Jeff Bezos launches into his 2001 Letter to Shareholders by lauding Amazon.com’s arrival at a milestone moment. In July of that year, the company became able to afford both balanced growth and cost improvement. In other words, resources could be allocated to both sides of the business.
In July, Amazon had started discounting books over $20 by 30%, which boosted sales. The following January, the company lowered prices again by offering free shipping on orders of more than $99.
Bezos pointed out that, until that past July, Amazon delivered on two pillars of customer experience: selection and convenience. The cost-cutting measures meant the company could add another pillar and relentlessly lower prices.
He calls that part of obsessing over customers a key Amazon value. On the selection side, the company made a number of moves, including adding ever more items on their virtual shelves, launching computer and magazine subscription stores, and bringing in Target (TGT, Financial) and Circuit City as strategic partners.
In addition, it added convenience-focused improvements:
- Instant Order Update: warns customers if they try to purchase something they’ve previously bought.
- Self-service capabilities: enables customers to find, cancel or modify their own orders.
- Look Inside the Book: a big feature, allowing customers to read a sample, see the covers in high resolution, as well as read the index and table of contents.
Yet, Bezos says one of the biggest accomplishments was to eliminate mistakes and errors at their roots. This meant both better customer service and a reduction of variable costs.
Because of his focus on customers, an article at Forbes puts Bezos in the same league as the legendary Marshall Field, the man who coined the phrase, “The customer is always right.” Field introduced many important customer service elements in the late 19th century, including liberal credit, the one-price system and merchandise returns.
In the same article, we learn Bezos sometimes adds one empty seat at the conference table, with that seat representing the customer and “the most important person in the room.”
The 2001 Letter introduces us to another metric Bezos will return to, over and over, in his letters: the American Customer Satisfaction Index, conducted by the University of Michigan. Bezos reports in this letter that they received a score of 84 for the second year in a row, the highest score ever recorded for any retail or service company.
At the Smart Customer Service website, Maria Minsker lists 10 remarkable customer service innovations in the preceding 20 years (the article was written in 2015):
- Customer reviews: Amazon was one of the first to collect and display reviews by actual customers; reviews generally help de-risk purchases for customers.
- Recommendation engine: Amazon introduced real-time recommendations, based on previous customer purchases and browsing behavior, making it the master of cross-selling.
- Quick and easy checkout: Thanks to its ability to capture, manage, and populate checkout forms, Amazon makes One-Click Shopping possible. Reduction of friction at the checkout improves the customer experience and allows customer service agents to focus on more complex issues.
- “Democratically” tiering customer service: Amazon Prime allows customer to receive free shipping and a host of other services for a modest fee, which saves money for regular shoppers. One industry observer notes that Amazon is getting customers to pay for a loyalty program.
- A network economy: A system that brings goods, distribution, and technology together to create a vertically-integrated model of retailing.
- Strategic support for shipping: A proactive approach to heading off shipping problems; Amazon was a leader in the use of package tracking. Customers receive a tracking number and the company lets customers know of any delays.
- Deep-branding: Beyond supporting customers when product or delivery problems arise, the company also works with brands to develop deeper relationships with customers. That includes Amazon Exclusives, in which sellers provide exclusive products in exchange for enhanced promotion.
- Mayday button: Introduced with Kindle Fire in 2013, customers buying some tech gadgets get a Mayday button, which provides access to live agents 24/7 by simply tapping on a button.
- Automation: Amazon has robots doing basic customer service functions giving agents more time to deal with complex issues. In its warehouses, the company uses its Kiva automatic-attendant robots to cut order processing time.
- Staying innovative: This remains a company that keeps on searching for new ways to serve customers even more effectively through productivity breakthroughs.
The list above has two purposes. First to highlight some of the many ways Bezos has made breakthrough after breakthrough to better serve customers. Second, to illustrate the power of the Amazon platform, discussed in a previous article.
Marshall Field led a retail revolution when he offered above-and-beyond customer services to his customers. He prospered by doing the opposite of what many of his shady rivals did in the 19th century.
Bezos is his heir in the sense that he has been leading a customer-service revolution of his own, one made possible by the mastery of new technologies. Where traditional customer service has meant respecting and taking care of buyers, Bezos has done that, and more, by baking many new functions into technological solutions.
Customer reviews and recommendation engines both make customers more knowledgeable and empowered. Experienced store clerks once provided that service in department and specialty stores, but with ongoing pressure from customers to keep prices low, fewer and fewer experienced clerks are available. The outcome is more sales, which in turn provides capex for more technological development. With the existence of the platform, the need for capital expenditures is reduced, and margins can expand.
Another important part of the genius of Jeff Bezos and his Amazon colleagues has been to envision, and actualize, the use of technology to serve customers at new and higher levels. They have relentlessly applied technology to enhance the customer experience, improving everything from browsing to delivery at the door. A true revolution in customer service began, and continues, at Amazon.
Disclosure: I do not own shares in any companies listed, and do not expect to buy any in the next 72 hours.
