Amazon’s Prime Example of Focus on Loyalty – From A-to-Z

The 2015 Temkin Experience Ratings consist of an annual ranking of companies based on a survey of 10,000 U.S. consumers. The survey is used to evaluate customer experience with companies across three components: success, effort, and emotion.  The resulting scores form the basis of the overall Experience Ratings. The ratings encompass 20 industries – including airlines, banks, computer makers, hotel chains, insurance carriers, retailers, wireless carriers and others, for a total of almost 300 companies rated. With its depth and detail, it is widely considered one of the most comprehensive benchmark of customer experience in the industry.

In 2015, Amazon, likely due in part to the rise of their popular Kindle tablet, ascended to the top of Temkin’s Ratings in the computer/tablet maker industry. By overtaking a position previously long-held by tech-giant Apple, the positive growth of Amazon’s CX journey is on full display.

This was a significant development: Apple has long been acknowledged as an industry leader in customer experience; extreme demand for their constant release of new products likely indicates a loyal customer base. However, 2015’s Brand Keys Customer Loyalty Engagement Index reveals Amazon.com to be the leading online retailer in customer loyalty, whereas Apple held the top spot as recently as 2011.

While Apple’s loss of customer engagement and loyalty quality is noteworthy, it’s more evident Amazon’s innovative strategies have helped improve their customer engagement and loyalty significantly.

But how did they do it?

One hint is a seemingly frivolous and perhaps somewhat risky marketing strategy. Amazon that immediately credits their customers if they purchase an item on Amazon and the price happens to go down afterward, no matter by how little. This may seem insignificant considering the multitude of quite minor price changes happening every day in very small amounts, not to mention impractical considering the time and resources expended by the company to contact the customer, calculate the difference, and then issuing a credit. One could infer that the expense of the policy likely outweighs any monetary benefit.

But as many CX pros know, and what Temkin Ratings actually take into account, is the importance of emotion – that is, a customer’s feelings about interacting with a company or brand. By going out of its way to provide a seemingly minor benefit, the conspicuous nature of a digital cash handout to a customer has an emotional impact that far outweighs any potential corporate bottom-line impact. In doing so, Amazon is promoting its brand as one with fairness and integrity – as well as one that places the interests of it’s customers’ happiness first. As recent survey numbers suggest, Amazon’s customers have noticed and their strong loyalty underpins it.

Another hint at Amazon’s CX prowess comes in the form of customer loyalty.

While loyalty programs are ubiquitous these days, few companies seem to truly be able to reap lasting, meaningful CX benefits from their existence. Yet Amazon has mastered this through their Amazon Prime program – which, almost like no other – encourages, promotes, and rewards loyalty.

Amazon Prime now has more than tens of millions of members worldwide. Its origin was a discount program that offered free two-day shipping—for a monthly premium. This results is a net financial gain for Amazon for most of its Prime user base – which is composed of ‘casual’ consumers (customers frequently shipping large numbers of packages might have saved more under the program). Moreover, customer satisfaction increased, due largely to two factors: customers felt rewarded with free shipping, and the Prime program directly targeted a major consumer “pain point” – shipping rates.

The magic in all of this is the free shipping rate offered with Amazon Prime actually promotes expenditure and increases spending: a survey by RBC Capital Markets indicates Prime members spend almost twice as much as non-members. In addition to rewarding and encouraging loyalty, Amazon expertly promotes Prime by offering members the option of gifting Prime memberships to other people regardless of whether or not they currently have an Amazon account. By doing this, Amazon natively and organically gets current loyal customers to promote the Prime program for them.

The level of innovation – and raising the bar – in the realm of customer experience is good news. As Bruce Temkin states, “The changing computer landscape is forcing traditional players to face Amazon’s level of customer experience.”

With consumer connectedness at an all-time high due to unparalleled advances in media outreach, today’s digitally-enabled consumers are much more nimble, selective, and expectation-driven; they have gained significant leverage on brands. They are ready, willing and more than able to switch brands at the drop of a hat, which makes true customer loyalty increasingly important in our evolving CX market landscape.