Question

MANAGEMENT DECISION CASE

Amazon Dash: More Than Just a Dash of Service

Imagine you just walked into your local Target. What do you see? We’re betting that you picture the aisles of goods for sale. This might lead you to believe that retail stores are mostly in the business of providing products. However, retailers rarely manufacture the goods they sell—in fact, they’re actually in the business of service.

Most retailers rely on repeat business and referrals to earn their profits, and therefore need to maintain high levels of service. The American Consumer Satisfaction Index (ACSI) has been tracking U.S. consumer satisfaction across different retail segments since the 1990s. A quick review of the ACSI consumer satisfaction scores shows higher satisfaction for all types of retail stores, including supermarkets, specialty retail, and department stores, over other industries such as banks or cable companies. But the leading edge of customer satisfaction with retail is Internet retail, and its star is Amazon.com.³³

Amazon.com (Amazon), founded in 1994 by Jeff Bezos, has grown into the world’s largest Internet retailer, capturing nearly three-quarters of all online commerce in 2016. It has nearly 125 million customers, half of whom subscribe to Amazon Prime, which provides free two-day shipping along with access to a large catalog of streaming music, movies, and TV shows.³⁴ Many companies have a difficult time justifying the cost of providing top-notch service, but Bezos actually planned for it, budgeting a loss for Amazon’s first five years. It ended up taking seven years for Amazon to see its first profit! But as Leonard Berry once said, if a firm is able to deliver great service as its core differentiator, it can likely create a sustainable competitive advantage, and Amazon has done just that. Amazon’s investments and relentless customer focus have created innovations that align to the key service attributes of search, credence, and experience.

In the search attribute, which applies to Amazon due to the large number of products it sells, Amazon has invested heavily in algorithms that recommend and suggest products for each individual customer. Amazon is so focused on correctly understanding the customer that Bezos sees a future where a customer coming to Amazon’s home page finds “one product, the one you are about to buy.”³⁵

While the credence attribute typically applies to services where special skills are required, it applies to Amazon because it sells products online, where customers cannot rely on the usual clues as to product quality. To address this issue, Amazon allows customers to share their opinions (positive and negative) about both Amazon’s service and the products it sells. This provides potential buyers a consensus of the post-purchase evaluations of other customers. (In fact, Amazon was one of the first Internet retailers to establish this type of review system!)

Finally, in the experience attribute, Amazon designs its service to give customers as much control Page 288as possible, allowing them to create the experience that meets their specific needs. Through personalized settings and features, customers can “tell” Amazon exactly what they want to experience when they place an order. For example, Amazon’s customer can preselect the delivery speed, destination, and payment method, and then order simply with “One-Click,” a technology that Amazon patented. The customer can just as easily override these settings for a single order. In addition, when ordering items that need to be installed, Amazon allows customers to order a professional installer at the same time the product order is placed. And that’s just for ordering via their website.

Although it may sound like Amazon has done enough to stay at the head of the pack, it continues to innovate in ways beyond web-based ordering. A recent service innovation, the Amazon Dash, allows customers to immediately place an order for a specific item from any location in their home—all with the push of one button. The Dash is a consumer goods offering that combines a replenishment service with two different physical devices, the Dash Button and the Dash Wand. The main device, the Dash Button, is a small, single-purpose button that is predefined for a specific product and can be placed where that product is used. For example, the Dash Button for Tide detergent can be hung or mounted in your laundry room, and pushing the Dash Button automatically reorders Tide. To setup a Dash, the customer orders the button for the desired product type from Amazon and pairs it to his or her Amazon account.

The Dash Button is part of a complete platform, combining physical devices, software linked to the devices, and Amazon’s fulfillment capabilities. Hundreds of Dash Buttons, each for a different product, are available. And thousands of products are accessible as part of the Amazon Dash subscription service. In addition, Amazon offers the Dash Wand, which allows customers to say an item’s name (or scan a barcode) to quickly create a shopping list. And while the Dash is designed for consumable consumer goods, Amazon’s Echo and Dot products (voice-activated “assistants”) can help customers place orders from a listing of hundreds of thousands of Amazon Prime–eligible products.

Amazon’s customer-centric actions emanate from the top; Bezos has said, “If you’re competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering.”³⁶ And, to emphasize the point, Bezos periodically brings an empty chair into meetings, telling employees the chair represents the most important person in the room: the customer.³⁷

Questions for Consideration

1. Amazon invests in predictive algorithms to assist its customers in finding products they may be interested in. What are some concerns Amazon should look out for as it improves its search and recommendation tools?

Answer 1

The concerns that Amazon will have to look out for as it improves its search and recommendation tools are getting more data for making the recommendations effectively. As the recommendation tool is based on what the customers search and the item data collected from it. The more the data the effective will be the recommender system. Hence it should continuously focus on increasing its users and their data on the system.

A concern that recommendation tool should work on is that it is based on the search made by customers in the past. Whereas they should be getting recommendations about the new trends. The market trends update should change the recommendations provided to the customers too for getting a better response.

Another issue with the recommender system is that it changes its recommendations with the user's search preferences. Though the search preference of the user might change only for a particular product and they also want to purchase the product they were looking for in the past, the recommendation tool will only update customers with recommendations based on the current search.

Such concerns should be addressed while improving the search and recommendations tool by Amazon.