I’m not saying that advertising is going away. But the balance is shifting. If today the successful recipe is to put 70 percent of your energy into shouting about your service and 30 percent into making it great, over the next 20 years I think that’s going to invert.