The keys to Amazon's success

The charmed life of Amazon's Jeff Bezos is a great article in the latest Fortune magazine about Amazon.com's success.  The key paragraph for me is the CEO's statement of their relentless focus on customer satisfaction -- even it means bad earnings for a few quarters:

For all of Amazon's ups and downs over the past 13 years, Bezos's strategy is one thing that hasn't changed. Customers want three things, he says: the best selection, the lowest prices, and the cheapest and most-convenient delivery. At Amazon, he explains, all decisions flow from those fundamentals. "What's not going to change over the next 10 years is incredibly important - you can build plans that are durable and meet important customer needs," he says, adding, "Ten years from now, customers will still want vast selection, low prices and fast, accurate delivery. In fact, it is impossible to imagine a world 10 years from now where customers will say, I love Amazon, but I just wish your prices would be higher."

A good example of this is Amazon's decision to build some excess warehouse capacity. As Amazon started to grow its business in the late 1990s, some members of the management team argued in favor of building just enough of the giant, automated warehouses - four of the $60 million facilities - to meet projected demand. Bezos decided to build five. "From a financial point of view, we should have built four rather than five," says Bezos, pointing out that in 1999, when the centers were built, "for a company that only had $1 billion in sales, spending $300 million on fulfillment centers is a very big investment."

Instead, he was positioning the company to pursue "more fundamental things": that is, keeping Amazon's customers happy. Remember all the post-holiday news stories at the turn of the millennium about little Timmy and Janie not getting their presents on Christmas because some fly-by-night toy site couldn't handle the holiday crush? Amazon came out smelling like a 1-800-FLOWERS rose. "A lot of companies stumbled and we didn't," said Bezos. "We had an insurance policy against that huge burst of demand" - the fifth fulfillment center.

Which leads up to the most important statement I think he makes:

"A lot of decisions around consumers are like that," Bezos says. "When you do the math it's not clear what will happen."

When you create a great user experience, the business will follow...

Brand Loyalty and the User Experience

I recently attended a brand presentation where the video below was shown. It’s pretty funny, and also (in my opinion) a perfect example of how interactive products and consumer-generated content should fundamentally change our traditional views of customer loyalty. Loyalty in our current environment is fostered through repeated great (user) experiences, not through advertising and coupons…

But even though I like the general point the video is trying to make, I think it stops a little short of the real issue. It is really just saying that we should listen to our customers better. But that's not enough -- we need to understand the customer in ways they don’t even understand themselves, and then build experiences that meet unmet (and sometimes unconscious) needs through repeated, positive experiences that deepen the customer-company relationship.

Uncovering these needs happens not through "Voice of the Customer" research programs, but through more contextual research efforts like ethnography and contextual inquiries (combined with validating quantitative research). I believe this is where traditional Market Research programs have historically fallen short -- although there is evidence that the tide is turning on this topic as HCI becomes more mainstream and user experience research techniques become more accessible.

In my view there can be no more powerful synergy in discovering how to deepen true customer loyalty than a collaborative effort between Market Research and User Experience Research. This view is very much in line with the thinking described in the Adaptive Path blog essay The Long Wow, which I have referenced before.

So in essence, my viewpoint is this: To not realize how important repeated, quality user experiences are to Loyalty would be an egregious misjudgment of what Loyalty really is about with an interactive product.