Amazon CRM Systems Case Study by Top Experts

Introduction

Amazon provides all kinds of products customer needs in one place and the purchase process on website is made easy by the company through features like one-click purchase and card storing for future purchases. Other benefits that add to the user experience on Amazon website include product recommendations based on buying patterns, giveaways, kindle services like Prime and library and so on. Such innovative features and ideas that are capable of capturing the audience attention and increase their retention on the website actually result from analysis of the CRM data.

In the background, Amazon uses a very high end advanced CRM system that captures customer data including their personal details and previous purchases so that their experience can be tailored to their preferences to engage them on website. This paper explores how Amazon makes use of the CRM system to formulate marketing strategies and how the customers are affected by these. Based on the study certain general recommendations can be made for any organization for the successful usage of CRM for increasing user engagement and retention in a business.

Amazon CRM system takes care of some key functions in an organization including customer support, marketing, executive information, ERP integration, data synchronization, sales management and time management.

Company Background

Jeff Bezos found Amazon.com in 1995 with a vision to build a virtual book store at start. Initially, Amazon sold books directly and by 2000, it became a platform for reseller of different products. Now Amazon.com provides platform to four types of customers including sellers, content creators, organizations and individual customers. It now provides many more services in addition to the bookstore that include music, video products, games and other products are sold on the portal by resellers (Celep, et al., 2013).

Amazon Operations

Amazon uses an interactive technology on its website such that whenever a user comes online, a direct marketing principle is used for recognition of the customer through the information saved in cookies of the user machine. Based on this data, Amazon customizes recommendations for users using calculations done on sophisticated statistical software running in the background. Every product listed on the website carries information about the category they belong to and when this information is matched with data found in cookies, automatic recommendations can be made by the software tool such that customers are provided recommendations based on his or her interests. Besides this, customers also receive communication from Amazon through emails including purchase recommendations tailored to their personal characteristics or information. Amazon also allows customers purchasing from their website to put reviews on products which allow users to interact with each other. Amazon also gives special rewards to customers who provide valuable reviews.

Amazon was one of the first retailers to adopt data efficiency and highest level of customer services through optimization of product information on the portal pages. This information included product details, inventory status, price comparisons, delivery and payment options, promotional offers, fulfilment options, user reviews, cross-selling products, and more. All this information was provided through a single user interface that helped buyers take informed decisions. Amazon systems analyze the transaction details of customers and their product search histories to come up with personalized and optimized sales pages. Amazon uses Customer Relationship Management techniques for managing their customer expectations (CDW, 2009)

Amazon Information System

Initially Amazon has been using separate systems for order fulfilment and website management but in the year 2000, Amazon invested $200 million to develop a new comprehensive system which included “Epiphany” analysis software, “manugistics” logistics solution, Oracle DBMS and Excelon B2B integration system. Amazon had its own cloud solution called Amazon Web Service (AWS) which it used for managing information about its customers and products. It also builds a SAS (Smart Analysis Search) for tracking the frauds in the ecommerce space which works through analysis of the patterns of the user behaviour they display. This makes it possible for the organization to measure customer usage patterns and personalize their experience for providing better services.

Amazon runs its operations over a Service Oriented Architecture (SOA) based decentralized information system that is both robust and scalable. The information system of Amazon includes:

Transaction Processing System: For ordering products, Amazon makes a visitor create an account on the website which starts the process of collection of the customer data. Based on this data, a personalized experience in provide while using features like shipping cart, wish list, and single click ordering are used. Moreover, the CRM data is also utilized for promotional purposes in which email communications are send to customers. Registered users can also store their payment and credit card details to later use for fast purchases reducing the time lag between the intension to purchase and checkout and thus increasing the probability of a purchase and reducing probability of change of decision.

Recommendation System: Based on the behaviour of a consumer over the website including their search and purchase patters, a recommender system, which involves linking and data mining procedures, is triggered which comes up with product purchase recommendations. For instance, in case a person is buying a fiction book, the recommender system would through recommendations on related books. This makes Amazon appear like an interactive platform and increases customer engagement and satisfaction from experience.

Supply Chain Management: Amazon runs an automated warehousing and supply chain management system which is linked with the CRM system.

Enterprise Resource planning: Oracle ERP systems are used by Amazon for storing customer and other organization related data. This system allows execution of an automated order management process in which the system searches for nearest distribution centre, the moment a product is ordered by a customer and triggers the logistics processes for distribution. Because of automation in order processing system, human errors are avoided and these least instances of wrong deliveries or other order related issues.

Customer Relationship Management: The CRM system maintains a database in which a huge amount of data about customers and their usage patterns is stored including payment card details, transaction records and histories, order histories, personal profile, browsing history, customer feedback, wish list, product reviews, . Order processing systems makes use of the transaction records stored in the CRM databases to process orders and execute triggers delivery applications for initiating shipment. Further, the CRM data is also used for triggering automatic communication with customers through email or direct messages. Customer services, sales systems and communication management systems are integrated through this CRM system which is used by the three as a common database to work with. 

CRM Strategy

CRM is not just about the implementation of a technological solution but also about developing strategic relationships and analyzing CRM data to understand customers. Amazon uses a 10 step CRM strategy that includes following steps:

Investment: Amazon makes investments into its operations based on the value created for customers. It has invested $200 million to build its CRM system and also uses other technologies that are integrated with the system including warehousing systems, order processing, ERP, recommender system and more.

Relationship: The customer relationships are optimized by Amazon in various ways.

Reputation: While creating marketing messages, Amazon appropriately communicates its value and positioning

Relevance: Every customer community is provided services in appropriate ways. The recommender system makes use of the CRM data to come up purchase recommendations having list of products that are most relevant for a specific customer profile.

Values: A value that is enduring is created for customers of Amazon. The CRM system of Amazon works on three main ideas for value creation that include limitless inventory, high margin at lowest price and excellent customer care.

Touchpoints: Relationships between different kinds of consumer touchpoints are identified and managed by employees of the organization. The company uses various touchpoints to connect with the customers including cart, emails, checkout, mobile application, social media, call centre, registration, search and so on . For instance, an area containing cart and surrounding area is called as a “ready to buy” area by Amazon as it is the point at which the customer is ready for a purchase. At this point Amazon communicates with the customers through some assurance messages like “You can always cancel”, additional purchase options and other information such as related products, other products, bundled offers, delivery details and so on.

Imagination: Imagination is used to provide a unique customer experience. Promotions offers like Best Buy, Today’s deals, lightening deals, Amazon Prime and more are able to help retain customers on website.

Learning: Amazon captures data about consumers and analysis the same to learn something useful for the company from customers. For instance, Amazon allows users to add items they like to purchase in future in their wish lists that helps company understand the interests of users. This information can be used while doing direct marketing such that customers about communicated about offers based on their interests in various products (IMRAN, 2014).

Technology: Amazon uses sophisticated technology for managing CRM. On the first entry on the website, featured products are the first to see but after a registration already happens, subsequent visits are responses by messages coming from recommender system based on the customer interest and understanding of personality.

Stakeholders: While managing CRM, key stakeholders who can be affected are also considered (Jenkinson & Sain, 2005). When Amazon gets reviews from customers on various books sold over the platform, the same is also shared with its other shareholders including authors and publishers which can help the organization to make more profits (Dalfard, et al., 2012).

Amazon Loyalty Model

Amazon runs a loyalty program which delivers additional benefits to its customers through a Prime membership. On the website, A Prime Explainer page in maintained that clearly communicates the benefits those customers would receive from the membership. These benefits are decided on the basis of mapping done between customer preferences and Amazon’s capabilities. Some of these benefits include free two day shipping which is the most preferred speed at which customers would like to receive their products. Amazon also provides some add on services to its customers through third parties like Apple Music and Netflix.

With the loyalty schemes running on Amazon, many of the first time purchasers come back for a repurchase and the investment that the company has to make for repeat customers is lesser. For instance, for book purchasers, the average earning for Amazon is $50 per book for first time purchase and $40 per visit after that (Srivastava, 2001).

The loyalty program is build by anticipating the needs of customers, stimulating the same and providing them assistance in searching for the items they needs. Amazon also provides them information on products and recommendations on the basis of their search so that they can evaluate product and takes a decision on purchase. Once a customer goes in to purchase area, the assurance messages and additional information is also provided as the system us optimized. Post purchase, Amazon had additional offers and communication for engaging them.

For running the loyalty scheme, Amazon makes use of several strategies such as:

• A 0.16 cents system on Amazon.com in which customers are returned with a cash back of 0.16 cents if the price of an item falls after making a purchase. The amount promised is very small for Amazon but it does create a feeling of having integrity in the customer bringing in more loyalty.
• Amazon Prime targets the customer pain points and solves them in the membership program by adding them as benefits such as free shipping, lower priced items, and free kindle books and so on.
• Amazon is likely to face fierce competition from other ecommerce players such as EBay and Flipkart and thus, the company should keep monitoring their competitive strategies and respond to them to stay ahead in the competition. This would include an understanding of how competition is responding to marketing strategies adopted by Amazon as they may also affect the position of the company. For instance, in response to the reading library feature of Amazon, Flipkart also came up with a books library. Offer zone has become a common functionality now for most nig ecommerce retailers.

Conclusions & Recommendations

The paper explored the case study of Amazon and made an attempt to understand how they use their CRM systems for managing customers. It was found that the company uses a highly sophisticated CRM system which is integrated with its other information systems including ERP, Order Processing system, and Warehousing system. It also runs a recommender system in which the data about registered customers is used to understand their preferences to make recommendations on products that have highest possibility to making a sale for specific customer as the recommendations are personalized. The CRM data is also used for the purpose of marketing and direct promotion such that based on the customer buying and search patterns on the website, customized communication is sent to them over emails.

Based on the study, certain recommendations can be made for Amazon to improve its CRM systems and processes such as:

• Improving customer loyalty: Customers feel satisfied when they get what is expected but when they receive more than that then they become loyal. Based on the consumer buying patterns and understanding of their interest and preferences, Amazon can come up with special offers or other forms of benefits that can help them improve customer loyalty.
• Free Shipment: Free shipment is something all customers look for when purchasing a product online but Amazon does not provide free shipping on every product and thus, if the company could increase the number of products that get free shipping then it can encourage customers more into buying. Often for products that are low priced, shipping charges can actually discourage customers. For instance, if Amazon comes up with a 60% sale on books and as a result, a book price is brought down to only Rs. 90 then if there is 50 of delivery charges then the book purchase or sale would not make much benefit for the customer and thus, a customer may choose to leave the deal.
• Improve Prime Service: The membership is focused on getting more purchases from regular users as the benefits are tailored for them. This can bring in more loyalty from customers who are frequent purchasers but does not take into account the occasional customers. The membership is paid after a month which would further discourage occasional customers to get into Prime. Prime can be made more engaging even for these occasional customers such that they can be turned into regular purchasers. Prime program accumulates points for customers but this is done through third parties like AMEX and CHASE which can create confusion in customers on how these points are maintained and can benefit them. 

References

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