Amazon.com Case Study | Audio Transcript

his is Professor Michael Rappa from North Carolina State University in Raleigh, North Carolina. And I’m here to speak with you about my course, Managing the Digital Enterprise.

Few companies are as synonymous with online commerce as Amazon.com. And much of that comes from the early years during the dot.com boom. But having come through it all to this day, Amazon still is a very singularly important case study of online commerce, and perhaps has spent more than any other organization in honing that interaction that it has with millions of customers, in terms of finding the products and services that they want, and successfully converting those into transactions and end product deliveries.

And so Amazon is a very special case, and worthy of very careful study, if for no other reason than it has learned an enormous amount about how to do this process about as well as it can be, given our current state of technology. And so it’s worthwhile to take a careful look. And I know many, many people who might be listening and studying about Amazon have used Amazon.com, that this is an opportunity now to take a very close look about what it is that Amazon does with its customers as it pulls them through, or walks them through what can be a fairly complex business process from the start of locating a product or service, bringing them through that process to a kind of successful conclusion.

Amazon spent more than anyone else, I think, in trying to understand how to do that well. And what is more, the sheer size of Amazon, in terms of the enormity of the catalogue of products that they offer, I think points to the fact that they’ve studied this very, very carefully, and have really done more than any other organization, I think, to carefully monitor and assess the nature of their interaction with customers, and to try to optimize that process – to streamline it, to make it as straightforward, as easy as it possibly could, while at the same time, recognizing that there can be a fair amount of complexity and detail in order to do it correctly.

So perhaps the best way to understand how to design a fairly complex business process via the web, one can learn an awful lot from Amazon.com, take a tour, if you will, of the Amazon experience from beginning to end by using the site itself, and walking through, perhaps, a search and purchase process. And that’s what I’m going to try to do today, walk you through. And perhaps the best thing for you to do is to follow along with a browser, looking at Amazon on your end.

So if you start off looking at Amazon’s home page, you’ll see that there are certain standardized navigational features that help one go from the start through to a very vast catalogue of products and services, and trying to address the fact that you may come here knowing specifically what you’re looking for, on the one hand. Or the other side of this is that you might be still undecided, or in the mood to browse, or still making a decision between one of a few different manufacturers, or what have you.

And so if you look at that home page, you’ll see a number of things which are important right from the start. First, along the top, you see a kind of tab and menuing system that has toward the right side some of what are now standardized features, in terms of a link to your account, a shopping cart, a wish list that you might add products to that could be shared with others, a help link. And then they have also a kind of hot button box, in which they offer up specials.

If you’ve looked at Amazon over the years, you’ll know that they’ve evolved this top menu tabbing system. And they’ve greatly condensed it. And you’ll see now that at least at this point in their evolution, they are basically giving you a home tab. They are giving you a tab to your own store, so that once you log in as a customer, they begin to give you personalized selections that you might be interested in, and then a tab to the rest of their product categories, which number 32 currently, and allowing you, in a sense to expand through. And then on each of those tabs, they give you a subsidiary menu. The home tab gives you gift ideas, and a few other relevant links to learn more about the company.

And then, of course, prominently in the top is the search box, because the great majority of people who come to this site are looking for something, and they may have it in mind already. And simply putting it into a box, typing a few words into a box, selecting from a pull down menu what category they might be interested in – let’s say books – and then going and moving forward. Now the rest of the page, what you see is, I think, on the left-hand side a kind of browsing approach to navigation, where they list featured stores, new stores, subcategories of books, music, and DVDs, which are perhaps the three biggest categories on Amazon, and then a few other areas.

And so when you look at that menu, usually they’re highlighting certain kinds of stores, which either they’re trying to drive customers to, or bring to their attention. But you’ll also notice that they don’t give full lists. They allow you to expand lists, and move further as you want to down that hierarchy of browsing through materials.

On the right-hand side of their home page, you’ll see more promotional types of advertisements, things that they have on discount, on sale, things that they think are highly popular that people would be interested in, and trying to use that as a kind of promotional part of that home page real estate.

And then, of course, the central part of the home page, the center window, is really where they’re obviously trying to draw most of your attention. So whatever they’re trying to convey to a customer on any particular day is really going to be right there in the center. And that’s going to be something that changes from time to time.

What you’ll more often than not find there is information on shipping, because shipping is a very big issue with any large product catalogue retailer like Amazon. People are shopping for any of a wide range of goods, and trying to get that shipping cost down to a bare minimum through various kinds of incentives, and also conveying issues like speed, overnight shipping, and so forth. That’s usually pretty prominent there in the center of the page. Whatever kind of shipping program they’re running, they want to communicate that to customers quickly.

And then if you move further down the page, the one thing you notice about Amazon is that it has long pages that you can scroll down. They then feature other products, various kinds of stores, until you get down to the bottom of the page, where you see some of the more typical kinds of administrative functions like: How to track my orders. Shipping and returns. How do I get help? How do I recover my password? And so forth. So that’s sort of where it’s at. And as you kind of move down the page, things get less retailing and more administrative.

So on my tour of Amazon today, I’m going to look for a book I’m interested in. I know the author’s name: Steven Weber. It’s a book about open source. So I’m simply going to put that in the search bar, and pull down the menu, and select books as my category, and hit return. Steven Weber is not an uncommon name, but on the search return, his book is, in fact, right at the top of the list. The Success of Open Source. And just looking at that page very quickly, what you see is they give you what they feel are the most likely results that you might be looking for, and then they give you the rest of the results that correlate with whatever you’ve searched on. In this case, there are over 33,000 results that correlate with either Steven or Weber in one form or another. And so you can be sure that there’s some kind of calculus going on in the background there that improve the likelihood of me seeing at the top of the list what it is that I’m looking for.

Now it’s important to point out that Amazon, more than any other organization, I think, is doing everything it can to understand various aspects about you from your surfing behavior on the website. So everything that I’m doing as I go through this process is being logged with Amazon. And they’re using that information, sometimes almost instantaneously to decide what to show me next, and to help me along through this process.

And so you can bet that most of the things that you are seeing are not in any way a kind of random process. And especially if you’ve been a customer of Amazon before, and you’re already logged in as an account holder in Amazon, you can be certain that everything you see now is optimized to your past surfing and purchase behavior.

So if you want to do this experiment kind of de novo, what you’d need to do is go into your browser cookie cache and delete all of your cookies, or at least delete the Amazon.com cookies. And this way when you go to the Amazon site, they won’t know who you are in a sense. They’ll kind of recognize you only as a new user. And then you’d get a kind of more generic experience, if you will. So if you want to try that, go ahead. Right now I’m browsing Amazon without them knowing who I am. I haven’t logged in yet. But yet they’re still very good at picking out what it seems that I was looking for.

So one of the things that you’re going to notice about Amazon is that there are a lot of things happening on their page. So now when you look at the result page, you’ll see that you’re in the books category. The tab at the top changes to books. You have a bunch of subcategories like browsing subjects, bestsellers, New York Times bestsellers, magazines. And in other categories as well, major categories, you have again the search menu. But there are a lot of things going on in their pages. They’re trying to do their best to understand what it is that you’re potentially looking for, and throwing as much information as they can at you, without getting way too cluttered.

But I’m just going to select the link to the book, The Success of Open Source. Now I’m looking at the book page itself. And what I see is more information about the book. There are customer reviews. It’s giving me the list price right away. Along with that, it’s telling me very quickly that I qualify for free super saver shipping. It’s also showing me an image of the book. And then what you see here – and this is very important to Amazon – is they’re doing everything they can possibly do to get me to go beyond my initial order. They’re trying to help me understand whether this is what I want. They’re trying to give me recommendations on whether this is a good book or not.

But they’re also doing a lot of other things. First I’m seeing an advertisement for a clearance sale out of one of their other stores. So they’re trying to catch my attention that way. But also, you’ll notice that they have a kind of feature called Better Together, in which they match the book that I’ve selected with another selection. And that selection, in all likelihood, is based on some correlation of past users who bought the book I’m looking at, and bought this other book as well.

And so that’s a very obvious kind of matching selection. And you might say that, “Well if I’m interested in buying a book called The Success of Open Source, there might be a fairly strong likelihood that I might be wanting to buy this other book as well. And now they’re giving me a kind of “buy both now discount” that shaves some dollars off the price of both of them combined.

The other important thing to notice in this process here is to the right-hand side, they give you the shopping cart right away. So if you want to add this product to your shopping cart and move right along, you can move very quickly through this site. The other thing that you’ll notice is that they’re showing me right away here the availability of new and used copies of the book, which come from partner sites that are working with Amazon. And they’re showing me a fairly significant discount.

If I follow that link, what I’ll see is a host of other providers who are selling the book. Sometimes it’s new. Sometimes it’s a used book at some kind of a discount off the list price. And so these are coming from any of a number of stores which are now affiliated with Amazon, that basically are selling through the Amazon site, but are ultimately the individuals responsible for delivery of that product.

So you might ask right away – why is Amazon offering up all of these other vendors? In this case, over 50 other vendors who are selling the same book. Aren’t they sort of competing with Amazon? What’s happening here? So what you need to understand about that is that Amazon’s entered into a business relationship with these other vendors. They’re in a sense providing a retail service to these other organizations who have an inventory of the item I’m looking for, and can provide fulfillment for that item. And Amazon is essentially taking a commission on that referral of my purchase decision to one of those organizations.

And so in fact, Amazon – from what we understand, Amazon can potentially make a higher profit. That is their commission is higher on some of these referral purchases of new or used books than it is when it tries to sell a new product itself. And so that’s just a very interesting development. But it kind of puts Amazon in an interesting and sometimes odd position of really creating a kind of competition among many retailers for my dollar as the consumer.

And so in addition to adding into the shopping cart, showing me other ways to buy it, showing me used editions, showing me paperback editions at a large discount, they’re also showing me right away how to drop this product onto my wish list that maybe I share with family and friends, who may buy the book for me as a gift. And, also, a wedding registry.

Now if you weren’t sure that this was the book you wanted to buy, or you were still indecisive about this particular product, Amazon goes through a fairly lengthy approach toward giving you as much information as they could, not only about this particular book, but also about other items that might interest you.

So as I move down the page, I see a category called “Customers Who Bought This Item Also Bought,” and then they list a number of other books. The Cathedral and the Bazaar by Eric Raymond, an obviously highly correlated book with anything on open source. And so again here, what they’re trying to do is provide at least what are the five or six most likely highly correlated purchases with the book I’m looking at, and then allowing me to expand that out, to look at yet even more items, such that I might increase my order.

Then I come down, and there’s the section on editorial reviews. So these are the commercially published editorial reviews of the books, so that I can understand the book more. I get the obligatory product details like the publisher, the number of pages, the dimensions, and so forth. I get a summary of the average customer review. In this case, there are only six reviews. But in other cases, there may be literally hundreds of reviews, and sort of what the average star rating is. I also get to look at the Amazon.com sales rank, what are its most popular books from the number one most popular one all the way down to something into a million or so. It also is serving up, interestingly, something that we talked about in a previous conversation, sponsored links from Google as part of their ad sense program.

And as I skip down further, I’m now getting another segment, that’s “Customers Who Viewed This Item Also Viewed.” So as opposed to the correlation between buying one thing and buying something else, they’re showing me a correlation between me looking at this page, and what other pages people look at in conjunction with this one.

And then I’m getting now down into the customer reviews. So this is where people themselves can come in and write reviews on the book. And that’s a kind of very interesting phenomena in itself, people’s ability to make recommendations, positive and negative, about the things that they’ve read, or the things that they’ve purchased from Amazon, and establish themselves as reviewers on the Amazon.com site.

It’s interesting to explore that. I’d highly recommend taking a look further. What you’ll find is that there is a whole subculture of people, some of whom do an incredible amount of contributions to the Amazon.com site, completely unpaid, simply wanting to talk about everything and anything they’ve read or purchased, wanting to share their opinions with other people.

And that’s where the careful study itself – and I can’t spend much time with it right now – but I’d strongly encourage you to take a close look at it – what people write – and get into some of the deeper pages on who these recommenders are. What you’ll find out is that some of the more frequent people have their own pages, and you can learn more about them, and you can look at their book lists, and the books they recommend. It really goes deeper, and deeper, and deeper from there.

The other important feature that I want to point out, with respect to user recommendations, is what you’ll see. There’s a kind of button there that says, “Was this review helpful to you?” And yes or no. And so what they’re really doing there is soliciting feedback on reviewers. So anyone can review something, but not everyone is a good reviewer, or a reliable reviewer. And so the idea that now users can rate the reviewers, not just individuals rating products or services, that kind of lends some credibility to who the reviewer is. And then they give you some very quick feedback about how many people found that review helpful or not.

As you move further down the page, you’ll see – after you get the customer reviews – you’ll see something called List Mania. And these are customer-created lists of books along different topics. And one of the lists in this case is my Open Source Favorite List by someone who is an open source practitioner. So here’s someone who is perhaps an expert in the area. And what they’ve done is within their own account on Amazon, they’ve created a list of books that they recommend, along with a particular theme, perhaps offering up small reviews of each book of their own.

We’re not finished there. You’ll see there are more categories. The next one is called “So You’d Like To.” And this category is guides to various topics that feature this particular book. And the guides are written, again, by users like yourself or myself, who come up with a particular theme. One of the guides is called Harness the Power and Value of Open Source by an IT consultant.

And rather than simply giving you just a list of books, they kind of walk you through some kind of a tutorial that incorporates this book, and other books as well. So you have the list. You have the guide. You have recommendations. You have the kind of standard pro forma information on the book. What you see here is Amazon is doing everything it possibly can to give you every last bit of information to do two things: one, to decide whether or not you want to make this purchase, and number two, to try to sell you something else in conjunction with this book.

Finally on this page, as you move further down, you’ll see that they provide you a kind of menuing structure to work your way through categories where this book might be found, or similar items. They allow you a kind of categorical search to select from. They allow you to provide suggestions. Was this product information missing details? Are there typographical errors? They’re, in a sense, enlisting your help to make this page better than it already is, which in itself is a novel feature.

So let’s say you’ve made up your mind, and you want to purchase this particular book. You add it to your shopping cart. And what immediately comes back is just an enormous effort to sell you something else. And so they’re offering me up today an Amazon Visa card, and how to buy this product with my new Amazon Visa card. They’re showing me customers who bought this book also bought some other books, which they feel that I might be interested in. And you can go down the page and see just endless recommendations of things to add to my shopping cart, based on that simple act of me adding this one book.

So at this point, I can browse some more. Or I can move on and proceed to checkout. And if you look at the right-hand side, what you’ll see is right away you can see what’s in your shopping cart. You can proceed to checkout. You can check to show whether or not this is a gift for someone else as you proceed to checkout. But let’s just say I’m in a rush, and so I’m going to go. So I head over to checkout.

And now comes the critical moment. This is where I have to log in, whether I’m a new customer or a returning customer. Of course if I’ve forgotten my password, I can retrieve it quickly by submitting my email address. And now they give me some important information about this is a secure server. It’s going to encrypt my information. They also make it a bit more prominent there – the conditions of use and the privacy notice – and try to do everything they can to assure me that things are going to go well from this point on.

So now I log in. And since I’m an Amazon customer already, they have my address information. But the first thing they ask me is whether I want to ship to this same address or not, and if not, to put in a different shipping address. Once I’ve decided where I’m shipping to, then I get to make a decision about what kind of shipping I want, whether I want to go for the free shipping, or standard shipping, express shipping, and where each item that I’m purchasing is going to, so they also understand that not everything I might be purchasing in my shopping cart is going to the same address. I might be buying gifts for several people and sending them all to different addresses. They’re also asking me again whether or not this order has a gift item in it. And of course, I might want to learn more about shipping details, and the cost. And they give me links to that kind of information.

What you’ll see at this point on, is that things are fairly uncluttered, but yet they have all of the things I really need to do on each page. The next element is to give payment information. Since I’m already a customer, they already have my payment information on record. They’ve given me what card I want to use, of what information they have available. They’re also trying to allow me to pay with my new Amazon.com Visa card, paying with check or money order, to indicate whether there are any promotional codes, or gift certificates, or gift cards that I might have on hand. And then finally, they’re giving me a kind of summary of everything: my shipping address, my shipping options, the product that I’ve ordered, the items, and shipping and handling cost, and the total bill, any chance for promotional codes again, my payment information, and my billing address. All on one single page.

So after reviewing all of the details, I finally select to purchase the item. And right after that, it comes back to me and thanks me for my order. It gives me some key information that I might want right away, like how to review a summary, track my order status, edit shipping gifts, view my account, share my purchase order with other friends, create reminders for birthdays, create an alert on the author’s name if I want to, and so on and so forth. So doing all kinds of follow-up that are helpful, but also try to keep me engaged as a customer.

The other thing that Amazon’s doing is coming back and recommending still yet more books that they feel I might enjoy, based on my purchase. So what’s clear is Amazon is really relentless in their effort once they have you engaged in the site, to try to keep you engaged, and sell you more.

The last element of this store is upon purchase, I’ll get sent a confirmatory email with my purchase order and the key links to track and follow up on the delivery. So what we find on this relatively brief tour of Amazon.com is a kind of clever balancing between allowing me to move efficiently and quickly through a purchase process, while doing everything they can to expand my customer relationship with them.

I hope next time you have the opportunity to use Amazon.com, you’ll take a chance to look very closely at what’s happening at each and every step during the way. I think what you’ll find is that this is a fairly elaborate and complex process in which at every turn, Amazon is taking information about its interaction with you, and translating that information into something that it hopes is going to improve your experience with them, and hopefully on their part, expand their relationship with you to make you a larger customer, a longer-term customer, perhaps a more satisfied customer.

(Music)

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Unedited transcript of audio podcast produced on September 11, 2005.

Audio source file: http://digitalenterprise.org/podcasts/amazon.mp3

Michael Rappa is the Alan T. Dickson Distinguished University Professor of Technology Management at North Carolina State University.

For more information, please visit: digitalenterprise.org