Amazon’s Customer Obsession
This is the second article by Marek Ròżycki and Thorsten Runge in a series dedicated to the e-commerce behemoth and its peculiar ways. While readers won’t be guaranteed that they will beat Amazon, they will at least be competing with an entity that is less enigmatic and therefore will be better placed to develop strategies and concrete tactical steps for their organisation.
In this article we cover another of Amazon’s Management Principles: Customer Obsession.
This is probably Amazon’s overarching management principle and the one that has helped the e-commerce behemoth reach its current position in the world of retail.
Amazonian leaders start with the customer and work backwards. Unlike many organisations that focus on what the competition is up to, Bezos’ company understands that if you obsess about your customers, you are unlikely to be under major threat from your competitors. It is this thinking that has allowed Amazon to become a catalyst for change in the last mile and far beyond.
So what implications does this have for an Amazonian leader? Above all, any project begins (and ends) with the customer.
When Marek started at Amazon and had to “sell in” a major new business opportunity he was faced with something he’d never heard before: “Ok so let’s have the press release.” Before any new project can take off, the project owner must prepare a customer-facing press release detailing why the idea is great and what it does for the customer. It is only after this initial idea passes internal scrutiny that the project has any chance of going further up the ladder. Of course there are several other steps and principles including the famous Word-only six-pagers, FAQs, and the pre-discussion silent reading time.
But what does this principle mean to Amazon? It streamlines decision processes and cuts out politics or any “non-value steps”. At all times, the Amazonian leader must ask himself, “Is what I am doing going to really help the customer?”
Let’s take a few examples relevant to the last mile:
Business performance metrics or KPIs are key to any last mile operator. Most companies will look at on-time delivery or first-time delivery. Not so at Amazon, here DPMO rules. “What’s that?” we hear you say. DPMO is a Six Sigma measure that looks at defects per million opportunities and takes account of the fact that there may be several defect “opportunities” per product (or service). That may sound a bit complicated, but actually it isn’t. All it does is translate what is usually measured as a percentage, into millions. Why is that significant? Well, if a business had, say, a 99.7% (sounds OK doesn’t it?) delivery performance and if that business had 1M orders, per day, per month an so on, then that means the business fails 3,000 customers every day, every month and so on. The “great” 99.7% becomes a “not so great” 3,000 dissatisfied customers – and that’s less great. Add to that the cost of calls into a call centre, and those are expensive, and every single point of DPMO starts to count.
Amazon Logistics (the BU Thorsten started in the UK, then known as ‘Delivery by Amazon’ and Marek took over in Europe) is a great example of what happens when a company has customer obsession. Interestingly, it all started in the UK.
The UK is one of the most important e-commerce markets in Europe and Amazon is market leader (having just topped a 30% market share…with eBay coming second with under 10%)*. Amazon was experiencing growing issues with the quality of delivery and equally importantly with the capacity operators were able to offer. Most “normal” companies would seek to work with operators to improve KPIs but Amazon just decided to take over the reins and show the market how to do things. Under 10 years later, Amazon Logistics is one of the top last mile operators with nationwide capability and an ever-increasing range of customer-centric features.
Another non-last mile, but customer obsession focused, example comes from Thorsten. One of his team developed a price comparison tool which showed other website prices for a product on the Amazon website, so customers could actually see if someone else offered the same product at a better price. Many other companies would shy away from potentially driving a customer to a competitor but Amazon didn’t because the tool was convenient for the customer and, at the same time, encouraged Amazon buyers to get better prices. The analyst was officially rewarded. Amazon customers were amazed and loved it. It actually drove conversion even when Amazon’s price was slightly higher than a competitor’s because they factored in the inconvenience of a late delivery by someone else. That’s where we get back to the importance of DPMO. How do we know that customers factor that in? Well, every senior Amazon manager is required to spend some time with customer service every year to hear what customers really care about. It’s an amazing experience but that will be part of another issue of our Amazon articles.
When we take a step back, it’s amazingly simple: think customer whenever you develop new products or deliver existing ones, and never forget that he has the choice to buy from you…or elsewhere. Some of the legacy carriers would do well to take a page out of Mr Bezos’ book… the ones that do, will surely be in better shape a few years on!.
About the authors
Marek Różycki is managing partner at Last Mile Experts, specialising in CEP and last mile advisory. He was previously VP Amazon Logistics EU.
Thorsten Runge is an e-commerce logistics expert and former Director European Transportation Development at Amazon. He now runs Thorsten Runge Consult, a boutique logistics consultancy, and is a PRO Partner for Last Mile Experts.
*Source: Edge by Assential