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AMAZON FLYWHEEL MODEL

The Amazon Flywheel model.

The flywheel business model from Amazon.

The Amazon Flywheel concept of growth template was first drawn on a napkin.

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AMAZON FLYWHEEL MODEL

The Amazon Flywheel business model is used by business owners, entrepreneurs and startup founders to quickly grow their organisations and businesses.

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WHAT IS THE AMAZON FLYWHEEL BUSINESS MODEL?

The Amazon flywheel model was first coined by business strategist Jim Collins in the year 2001. It was originally known as the “flywheel effect”.

Jeff Bezos from Amazon used Jim’s model and tailored it for their own business objectives and revolves around the concept of “Customer centricity”

The virtuous cycle works this way:

Lower prices led to more customers.

More customers increased the volume of sales and attracted more sellers on the Amazon marketplace while keeping fixed costs low.

The more efficient the business gets, the more it can reduce prices to customers.

The idea is if you can optimise any key area of the flywheel, you can decrease the time that takes to increase sales.

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Taking the old theory of marketplaces, as more sellers and the more competitive the prices are, the more customers come back to the marketplace as they know they can find a great selection of products with the best prices. Customers then buy more, more often and some more premium.

The Amazon flywheel business model brings benefits to both customers, sellers and the marketplace (Amazon) as cost lines decrease across all departments and the marketplace can reinvest in areas where they can transform more people into Prime customers.

You can also use:

• Business Model Canvas PDF Template
• Digital Marketer’s growth flywheel diagram
• The best Critical Thinking Process Framework

The increased sales volume planned as part of the flywheel model allowed Amazon for economies of scale, hence reducing costs. This enabled Amazon to invest more in customer service and product offerings, further improving the customer experience.

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The Amazon flywheel model confirms that a growing customer base attracts more sellers, leading to a wider product selection and competitive pricing. This increase customer choice and satisfaction, feeding back into the flywheel.

Conclusion

The Amazon Flywheel model is important in marketing because it emphasises a self-reinforcing cycle that drives business growth and customer satisfaction.

At its core, the Amazon flywheel model prioritises the customer. A great experience leads to repeat purchases, which increases the chances of brand loyalty and drives customers’ recommendations (word-of-mouth).

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