Case study: how Amazon and Starbucks made flywheel marketing work

Updated on October 18, 2026: figures reviewed and updated.

Case study: how Amazon and Starbucks made flywheel marketing work

For many years, businesses built and ran their strategy through the marketing funnel model. Today, however, more and more companies have been gradually shifting toward flywheel marketing. To get a clearer picture of how flywheel marketing works in practice, Adtek walks through the case studies of Amazon and Starbucks, along with the lessons for businesses that are interested in building a flywheel of their own.

How Amazon drives flywheel marketing

Background

Amazon grew at an explosive pace, expanding well beyond its original book category into many other categories. At the same time, to reach success as quickly as possible, Bezos turned Amazon into “the everything store”, a shop where everything is available, and placed his bet on internet users.

When the dot-com bubble burst, some of those bets failed badly (companies such as Pets.com and Kozmo went bankrupt). Amazon held on, but at the time many analysts believed the company would not be able to survive the dot-com bubble.

Jeff Bezos sketched the Amazon Flywheel, also known as the “Virtuous Cycle”, on nothing more than a napkin. Amazon was one of the most firmly positioned companies of the whole internet revolution, because Jeff Bezos already had the entire picture worked out in 1994, when he founded Amazon.

The flywheel was born at a time when Amazon was an e-commerce company with lower margins than expected, and whether it could scale at all was still an open question. To respond to this situation, Amazon changed its model. Specifically, Amazon began its transition from an e-commerce company to a platform.

It went from a company that mainly sold its own products to one that built a market advantage by hosting as many third-party stores as possible. The flywheel turned into a growth strategy in which Amazon accelerated the process of offering a rich and wide selection, something that had taken Amazon many years to build on its own.

The flywheel marketing strategy took roughly a decade to fully take shape, and by 2017 to 2018, most of the products sold on Amazon came from third-party stores.

The Virtuous Cycle left a distinctive mark on Amazon’s growth, as Jeff Wilke, one of Amazon’s top executives, explained:

“You grow the company, and the side benefit of growth at Amazon over the past 10 years has been building a lower cost structure that creates momentum. We can make use of our purchasing power, and of the operations and logistics infrastructure we get from the way we use the website, and lower the cost per unit. We had two choices: keep that cash as a dividend, or lower prices. In the end, we chose to lower prices to complete the cycle of a great customer experience once again.”

Goals

When it comes to the Amazon Flywheel business model, think of low prices as the thing that first set the flywheel spinning. Once those low prices attract more consumers and make third-party sellers curious enough to join the marketplace, more and more stakeholders show up, and Amazon can then gradually start widening the market share gap between itself and its competitors in other online marketplaces.

Over time, the bigger and stronger Amazon becomes, the lower its price structure gets and the more conversions it generates. Amazon’s Virtuous Cycle keeps repeating until the flywheel builds its own momentum, giving Amazon the chance to improve its structure, cut costs and reinvest the money into other ventures. Think of Amazon Prime and the Fulfilled by Amazon (FBA) program: both are products of years of the Amazon Flywheel, and both let Amazon reinvest in further ventures that pulled it far ahead of competitors.

Insight

As mentioned earlier, Amazon’s flywheel marketing strategy starts from giving customers the best possible deal, and every action is guided by one central question: “What is the best thing we can do for our customers?” In its early days, Amazon set its flywheel turning by keeping product prices low. Lower prices attracted more and more customers, and from there, even more customers kept showing up.

Amazon kept the flywheel turning by letting third-party sellers, who paid Amazon a commission on their sales, join the game and sell products through the Amazon marketplace. This group of third-party sellers gave Amazon the means to fund the fixed and operating costs of the platform, and let it invest in more and better servers to host the platform and set up fulfillment centers in many locations around the world. All of this made the process far more efficient, and that in turn brought Amazon more money. Instead of pocketing it, though, Amazon reinvested the profit into the platform, which lowered the prices of the products it sold, and then spun the flywheel again through repeated loops, each one faster than the last.

At its core, Amazon’s flywheel idea is centered on the concept of value. As prices become lower and more competitive, more and more third-party sellers sell on Amazon. More third-party sellers means more product choice, which pulls consumers’ attention away from other marketplaces and toward Amazon. That is how Amazon was able to raise conversions while expanding and enriching the customer experience. Improving the customer experience by cutting product prices brought even more customers to Amazon.

Instead of distributing its earnings as dividends to shareholders, Amazon passed its profits on to customers in the form of lower prices, while keeping short-term operations running on the cash it held back. The extra money was also invested in useful and popular initiatives such as Amazon Prime.

All of these elements combine, feed one another and drive growth. The growth of the platform restarts the cycle by cutting prices and paying for improvements across Amazon, and those improvements in turn lower prices further and raise the quality of the customer experience.

Creative idea

The Amazon Flywheel cycle has growth at its core, but that growth is driven by a focus on customers first rather than on profit. You can see the Amazon Flywheel diagram below.

In the end, Jeff Bezos still grew Amazon on one principle: keep the customer happy. By offering a great customer experience at reasonable prices, Amazon reached satisfied customers, the people who are most likely to come back, and every return visit gives the cycle more momentum.

The Amazon Flywheel runs on two combined cycles

The first cycle starts with the availability of third-party sellers, which leads to more competition and a much wider product selection. Competition and a wide selection allow lower prices, and lower prices give customers a positive experience. A positive customer experience leads people to buy again and again, repeat purchases bring more traffic, and that traffic in turn attracts more sellers and creates overall growth for the whole platform.

The second cycle works like this:

• The company’s growth opens the door to a low cost structure
• A lower cost structure allows lower product prices
• Lower prices once again improve the customer experience

Execution

When you use the flywheel business model in your own strategy, it is essential to treat the flywheel as a mindset and think about it in a way that fits your business, not as a fixed action plan or roadmap to follow. Every change you make to your strategy should, at its core, aim to speed up your growth and bring you closer to your KPIs, even though some improvements will naturally have a more noticeable effect than others.

Here are some important parts of Amazon’s flywheel strategy that businesses can apply to their own campaigns:

Customer experience

Customer experience covers every interaction or event that happens over the course of the relationship between a consumer and a brand. For the flywheel model to actually work, you need to monitor every single aspect of the customer experience closely.

To do that, keep track of all your customer performance metrics on Amazon and on other online marketplaces, such as the number of support tickets, the support ticket backlog, average resolution time, average response time, customer satisfaction scores and so on.

As a seller, you should always be looking for new ways to improve the customer’s buying journey and optimize the user experience, starting from the very first time a potential customer sees your product and running right through to the moments after they have bought it.

There are some fairly obvious ways to improve the customer experience, such as pricing, product selection, delivery time and the delivery experience itself, as well as how you manage customer service.

Stay dynamic

One thing Amazon is famous for is putting a standout feature front and center every time it launches something new, whether that is Amazon Prime, Prime Video, Same-day Shipping and so on. Take a page from Amazon’s book and never let your promotional methods or strategy go stale.

To get the flywheel model started and then keep building momentum for growth, sellers must always be trying new ways to grab attention, whether that is through better ad campaigns or through more attractive product offers.

SEO optimization

Every product listing on Amazon and on other online marketplaces should be optimized for search so that it can rank. If it is not, you put yourself at a disadvantage from the start, which means you will not get any real visibility in the SERPs (search engine results pages).

Make sure you look closely at the target keywords for each product and work them into the product title, the description and the list of features. The more visible you are when users search, the more sales you get, and as sales grow, your ranking improves significantly too. SEO is a textbook example of the flywheel marketing model, and these small efforts have a lasting, continuous effect on your overall sales strategy.

Product analysis

Another important part of the flywheel concept concerns the products you have to offer. It is important to analyze your product catalog on a regular basis and to take a proactive, methodical approach to managing inventory. Sellers should aim to understand their best-selling products clearly, and to know just as clearly which products underperform, which ones have passed their expiry date, and so on.

Product analysis is not just about restocking when your inventory is about to run out. Instead, you should always be on the lookout for new opportunities to expand what you offer, and you should not be afraid to stop making a product if it is not meeting its goals.

Reputation monitoring

Last but not least, make your reputation a priority. When it comes to selling as a third party, or to generating any e-commerce sales at all for that matter, reputation is everything. We are all guilty of checking product reviews or brand ratings right before we buy, because it makes us feel more confident in our decision.

For that reason, online sellers should try to offer as many trust signals as they possibly can by making sure they have a legitimate website, social media presence, an existing customer base and a store of honest product reviews. By putting effort into tracking, managing and building your reputation, you will see the benefits in sales, rankings and overall revenue, because every stage of your customer journey is linked to the others.

If you have not started with flywheel marketing yet, here are some pointers:

• First, follow the same customer philosophy, then focus on quality products, how to grow sales and reviews, and then how to reach higher rankings.
• Find your areas of strength and focus on them, and identify and remove the root cause of every problem (and manage customer pain points)
• Decide what you want your brand to communicate and build content around that vision. This makes it easier to attract customers.
• Use Amazon’s A/B testing to better understand customer preferences. Testing gives you reliable data, saves time, and spares you the stress of running test after test without results.
• Run surveys or case studies and keep the results for future reference. You can then draw on that experience for later product launches and new strategies.
• Provide excellent customer service. Word of mouth is still one of the most powerful forms of advertising.
• Learn the game through optimization research, and invest in advertising and quality content.
• Expand your product line when the opportunity arises, to strengthen your brand’s reputation.
• Build a system in which each step of the cycle builds on the previous one and feeds the next, so the flywheel gains momentum (in other words, everything is connected)

Lessons

A flywheel can be applied to any kind of business. Although the Amazon Flywheel we have looked at was built specifically on top of an e-commerce platform, you can still try to work out the flywheel that fits your own business.

Keep these 5 points in mind:

• At first, it takes a lot of force to get the flywheel moving.
• As you add energy, the flywheel spins more efficiently.
• The flywheel also stores energy for growth.
• Once the flywheel has enough momentum to keep itself going, it also keeps releasing energy.
• At that point, nothing can bring the flywheel to a sudden stop.

If you have never thought of your business, one of its business units or a single project as a flywheel, now is the time to start building that way of thinking. The Amazon Flywheel does more than repeat the same loop: it gets stronger with every turn. Jeff Bezos started Amazon in his garage, and you have the potential to reach greater heights too.

In business, we always tend to think in terms of numbers. Stop for a moment and put yourself in your customer’s shoes instead. Ask yourself what you would actually want from the buying experience if you were the one buying. From there, you will be able to think through the next steps you need to take to become an expert in your field.

STARBUCKS AND THE FLYWHEEL MARKETING MODEL

Background

Over the past 30 years, Starbucks has grown from a regional chain of coffee shops into a major global brand and a darling of the digital world. Besides bringing Seattle coffeehouse culture to every shopping mall and suburban center in the world, Starbucks also pioneered mobile ordering and payment.

Starbucks’s digital platform, combined with its diverse revenue streams, was in other words the key that helped Starbucks hold steady through 2020. Like many traditional businesses, Starbucks saw its revenue fall to an all-time low in March 2020, and although it is now on the road to recovery, the company has never stopped changing along the way.

Starbucks keeps reinvesting heavily in its four-pronged technology innovation strategy, and that strategy drives growth across every part of its business

As a frontrunner of the digital age, Starbucks put a spotlight on the role of its first Chief Digital Officer (CDO) more than 7 years ago. A great deal has changed in the business world since then, but one thing has stayed the same for the company: Starbucks keeps placing its heaviest strategic bets on innovation led by technology.

“We believe that innovative ideas power the future, and we continue to build on this legacy,” Kevin Johnson, then CEO of Starbucks, said at an annual shareholders meeting.

That legacy goes back to a run of early successes in digital marketing, in customer-facing technology and in point of sale technology improvements, stretching back more than a decade. For example, the company led the market in 2011 when it first started accepting mobile payments, years ahead of big tech brands such as Apple and Samsung. By the time Apple began rolling out mobile payments in 2014, Starbucks was already processing 6 million mobile payment transactions a week in the United States.

Goals

In 2017, Starbucks unveiled its new digital transformation strategy: the “Digital Flywheel”. Built on four pillars (rewards, personalization, payment and ordering), the goal was to unify physical and digital customer touchpoints so that “we not only drive outsized business results in the near term, based on rewards, ordering and personalization, but we also make it very hard for digital companies to outdo us in the physical world,” said Starbucks Chief Strategy Officer Matt Ryan.

He went on to explain, “This fundamental modernization of our technology platform will replace legacy rewards and ordering functionality with a cloud-based platform, which will scale rewards and ordering, improve the organization of customer data, and integrate more tightly with store operating systems, including inventory management and production.”

Beyond enabling Mobile Order and Pay, Starbucks redesigned its customer app to use artificial intelligence (AI) to personalize product offers and discounts based on each user’s unique preferences and spending habits. On top of that, the gold mine of data collected through the mobile app is used as the foundation for executing a fitting marketing strategy, covering everything from choosing new store locations to planning staff logistics inside each store.

In March 2020, just as Covid-19 was bringing countries to a standstill, Starbucks CEO Kevin Johnson told investors: “In every industry, there are periods of disruption that create big opportunities for the businesses that adapt to that disruption, invest in the right ways and strengthen their differentiation and competitive advantage. I believe COVID-19 is one of those rare opportunities to transform ourselves and further differentiate Starbucks from our competitors.”

When Covid-19 hit its peak in the spring of 2020, Starbucks’s sales fell sharply, and so did the value of its shares. Unlike many of its competitors, however, Starbucks was in a better position to weather the storm thanks to its earlier investments in digital technology.

For example, even before the pandemic broke out, about 80% of Starbucks customers regularly used the app when placing “to go” orders. Drive-thrus and mobile-only locations were already well established before the crisis, so extending those approaches to additional locations went fairly smoothly when the company needed them most.

The result of these efforts was customer loyalty: although sales fell, spending per order rose every quarter of 2020, which helped the company make up most of the lost revenue. In fact, Starbucks’s revenue fell only 5% in the first three months of 2020.

Execution

Rewards

As of Q3 of fiscal year 2026, Starbucks Rewards had 35.8 million active members in the US (members who made a transaction in the past 90 days), and member spending accounted for about 59% of tender at Starbucks company-operated stores in the US (Starbucks, July 2026). At the end of 2018, the program had about 16 million active members, and Rewards transactions made up 40% of tender at these stores.

“Starbucks Rewards continues to be a powerful driver of loyalty, and we are thoughtfully evolving the program to offer more choice and flexibility to Rewards members,” Johnson said.

Personalization

In early 2019, Johnson told CNBC that the company was investing heavily in artificial intelligence (AI) to understand customers better and to personalize. The Rewards element of the Digital Flywheel supplies a lot of data on customer segments and individuals for these efforts, while other forms of digital connection, such as the Mobile Order and Pay system, remain in place. Overall, the company reported having about 30 million digital connections feeding its personalization systems. Everything from the time of day people usually order to the drinks they usually like can be combined with other data, such as geographic location and time of year, to suggest items and personalize offers.

The company has also brought its consumer insights, partner analytics and marketing analytics functions together into a single center of excellence to mine the data from these connections and turn it into more personalized customer experiences.

Payment

Starbucks’s mobile payment ecosystem still has more users than Apple’s, but the company never stops pushing forward on payment innovation. Starbucks is also a partner of Bakkt, a digital asset platform launched in 2018. According to press reports (March 2019), Starbucks received a significant equity stake in Bakkt without putting in any cash, and in return lets customers pay with cryptocurrency in its stores through Bakkt’s software (the cryptocurrency is automatically converted into fiat currency).

Starbucks is still concentrating its resources on improving payments and adjusting them quickly as needs change. Payment is another element that works hand in hand with the rewards program. For example, the company once updated its reward redemption process with a series of changes, including changes to the points earned when customers link a prepaid card or a Starbucks Rewards Visa credit card.

Ordering

The goal here is to make ordering quick and convenient for the customer, and Starbucks adapted the way Mobile Order and Pay works through its Starbucks Delivers program. Working in partnership with Uber Eats, Starbucks has been gradually rolling the program out to more and wider markets. As of April 2019, the company had brought it to about a quarter of its stores in the United States.

“From a customer perspective, Starbucks Delivers is being seamlessly integrated into the Uber Eats mobile app, allowing full customization of beverages and full integration into our store operations to ensure a premium experience for Starbucks customers,” Johnson told investors.

Results

While still in the middle of its 5-year innovation strategy through the Digital Flywheel, Starbucks has already seen well-earned results. Executives say the annual and quarterly financial growth they report is a direct reflection of their ongoing commitment to a digital transformation that never really ends. In fiscal year 2018, Starbucks posted double-digit growth in top-line revenue, reaching USD 24.7 billion. In Q1 of fiscal year 2019, the company grew 9%, and Starbucks shares had been climbing steadily since the start of that year.

At the shareholders meeting, Johnson named the Digital Flywheel as one of three strategic business initiatives that would carry Starbucks forward, alongside its advantage in innovating the retail experience and its beverages. While the flywheel forms the center of Starbucks’s digital strategy, the company clearly stays flexible and ready to move into other areas of innovation as well. For example, it was halfway through a two-year exploration of bringing digital traceability to its coffee supply chain. Starbucks also announced that it had invested USD 100 million in Valor Siren Ventures, a new incubator for food and retail technology startups.

Although its digital investments served Starbucks very well in 2020, the company still plans to expand its store footprint to 55,000 by 2030. It also opened the ASU-Starbucks Center for the Future of People and the Planet in December 2019, a new purpose-driven initiative to explore “how businesses can deliver customer and human experiences at scale while contributing to the care of humanity and the protection of the environment.”

Summary

It is fair to say that, with technology advancing and a constant drive to innovate, Starbucks did not sit on the sidelines: it was quick to pick up a new way of marketing, flywheel marketing, and rolled out its Digital Flywheel to gain an edge over competitors. According to Rosalind Brewer, Starbucks COO at the time, AI plays an important role in the company’s future. In practice, that means Starbucks can keep making relevant recommendations to customers, manage its inventory and improve the speed of service in its stores. AI is also being used to drive a new initiative that introduces two-lane drive-thrus at some stores.

As part of its commitment to responsible and inclusive business, since March 2021 Starbucks has partnered with Aira, an app that connects blind and low-vision people with remote assistants, so customers can use the service for free in its US stores. When they use Aira, people who are blind or have low vision can find their way around Starbucks stores (and around the social distancing measures in place) with ease.

This article was compiled by Adtek. The Starbucks section draws on original content from Intelligent Automation Network (2021). Updated on October 18, 2026.