The Implications Of Customer Loyalty in Relation to Amazon
This report aims to review the marketing topic of ‘customer loyalty’ and how it relates to the company Amazon. For purpose of this essay and in a business context, ‘customer loyalty’ can be defined as something that consumers may exhibit to brands, services, stores, product categories, and activities. The term customer loyalty is different to brand loyalty; this is to emphasize that loyalty is a feature of people, rather than something inherent in brands (Uncles, Dowling, Hammond, 2002). This essay relies on the use of secondary information from a variety of academic and non-academic sources.
Having loyal customers is an essential foundation for success. Loyalty is an economic and competitive necessity. The impact of brand-fests is paramount in the erection of customer loyalty. It is more effective to focus on retaining the existing customers rather than acquiring new customers. In today’s digital era, most of the companies like Amazon, Alibaba and Walmart are just a click away, their new marketing style is the loyalty of the customers. According to Isoraite (2016), an exceedingly loyal customer base is a central part to any company’s basic strategy. Keller (1993) defined customer loyalty as repeated purchase behavior driven by the love for a certain product over a period. Shankar et al (2003) identify that customer loyalty includes mood and attitude of loyalty and is not be viewed merely as repeated purchase behavior. Commitment is a key component in gaining customer loyalty. Many researchers and consultants say that there must be a strong commitment to a brand and this can be evidenced by the existence of true loyalty, that could be measured by asking people how much they like the brand, feel committed to it, have a reliance on it, will be recommended to others and have positive feelings and views about it.
Loyal consumers are crucial to gain profitability and sustainable business, because they bring a good amount of earnings by accounting for only a small amount of time and energy to the business. According to Pareto rule, 80% of the profits are created by 20 % consumers. Hence, the 20% of consumers are the company’s essential consumers or named as loyal consumers. In view of this fact, companies must know the relationships between customer retention and other parts of the business, which comprises of four vital elements: customers, product or service offering, employees and measurement systems. For customer retention there needs to be customer satisfaction, quality, consistency and/or price of product or service, customer focused employees and real time and responsive data analysis. If loyalty to a brand can be increased by leveraging the four vital elements, the revenue flow from loyal customers becomes more predictable and can become considerable over time. Analyses of cases such as Federal Express, Pizza Hut franchises, and Cadillac dealerships have shown how customer loyalty benefits profitability..
Hyken (2016) suggests maintaining customers by maintaining their trust, through creating harmony. This harmony could be created through a consistent and predictable above average experience, all the time. He also emphasizes creating an emotional connection with the customers which is the key part for any business. Furthermore, he added that there is a big difference between satisfied customers and loyal customers. Satisfaction is just a rating, whereas loyalty is an emotion. To get emotionally connected with customers, make them feel special, treat them like they want to be treated and thank them for their business Hyken (2016). Consistency without fail, is crucial to getting loyal customers. Hyken (2016) believes, rather than getting the customer for a lifetime, focus on next time or every time.
Taking into consideration aforesaid theories about customer loyalty by different authors how has Amazon consistently retained such a large-scale customer base?
It is irrefutable to say that Amazon dominates the e-commerce and general retail market nowadays, considering this, Amazon is simply “too big to fail”. When a company steadily delivers greater value and triumphs customer loyalty, market stake and returns go up and the cost of obtaining new customers goes down. If the company succeeds in reducing the average cost per customer, straight away profitability would increase.
Amazon in recent times, has become the most valuable and profitable e-commerce and retail company in the world. Amazon’s prime membership has been proved as the key strategy of its growth throughout in 2017. Some of their strategies to seek and maintain customer loyalty have been, annual $99 subscription fees with which members receive free two-day shipping for most of their purchases, unlimited streaming of movies and television shows with Prime Video and lending library services for Kindle users, also special discounts on products only available to Prime members during the Prime sales. Gradually, Amazon has managed to entice an estimated 70-90 million people to sign up for membership. It was also reported that in 2017, Amazon shipped more than 5 billion items worldwide, on time and without fail. As a result, loyal consumers started preferring Amazon for almost every activity possible in their shopping experience. It was mentioned by Gremler and Brown (1999) that if loyalty towards a brand is increased, the revenue flow from loyal customers is boosted.
Amazon’s next agenda is signing up more third-party sellers program, which both grows their business and provides their loyal customers with even more shopping experiences. One of the most interesting facts about Amazon is that it is truly the ‘one-stop shop’ for consumers.. Such third-party agreements are appealing to many small businesses and individual sellers, as the company reports that more than 40% of Amazon’s total unit sales come from third-party selections. Over the past holiday seasons, Amazon reported more than one billion products ordered from small businesses and entrepreneurs worldwide. For activities like browsing for new deals and discounts, comparing prices, and checking availability, Amazon is head and shoulders above other marketplaces and retailers and it is for this reason that small businesses seeking new customers, might find selling through Amazon attractive. In this third-party program there are open or approval only retail streams. Open sellers are limited to a range of product categories in which they can list their products for sale, whereas, the approval only product categories, are subject to agreement by Amazon and require the sellers to step up their level of commitment, to a professional level, which also includes an additional $39.95 monthly fees.
Bindra (2018) has charted the grow of Amazon customer base, particularly in relation to Amazon Prime services and customer loyalty. He mentioned that customer loyalty depends on the Voice of the Customer (VOC), being what customers like most and what customers dislike the most Bindra (2018). Amazon has quickly determined three points of what customers dislike most: delay, defect and out of stock. Once these issues were identified, Amazon proactively responded to these issues Bindra (2018). Amazon was one of the pioneers in same day or two delivery, around the world, where ever possible. They set the vision as to build the earth’s most customers centric company and a place where the customer can come to find and discover anything and everything they might want to buy online Bindra (2018). Moreover, to meet the fast-paced real-world requirements, Amazon has created an ownership and responsibility in every employee within the organization and initiated taking quick decisions with 70% information in hand and feedback from the market Bindra (2018). For instance, Amazon Prime was launched in 111 days and as the first product is never be the last product, improvement and modifications for Prime service continue to evolve in response to current product and services and technology, to enable the company to stay longer in the competitive environment Bindra (2018). Likewise, Amazon believes in value innovation, instead of value imitation. Because of the success of Amazon Prime services, the company succeeded in multiplying its recurring income with loyal customers. Eventually, to satisfy the customer on time, Amazon put emphasize on 80% Product and 20% Promotion which signifies that they have focused more on building a good product. They believed that exceptional product experience would bring numbers loyal of customers in the future and it was evidenced in 2017 with majority of sales to Prime members. In 2018, Amazon is expected to be the largest e-commerce company in the world Bindra (2018).
Another reason for the success of Amazon Prime is when customer purchase an item on Amazon and its price happens to fall, the difference is immediately credited back into customer’s account even if its 0.16 cents and that is what makes Amazon different from everyone else. With the 0.16 cents transfer, Amazon tells customers that it runs an honest business built on integrity and that it always puts the customer first. Similarly, while the minute refund might not make a big disparity in the bank accounts of your customers, it can mean a big difference in terms of the place you have in their hearts.
Amazon and their Prime membership, demonstrates the value of a company paying attention to and proactively growing customer loyalty, evidenced by Amazon’s loyalty sales in 2017. Amazon can provide express delivery, guaranteed the quality of product and negotiate out of stock items, where possible in response to VOC and what customers dislike most. Customer loyalty research indicated the need to satisfy trust, emotional engagement as well as product/service reliability, quality and value for money. Amazon response to this information has been able to fill the gap between what customers expect from loyalty programs on both a rational and an emotional basis. This is what made Amazon now the world’s most preferable e-commerce company. With a view to further expansion of the business and enhancement to customers, Amazon are actively growing their ‘Third Party Seller Program’.