At Amazon Consistent Quality Service Brings Customer Loyalty even in Recession

The world's best-known companies typically spend hundreds of millions of dollars a year on advertising and marketing to build their brands.

Not Amazon.com (AMZN). The giant online retailer has created one of the world's strongest brands by eschewing conventional tactics. Instead of shelling out big bucks for lavish trade shows and TV and magazine ads, Amazon pours money into technology for its Web site, distribution capability, and good deals on shipping. The result: a smooth shopping experience that burnishes the company name. "It is pretty unprecedented that their brand has ascended so quickly without a large marketing budget," says Hayes Roth, chief marketing officer at brand consultant Landor Associates. "It's not about splaying their logo everywhere. They are all about ease of use."

Amazon declined to participate in this story, in part because executives say they don't spend much time on branding. Still, the company had the biggest jump in this year's ranking of the Best Global Brands, rising 13 spots, to No. 43.

One reason is that Amazon has thrived during the recession, even as other retailers have been battered and pushed into bankruptcy. The company's reputation for offering low prices, broad selection, and quality service has resonated with strapped consumers. In the past six months, Amazon reported 16% revenue growth, while most retailers saw sales fall. "By investing back in the user experience, you get high loyalty and repeat usage," says Sebastian Thomas, head of U.S. technology research for RCM Capital Management, an investment firm with a stake in the company.

The performance is something of a vindication for Chief Executive and founder Jeffrey Bezos. After the dot-com bubble burst, critics hammered him for investing so much in technology and physical distribution centers. Some investors called for Bezos to pull back and produce more short-term profits. Now those heavy investments are paying off big time, helping the company sell an ever-widening range of products to more than 94 million customers. Amazon's stock has more than doubled over the past three years, while the Standard & Poor's 500-stock index is off about 20%. "Amazon has taken the long-term perspective," says Thomas. "Things they were criticized for have become essential assets."

There are limits to the Amazon brand. The company hasn't had much luck selling luxury items, and some expansions, such as its shoe site Endless.com, have failed to gain much traction, prompting Amazon's bid for rival Zappos in July. "They have not been successful in all categories," says Citigroup (C) analyst Mark Mahaney.

Such disappointments won't stop Amazon from new experiments, though. The company plans to dabble in conventional marketing this fall, with a national TV ad campaign. But instead of hiring a hotshot ad agency, Amazon started a contest in which anyone could create their own commercial. The company picked five finalists and then asked customers to vote for their favorite. The filmmaker with the highest average customer rating, to be announced on Sept. 21, will get a $10,000 Amazon.com gift card. "I am sure they will get a great deal of press," says Landor's Roth. "They won't have to spend a lot of money on media because they will get everyone else to do it for them."