5.4 The Secrets of Amazon.com

 

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The E-Business, the E-Customer, their Relationship and Interactivity

 

 

KunnskapskildenE-Business –
E-Business, E-Customer, Relationship and Interactivity

 

Dissertation
The E-Business, the E-Customer,
their Relationship and Interactivity 

Jan Vig 

Dissertation  av Jan Vig om E.Business, E-Customer, Relationship and Interactivity  (286 sider) i forbindelse med Masterstudie i Information Technology and Communication Juni 2000.

 

The E-Retailer Business, the E-Customer,
their Relationship and Interactivity

Table of Contents

Chapter One Introduction to the study

Chapter Two Business in Cyberspace

Chapter Three E- Retailer Commerce

Chapter Four E-Customer, Relationship and Interactivity

Chapter Five A Successful Case study – Amazon.com

Chapter Six The Future, Critical Success Factors, E-Business Strategy, Results and Conclusion

Appendix

 

Chapter 5

A Successful Case Study Amazon,com 

 

 

Chapter Five A Successful Case study – Amazon.com

5.1 Introduction
5.2 Amazon’s position
5.3 About Amazon.com
5.4 The Secrets of Amazon.com
5.5 Summary

 

 

5.4

The Secrets of Amazon.com 

 

 

 

According to Firmware (1999):

Amazon.com is not successful because of its online credit card authorisation system.
Rather, Amazon.com’s success is mainly due to its superb customer service,
based on respect and trust and enabled by its systems,
which in turn drives sales of its books, CDs, and videos.
For Amazon.com, credit card transactions are vital since they facilitate
the interaction between buyer and seller.
But the credit card transaction comes at the end,
not the beginning, of that interaction.
At the beginning, what is required is establishing trust and forming a relationship with the customer.

Amazon.com has proved two things: (Birch, Gerbert, & Schneider, 2000:17)

“E-Customer can sell goods successfully over the Internet and E-tailing can take significant market share from traditional retailers.”

 

Jeff Bezos, Amazon.com’s founder has laid down what amount to three basic rules for his staff that capture the spirit of Amazon.com: (Birch, Gerbert, & Schneider 2000:17-18)

  • Be obsessed with E-Customers
    Concentrate on the whole experience the customer has with Anazon.com and constantly look to improve every detail of their interaction and Amazon.com’s business processes.
  • Remember that Internet is still in its infancy
    Always look for new opportunities and possibilities.
  • Satisfy each individual customer
    Dissatisfied customers don’t influence five friends but 5,000 news groups readers. 

 

 

Amazons success has been driven by a number of other important principles it has followed: (Birch, 2000; 18-19)

  • Strategic choice of goods
  • Systematic expansion to become a shopping hub
  • Formation of strategic partnerships
  • Early internationalisation
  • advertising through banner and network of affiliates on the net
  • Excellent customer loyalty
  • Creating value through investment 

 

 

Amazon.com was one of the first E-Retailers to convert massive numbers of their browsers into customers and still has a high conversion rate among first-time users. Amazon.com is quick to point out to its users the security of the transactions that they may make and gives further information if requested. It manages the first time buyers process extremely well. The data it needs to collect to allow a first-time purchase, name, address, credit card details, etc., are just as comprehensive as in other Internet stores, but its steps are well structured so that the customer feels logically led to the purchase, rather than feeling ‘I want to buy a book, why do I have to fill in all this stuff now? Amazon.com also makes second time purchasing easy by giving users a unique name and password.
They also refer many times to their generous returns’ policy. In this way it has achieved a high conversion rate for first-time users, which has been reflected in their rapid growth.

 

As well as these ‘tools’, Internet customers expect to be able to navigate through the site easily. Many studies have shown that attention and patience are in extraordinarily short supply for he Internet user, and personal experience will tell E-Customer that they are right. Each time a visitor to a web site has to think where he is and where he wants to go makes him more inclined to leave with the next click. For a customer, learning the way around a web site has to be much easier than learning to use other software. It has to be similar in ease of use to picking up web site that takes the visitor quickly to his goal without stress.

Users should be able to go through the site intuitively. A visitor to a web site should be able to find his way around without any specific help. The visitor should reach the desired information easily and quickly.

 

Many shoppers value good product-recommendations, but buy on the basis of different types of recommendations. When choosing a book from Amazon.com’s web site the E-Customer gets not only general information on the book, but also the book’s sales ranking at Amazon.com. Further he gets reviews by the author, the publisher and readers.  Amazon.com will also give the E-Customer further book recommendations on this same subject area. Amazon also lists the three most frequently purchased books that buyers of the same book also bought. Amazon.com’s music shop and  ‘Recommendation Centre’ research what kind of recommendation customers respond to and offers different types of music recommendation.

 

Here are some factors to consider which Amazon.com does in a good manner:
  • com offer what the E-customers want, the way they want it.
  • Amazon has tailored the web site to the E-Customers. It sells mainly to individuals and delivers an ‘infotainment’ experience designed to continually expose E-Customers to potential items for purchase.
  • com is investing in the E-Customer. It gives E-Customers something before asking them to spend money. Amazon.com provides recommendations for instance. This represent values to potential customers and is developing customer trust.
  • com provide superb customer service. It is known for its customer service and fulfillment policy. Further properly implemented online systems, complemented by well-trained, responsive staff.
  • com give the E-customers control over each transaction. It gives the E-Customers immediate feedback at every important point of the purchase cycle and use e-mail and the web site to keep them informed of the status of their order.
  • com respect the E-Customers’ privacy. It has implementing a trustful privacy policy and informs potential customers that their contact details and other information will be secured and guarded.
  • com integrates the web site with the company’s other business processes.
  • com establishes and maintains a relationship with each customer It provide the E-Customers with a personalised online experience. The E-Customers have ability to monitor an order’s progress, even to change the order after it has been placed. This provides the E-Customers with a sense of control and evidence that the company values and recognises their needs.
  • com win and hold the E-Customers’ trust. Once trust is established, most customers feel secure enough to give their credit card details online in exchange for products or services.
  • com provide secure online credit card transactions
  • com is offering security information and guarantee. Amazon.com offers its customers the «Amazon.com Safe Shopping Guarantee.» Essentially, Amazon.com assures its customers that they will have a 100 percent safe shopping experience. It also gives the customer an integrated way to order via phone if they don’t feel comfortable ordering online.

 

 

Bezos has earned Amazon.com its leading edge status and success. His ten secrets: (Saunders, 1999)

  1. Understand E-Commerce.
    One of the most important thing for a company is to understand that E-Commerce is something different from Commerce in the offline world. Internet is different and the E-Customer has to look for new possibilities to attract visitors to E-Customer site. The key to profitability on the net is traffic. Further the E-retailer have to be customer focused in everything they do, the Web site has to constructed in the way that suits the impatient customer, change regularly the Web site, but be consistent, stay ahead of the technology and listen and make conversation with the customers. It is important to use all the free promotion opportunities available online. And make it easy for the customer to find the company.
  2. Build an entrepreneurial team.
    As an E-Retailer E-Customer should always seek out the best people, but who are they? They have to have different talents, they have to be curious and willingly to live with the change and see problems as opportunities for change. Further it is important to give people reasons for staying by giving ownership in the company
  3. Bezos is quite clear about the company’s purpose it is to build customer loyalty trough
    customer, product, technology and distribution focus. He is further focusing on traditional value proposition as costs, quality, speed, service and innovation.
  4. Brand the site.
    Bezos has used branding to make the Web site Amazon.com into one of the hottest online retail sites. He stresses the importance of traditional marketing and to promote branding as a corporate value. Further his advises are:
  • Grow brand name today
  • Understand what is behind E-Customer brand identity
  • Make public relations as important as advertising
  • Make E-Customer name mean something
  • Share the wealth
  • Regognise that service quality is a perception, not necessarily a reality.
  • Deliver what the brand name promises.
  1. Get and keep customers by offering value
    Of the company’s customers, from more than 160 countries, approximately 75% are repeat buyers. The company is practising customer-centricity and is going to extraordinary measures to keep it’s promise to their customers. He know that his customers want availability, selection, delivery lead times, quality, reliability, service, customer-friendliness, knowing the costs. His advises are:
  • Leave visitors to the site with a positive impression
  • Give potential buyers other reasons for visiting the store.
  • Make a customer’s encounters with the company a delight.
  • Personalize and customer service.
  • Perform as promised.
  • Exceed expectations.
  • Communicate the importance of customer satisfaction, beyond all other value.
  • Create ownership.
  • Do something better than anyone else does it.
  • Marketing knowledge as well as product.
  1. Set up a distribution network.
    The secret of retail is offering the right product at the right place at the right time with the right packaging in the right quality at reasonable price to the right customer. Failure to do this means lost customers. His employees have the following points of contact where they have to watch up:
  • The visit
  • The point when they place the order
  • The e-mail message that they get when they order has been received and is being processed, with a projected due date
  • The final delivery of their order

The main things to do is to make sure a safe, fast delivery, that means ship on time and get orders to the customer in a safe way. Further monitor and act immediately by revisit the system to ensure that it provides what the customers want. The main components in Amazon.com’s distribution network is: begin with the customer, be alert to the various ‘moment of truth’, tie distribution logistic to marketing issues and provide a single face to customers.

  1. Stay lean
    Watching overhead enables Amazon.com to spend more on branding and business expansion, allowing it to grow fast. From lean management there will be money available to accomplish the other values critical to the organization’s success, satisfied customers, ever-increasing traffic to the site through strategic alliances, product extensions, and new service offerings and brand enhancement to differentiate Amazon.com from both brick-and mortar retailers and e-competitors.
  2. Practice technoleverage
    com is a retail company, but also a technology company. Amazon.com was launched with its own software, developed by Amazon.com. His advises are conduct technology assessment, be willing to invest in new technology, always set the example, conduct frequent technology audits, acquire proprietary technology and overcome technology shortcomings. Further he stress that what programmers can create, another can copy, so keep innovative.
  3. Constantly reinvent oneself.
    That means to be innovative. Listen to the customers, make conversation with them and get the customers to be part of the companies innovation. Further monitoring the surroundings trough business intelligence methods and be first with new ideas.
  4. Grow by strategic alliances as well as acquisitions.
    There are three ways that Amazon.com will show profit, by finding new customers, increase the number of purchase per customer or increase the frequency of purchases.
    Bezos has used both acquisition and strategic relationship to grow sales, improve services and bring in new customer. Affiliate program is one. Bezos demonstrates that in partnering with other firms he know not to limit himself to acquisitions, building a culture receptive to partnership, have purpose in partnership, be farsighted about customer expectations and grow globally.

 

Amazon.com knows it takes too long to ‘build for growth’ on the Web. There is too little time in Web time to do so. Better to buy what E-Customer need or partner with another business both online and offline to provide the factors for success.

 

Only time will show whether Amazon.com will be successful in the future in terms of profitability. Today it is no doubt that the company is more customer driven that most of the online players.

 

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