{"id":7027,"date":"2022-06-28T10:04:51","date_gmt":"2022-06-28T03:04:51","guid":{"rendered":"https:\/\/adtek.agency\/flywheel-marketing-amazon-starbucks\/"},"modified":"2026-10-20T23:04:19","modified_gmt":"2026-10-20T16:04:19","slug":"flywheel-marketing-amazon-starbucks","status":"publish","type":"post","link":"https:\/\/adtek.agency\/en\/flywheel-marketing-amazon-starbucks\/","title":{"rendered":"Case study: how Amazon and Starbucks made flywheel marketing work"},"content":{"rendered":"

Updated on October 18, 2026: figures reviewed and updated.<\/em><\/p>\n

Case study: how Amazon and Starbucks made flywheel marketing work <\/strong><\/p>\n

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.<\/span><\/p>\n

How Amazon drives flywheel marketing<\/b><\/span><\/h2>\n

Background <\/b><\/span><\/h2>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

The Virtuous Cycle left a distinctive mark on Amazon’s growth, as Jeff Wilke, one of Amazon’s top executives, explained:<\/span><\/p>\n

“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.”<\/span><\/p>\n

Goals <\/b><\/span><\/h2>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

Insight<\/b><\/span><\/h2>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

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.<\/span><\/p>\n

Creative idea<\/b><\/span><\/h2>\n

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.<\/span><\/p>\n

 <\/p>\n\"Amazon\n

 <\/p>\n

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.<\/span><\/p>\n

The Amazon Flywheel runs on two combined cycles<\/i><\/b><\/span><\/p>\n

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.<\/span><\/p>\n

The second cycle works like this:<\/span><\/p>\n