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LUT School of Business and Management
A350A0050​ Business Research Methods
Course Mentor:
PAPER TYPE: QUALITATIVE RESEARCH 2016
Is Amazon a customer focused company: customer perspective.
Case company:​ Amazon
Date: 06.10.2016
​Prepared by: Group 10
Md Zulfiqur Islam 0459285
Petruchuk Liisa
Rohan Erava
Sultan Islam
Tatichek Gleb 0499290
1 Introduction 3
1.1 Research aim 3
2 Theoretical background 4
3 Case description 10
3.1 Introduction to Amazon.com 10
2.2 Customer focus and Amazon.com 11
2.2.1 Product stage 11
2.2.2 Experience stage 13
4 Research methods 14
4.1 Data collection procedure and process 15
4.2 Research Question & Research Structure 16
4.3 Limitation of the study 16
5 Primary data analysis 16
5.1 Survey overview 16
5.2 Data analysis 18
Conclusion 21
6 Reflection on each student contribution 23
References 24
1 Introduction
It seems that there is a general consensus among business academics and
practitioners that firms should be customer-focused in order to deliver a superior quality
to the market. However, there is still quite a bit of misconception about the term
“customer-focused” and its meaning. Many practitioners, including Amazon’s CEO Jeff
Bezos as this paper will show, and academics tend to use the term “customer-focused”
interchangeably with terms like “customer-oriented”, “market-oriented” and many others.
The confusion got to the point that a Harvard marketing professor Benson Shapiro
(1988) published a paper under the title “What the hell is ‘market-oriented’?” In the
article Shapiro (1988) aimed to raise attention to the issue that everybody seemed to
agree on, but no one could tell exactly what it meant.
Therefore this paper takes an online retailer Amazon as a case study company for a
qualitative study, which aims to learn more about the notion of the “customer-focused”
approach from the customer perspective. This aim should be achieved using primary
data via conducting of 30 interviews with Amazon’s customers, who are currently
studying at Lapppeenranta University of Technology.
1.1 Research aim
The aim of the research is to compare how academic literature defines
customer-focused approach with the way Amazon’s customers define this approach. As
a conclusion the research aims to combine the theory, customer perspective and
secondary data, in order to answer the question: is Amazon a customer-focused
company?
It is important to note that the purpose is not necessarily to find a definite answer to the
question, but to build a strong and logical understanding of the customer-focus
approach. Since it may be the case that Amazon’s practices in reality (derived from
secondary data) match neither customers’ perception of the company, nor theoretical
framework. The purpose is rather to attain a better understanding of the
customer-focused approach, while reaching the common ground between theory,
practice and customer opinion.
2 Theoretical background
As we mentioned in the introduction, terminology related to the customer-focused
approach contributed to misunderstanding between practitioners and academics. The
misunderstanding eventually led to contradictions, since different groups assigned
different attributes to the term. Therefore for the purpose of the analysis it is important to
first clarify the terminology.
Dictionary of marketing and advertising (Rosenberg 1995, 80), describes
customer-focus as:
“The effort to comprehend the reasons, desires, and problems of the customer with the
intent to use this information in fulfilling the customer’s needs, at the same time
increasing sales and profits.”
However, this definition does not reveal how should “the effort to comprehend the
reasons, desires and problems of the customer” be realized in practice. What are the
key features of this approach and how is it different to conventional marketing
practices? For example, a renowned marketing scholar, Philip Kotler (2011), defines
marketing as:
“…the science and art of exploring, creating, and delivering value to satisfy the needs of
a target market at a profit. Marketing identifies unfulfilled needs and desires.
Both definitions are very similar and it becomes extremely difficult to differentiate one
from another.
Narver and Slater (1998, 1999) offer a very different perspective on the issue. They
argue that there are two different approaches to serving the customer needs and wants
by a firm, while keeping customer in mind. First is a “customer-focused” approach and
the approach concentrates on comprehending the ​expressed wants of customers and
develops a product or service in order to fulfill these wants. (Narver and Slater 1998,
p1000)
Generally customer-focused business uses surveys and focus groups in order to obtain
insights about the customer wants (Narver and Slater 1998, p1002). However, the key
issue with this approach is what Hamel and Prahalad (1994) called “tyranny of the
served market” when management perceives the world through the eyes of their current
customers.
Moreover, according to Hamel and Prahalad (1994) “customers are notoriously lacking
in foresight”, hence it becomes difficult for companies to innovate (Christensen and
Bower, 1996). Therefore many academics believe that conventional market research
techniques such as surveys and focus groups are limited when the purpose is to create
an innovative product or service. Customers tend to discuss either technologies that
already exist in the market or technologies that would not be economically feasible in
the near future. Too often customers are not able to formulate their wants and needs in
a meaningful thus business is unable to act on these insights. In addition to that stated
wants and desires maybe very different from what the potential market actually needs.
(Leonard-Barton 1995; Lynn, Morone and Paulson 1996)
Hence, according to Narver and Slater (1998 p1002, 1999 p1165), customer-focused
approach is a short-term philosophy, which is reactive and adaptive in its nature. The
main purpose of the philosophy is to respond to the customer’s feedback as quickly as
possible in order to achieve immediate customer satisfaction. However the approach is
not sustainable in the long run, because it becomes increasingly difficult to respond to
customers’ wants and adapt firm’s production to every change in customer opinion.
(Narver and Slater 1990, 1998)
In relation to the research question one could say that the approach that Amazon is
taking as articulated by the company’s CEO Jeff Bezos is far from being a reactive
short-term strategy. On contrary in their approach to customer, Amazon is looking into
the future customer wants as actively as it is looking into the immediate wants and
desires. For example, senior management team meets twice a year for a two-day
meeting where they discuss different ideas and explore the future. “Things discussed in
those meetings are not that urgent – we’re a few years out and can really think and talk
about them at length. Eventually we have to choose just a couple of things, if they’re
big.” (HBR 2007, p76)
This perspective set by Jeff Bezos does not look like a short-term approach. In fact the
approach resembles what Slater and Narver (1990, 1998, 1999) call “market-oriented”
approach.
In their literature review Narver and Slater (1990) do not provide a strict definition of
market orientation. Nevertheless the researchers conclude that at the core of
market-oriented approach lies firm’s long-term focus and long-term profitability, see
figure 1. The long-term orientation is derived from the theory of sustainable competitive
advantage (Porter 1985, p15). That is in order for customer to buy product or service A
the value to the buyer of the proposed product should exceed the expected value from
any other alternative product or service. Moreover the delivered value should be
sustainable in order for a firm to retain a competitive advantage.
Figure 1. Long-term orientation adapted from Narver and Slater (1990).
The long-term focus is a firm’s commitment to concentrating on three behavioral
components of market orientation, which are customer and competitor orientation and
interfunctional coordination, see figure 1 (Huston 1986; Narver and Slater 1990, p23).
Narver and Slater (1990, p21) argue that a firm should have sufficient understanding of
both current and future needs and objectives of its customers in order to attain
long-term perspective. Similarly a market-oriented approach implies that the firm should
be aware of its competitive environment, since competition directly influences customer
preferences in the target market and thus affects long-term profitability of the firm
(Narver and Slater 1990, p22).
Lastly, Narver and Slater (1990) believe that additional value creation for the customer
within a firm should occur at all stages of production, promotion and distribution.
Consequently, any individual can contribute to the firm’s long-term success if only
sufficient coordination infrastructure is in place. In other words development of firm’s
sustainable competitive advantage through market orientation is the function of all
departments and all employees within a company and not only of the marketing
department.
To recap, contrary to customer-focused business market-oriented approach is
concerned with long-term orientation. The long-term orientation towards understanding
both current and latent customer wants, while keeping in mind competition and
marketing trends. This approach is realized through participation of all departments in
the firm.
Another group of researchers, who took up the challenge to answer Shapiro’s (1988)
question - “what is marketing orientation?” were Bernard Jaworski and Ajay Kohli.
Having studied writings on the subject for the period of 35 years and having conducted
62 field interviews with various managers within organizations Jaworski and Kohli
(1990, p6) offered a definition of market orientation:
“Market orientation is an organizationwide ​generation of market intelligence pertaining
to current and future customer needs, ​dissemination of the intelligence across
departments, and organizationwide ​responsiveness to it.”
There are several points, which should be highlighted in this definition. First of all
Jaworski and Kohli (1990, p3) use the words like “market orientation” not “marketing
orientation”, and “organizationwide” in order to emphasis the fact that market-oriented
approach requires involvement of all departments of the firm not only of the marketing
department.
Secondly, market orientation is all about the market intelligence. According to Jaworski
and Kohli (1990, 1993), intelligence encompasses both customer and competitor
insights that can be gathered through formal or informal channels by all the departments
of the firm.
Thirdly, the definition stresses the importance of the intelligence dissemination
throughout the firm. It is often the case in large firms that only higher management is
aware of the survey and other collected data results. At the same time insights
possessed by ordinary workers, who face customers daily are not considered as
important by the higher management. Thus different departments and levels of the firm
live in a kind of own world divided by the lack of communication. (Jaworski and Kohli
1990, p5)
Lastly, intelligence is of no use if it is not acted upon. Business practitioners tend to
admit that often gathered intelligence or even strategic objectives remain such only on
paper. Responsiveness includes target market selection, product or service design and
production, distribution and promotion. Thus again, it is a process, which involves not
only marketing department but all other departments. (Jaworski and Kohli 1990, p6)
In brief the definition argues for an establishment of an organizationwide culture and
processes that put intelligence generation, dissemination and responsiveness to it, as
the core principle of a market-oriented firm. At the same time although the definition
seamlessly show the way for establishing market-oriented processes within a firm the
definition lacks an important dimension for all firms operating in capitalist realities - that
is profit. It is important to note that in their articles Jaworski and Kohli (1990, 1993,
2000) mention profit as an obvious outcome of market orientation rather than an active
part of it.
The literature review revealed a peculiar fact about the terms such as
“customer-oriented, -focused, -centric, etc.” All of these terms both in academia and in
practice are being used interchangeably with other terms such as “market-oriented”;
hence there is quite a degree of confusion about the terminology. As this literature
review showed the CEO of the case study firm Jeff Bezos also uses the terms
“customer-focused” and “customer-centric”, while obviously mentioning points about
Amazon that would have qualified it as a market-oriented company from a strictly
theoretical perspective.
To conclude one could say that these approaches are by no means are mutually
exclusive. It can be suggested that a market-oriented approach is just a deeper and
more systematic perspective on customer orientation. Moreover one could argue that
market orientation is the broader philosophy that uses some of the customer-focused
approaches in product development, design, marketing and even in human resources
while keeping in mind a long-term perspective. Main tools by which this philosophy is
realized are intelligence generation, dissemination and responsiveness to it.
In order to simplify terminology and avoid confusion we will be using two terms in this
case study: short-term customer focus or orientation and long-term customer focus or
orientation. The earlier will be related to a short-term view and concentrate on
immediate customer wants, while the later will imply a more thorough organizationwide
approach.
3 Case description
The case description part of this report introduces the case company Amazon and its
initiatives, which were undertaken in the process of implementing customer focus
strategy & the processes of doing so.
3.1 Introduction to Amazon.com
Amazon.com Inc., started as an online book seller in 1994 and has managed to
transform itself from an online bookstore to one of the world’s key online shopping
destinations. The company has developed from a start-up to a number 35 Fortune 500
company just within two decades. (Lindic and Silva, 2011)
Throughout the time Amazon has penetrated the market of online retail, solutions
providers, warehousing, distribution and many others. Nevertheless the main focus of
the company is its retail website where online shoppers can purchase a variety of
products. In this process of business the third party sellers are included, who sell their
products on Amazon’s website. (Reuters, 2014) One could say that Amazon
development strategy is based on the business model that allows for a continuous
diversification of its product line. Amazon’s ability to look behind the horizons and the
company’s forward thinking facilitated its successful performance. (HBR, 2007)
2.2 Customer focus and Amazon.com
Customer focus has been one of the prime strategies and concerns all areas of
Amazon. Being passionate about customers for Amazon means fast and reliable
delivery, low prices, siding with customers if there is a disagreement with a third-party
merchant. (HBR 2007)
However, all these features are what the customer sees on the surface. In reality behind
all of these customer benefits Amazon has built a robust organizational culture that
supports the company’s success. The final value for the customer is derived from two
separate stages: product stage and experience stage. (HBR 2007)
2.2.1 Product stage
In relation to product innovation Amazon has made it open to all to come up with any
innovative idea, which is beneficial to the company’s customer. Instead of restricting
decision-making power, Amazon is empowering its employees to make decision that the
company considers to be its internal customers. Now apart from this, Amazon has a
senior management team to come up with product ideas, which meets every week for
four hours and twice a year for two days. In these meetings, various ideas are evaluated
and scrutinized keeping the customer focus in mind. (HBR 2007)
Amazon works with a specific group of its customer base. In the interview Jeff Bezos
(HBR 2007) spoke about their decision making process of not going to build a platform
for auction like eBay. Amazon did not opt for this opportunity because it knows its
customer better and it wants to remain efficient to its customer while providing the
service and generate high revenue at the same time. The company does not want it
customer to wait for the auction to close and then purchase which will be an inefficient
way to make sale.
Additionally, Amazon has a lot of data, which allows the company to learn about its
customers. Amazon collects details about every transaction and about every online
visitor in order to use this data in future product developments. (Shopify, 2016)
This attitude correlates with the definition by Jaworski and Kohli (1990), who argued that
a customer-oriented company with the long-term focus is essentially data or intelligence
driven.
Furthermore whenever a new product is being launched, the first question Amazon asks
will this product stay in the market for the next five or ten years? This is a clear
indication that the company is implementing a long-term vision along with the evaluation
of customer need in the long-term perspective. (HBR 2007) The long-term approach
once again correlates with the academic literature, which claims that a more thorough
customer-focused company would always strive to plan its actions in for the long-term
perspective (Narver and Slater 1998, 1999).
For Amazon customer focus is in the center of every product, idea screening,
development and implementation. One could argue that Amazon does not rush to
implement every customer idea, but it considers every customer idea in order to gain
insights for the long-term development.
2.2.2 Experience stage
Not only in product, but also in experience stage, Amazon has worked a lot to make
itself the number one online retail-shopping platform. Firstly, whenever a new feature in
the web platform is introduced, Amazon tracks every movement of the users and then
comes up with the follow up actions. If there is anything, which is not fulfilling the
customer needs, the company modifies the content in accordance with customer needs.
(HBR 2007)
For example, the company’s data shows that a 0.1 second delay in the web page
loading can turn into a 1% drop in customer interest. This is only one out of 500
measurable performance goal, which Amazon tracks daily. Out of these 500
measurable goals some 80% are directly related to customer experiences. (Forbes
2012)
Secondly, Amazon has a policy for employees to work in the company’s fulfillment
center; this program is created in order to put all employees onto the right track of
customer orientation. After the period of one year, every employee works for two days a
year in the fulfillment center. It is a branch of the company that specializes on
scrutinizing customer wants and develops consequent approaches to satisfy them. The
more employees interact with the customer data and opinions, the more they focus on
customer satisfying these wants. (Forbes 2012)
From all of the above features, one can see how Amazon is putting effort to implement
the customer focus strategy. As a recap one could say that Amazon’s approach to
building an organizational culture that facilitates customer orientation is in line with the
current theory on long-term customer orientation. The company does not seek to satisfy
customer’s immediate want, but rather aims to create a thorough understanding of the
market and address the challenges in a coherent manner.
However, as it was argued in the theoretical part of the case-study long-term
customer-focus does not exclude short-term corrections in Amazon’s approach to
customer.
4 Research methods
The methods part will briefly introduce the research progressed and how primary and
secondary data have been collected.
This research is an exploratory ​research built on the primary and secondary data. In the
research a ​deductive ​approach will be used. According to an online source, Kowalczyk,
D 2003-2016 ​“exploratory research is defined as the initial research into a hypothetical
or theoretical perspective or a new way of measuring something”. In this type of
research, researcher has an idea and seeks to understand more about it (Kowalczyk, D
2003-2016). As it was mentioned in the introduction, there is a general and implicit
agreement on the notion of customer focus. At the same time the implicitness of the
agreement causes quite a bit of confusion, because in practice and in theory for
different people the customer-focused approach means different things.
Deductive approach in general, highlights the scientific principles and follows theory to
data path. Using deductive method is also specified the theoretical based proposition
and from that proposition can be built as well as analysis (Saunders, Lewis and
Thornhill 2009, p502). The following research process has been used in this paper, see
Figure 2.
Figure 2​: An example of deductive method research. Source: Adapted from Saunders et
al. 2009
4.1 Data collection procedure and process
According to the Ghauri and Gronhaug (2010, p109), research procedures refer to a
systematic, focused and orderly collection of data for the purpose of obtaining
information from them to solve a particular research problem or to solve particular
research questions. Thus, in this chapter we discussed about the sources of data we
used for this study.
For primary data we have conducted interviews of 30 students who have been the users
of Amazon. All the questions were open ended in order to get insights into customer
perspective on customer-focused strategy in general and particularly on
customer-focused strategy of Amazon. For this particular study we believe that primary
data provide or show the path for the solutions and it is more reliable since we collect
data, which are relevant to our study.
For secondary data sources we have used online articles, scholar reports and
interviews. Secondary data sources are supposed to provide additional backing to our
argumentation throughout the analysis.
4.2 Research Question & Research Structure
After going through Jeff Bezos’ (2007) interview and analyzing it, we decided that using
qualitative research methods, we will attempt to analyze the notion of customer focus of
Amazon from the customer perspective. In other words do Amazon’s customers
perceive the company as a customer-focused. More precisely our research question is:
“Is Amazon a customer focused company: customer perspective”
4.3 Limitation of the study
Our research topic aims to reach a vast area and is subject to analysis of large amount
of data, from different countries and sources. Due to the time constraint it will be
extremely difficult to perform a thorough analysis of the subject matter. At the same time
since we interview only students of Lappeenranta University of Technology the sample
size and its representativeness impose certain limitations.
5 Primary data analysis
This part will briefly introduce the survey questions, interviewees’ demographical data
and further proceed to the primary data analysis.
5.1 Survey overview
In total questionnaire and interviews consisted of seven main questions, see Table 1.
Plus, three general questions about personal information such as name, educational
background and nationality. Questionnaire was built up and conducted within short
period of time and was addressed to students of Lappeenranta University of Technology
who were customers of Amazon online store and have purchased something from it.
Total amount of participants is 30 people. Origin of biggest part of the respondents is
60% from Europe, and other 40% from Asia and other parts of the world. This helps to
make an assumption that origins of respondents are wide enough to have different
backgrounds and mind-sets. Age gap is from 20 till 35 years what makes relevant
information being analysed and processed by present social conceptions. Educational
background of around 80% of relevant respondents are Master’s degree students from
program such as Marketing, Strategy, Engineering, etc.
Basic
questions
What is in your opinion a customer-focused company?
What customer-focused company must have or do?
Have you ever ordered something from Amazon?
Amazon
related
question
Do you think that Amazon’s focus is customer service, why?
Do all Amazon’s employees committed to listening,
understanding and acting on the needs of each customer,
why?
Is it hard for Amazon’s customers to contact the company when
they have a problem?
If a customer submits a complaint, will Amazon do something
about it, if yes then what?
Table 1. List of basic survey questions.
5.2 Data analysis
Most of the interviewees did not have a marketing background therefore in answering
the questions respondents relied heavily on their feelings and own experiences with
Amazon rather than on a specific theory. In line with findings from the literature review,
field interviews revealed that most of the respondents are confused about the
terminology when it comes to defining a customer-focused company and how this
definition relates to Amazon.
First respondents were asked to state what is in their opinion a customer-focused
company without binding this question to Amazon practices. The aim of the question
was to find out what is the general level of knowledge about the customer-orientation.
Most of the answers are related to a short-term oriented customer-focused approach as
defined by the literature review. For example, respondents defined customer-focused
company as:
● “A company that satisfies my needs.”
● “...very friendly and customer-oriented company.”
● “A company that develops products or services with help of customer feedback.”
● “It is a company who takes care of its customers and does all decision based on
the customer needs.”
In relation to question, “what customer-focused companies must have or do?” most
answers covered the topic of researching and addressing the customer wants.
● “Really good listening skills to suit the customers needs.”
● “...identify customers’ and shape their strategies according to them.”
● “Be flexible and alter and update products.”
● “Adjust internal processes and organization to support customer needs in most
sufficient way.”
One could argue that the question “What is the difference between customer-focused
and non-customer focused company from your point of view?” made some of the
respondents think deeper about the notion of customer orientation. Some of the
answers were mentioning organization structure, trained personnel and communication
with customers.
● “Organization, processes, way of communication and decision making.”
● “...customer focused company makes all its strategies keeping in view the needs
of the customer while the non customer focused one produce products and then
introduce those to customers.”
● “Customer-focused company pays attention on what kind of effect their decisions
have on customers and non-customer focused company can pay more attention
on the revenue and other factors not so close related to customers.”
As an interim conclusion one could claim that in general, interviewed students did not
mention any of the features of the long-term customer orientation. Majority of the
respondents describe customer orientation very generally in terms of processes that
take place prior to the value delivery, which is the most fundamental part of the
long-term customer orientation. At the same time almost every answer was concerned
with “getting what the customer wants”. This fact maybe interpreted in a way that
customers are less concerned with what companies do as long as customers are
getting what they want.
At the midpoint of the interview respondents were asked to assess whether or not they
perceive Amazon as a customer-focused company and to comment on the experiences
they have with Amazon. Most of the interviewees claimed that they believed that
Amazon is a customer-focused company. Here are some of the comments from the
interview:
● “I feel like they are always trying to facilitate the customer.”
● “Yes, because of its service quality (reliability, fast to deliver).”
● “Yes, because they provide many options like CoD and money back guarantee
etc.”
● “Yes, customer excellence is one of their core principles.”
● “Yes, for example, replace a non-working Kindle.”
● “No, customer service is sometimes unable to solve problems or give the right
answers.”
In relation to the particular case of Amazon the answers were also rather short-term
oriented, in other words, customers perceived Amazon as customer-oriented company if
the customers did not have issues with delivery, payment or money back procedure. In
fact, this is exactly what Jeff Bezos aims to deliver to the customer as per interview in
the Harvard Business Review (2007). The respondents seemed to be rather satisfied
with Amazon’s price policy and just in general with with the complex of services that
Amazon has created.
None of the respondents mentioned that in his or her opinion Amazon was a
customer-oriented company, because Amazon has established and effective system of
communications throughout the company. Thus the interest of the customers lies on the
surface and mostly related to practical issues.
The major finding of this case-study is that customers are primarily concerned with
immediate quality, rapidness, pricing and availability of service or product. Customers
define customer orientation by these factors and if all of the factors mentioned above
delivered the expected value to the customer, then he or she was ready to call the
company a customer-oriented one. In most of the cases customers are not interested in
the processes within a company, when asked specifically about customer orientation.
Conclusion
Firstly the case has established that customer orientation can defined differently when
looked at from different perspectives. Academic literature perceives two major
approaches to customer orientation: short-term customer orientation and long-term
customer orientation. The primary difference between the two is concerned with kind of
customer wants the company aims to satisfy. The short-term approach is aspiring to
satisfy immediate customer wants in order to achieve immediate customer satisfaction.
At the same time the long-term approach seeks to satisfy both current and future wants
of the customer. Since the process of satisfying future wants is much more complex,
companies need to establish a more complex system of communicating and
organization within the firm itself, while keeping the focus on the customer.
As argued in the paper Amazon combines both approaches since they are not mutually
exclusive. The company tries to look over the horizon of five to ten years by planning
future products that are ahead of their time. Simultaneously the company keeps focused
on immediate wants regardless of the product, which are prices, convenience and fast
service. In fact Amazon has a well-established communication and implementation
culture engraved in the company’s structure, while the simplicity of the service and
customer benefits (what customer actually sees) is the result of the long-term processes
that shaped company for years.
Results of primary data show that Amazon can be seen as a customer-focused
company. Although the customers take into consideration more immediate benefits than
the academic literature suggest.
However the major finding of this report is that the notion of the customer-orientation is
a multidimensional one. Although the case of Amazon shows that the company meets
theoretical, practical and customer criteria to be called a customer-focused company it
does not mean that other companies would follow the suit. These criteria may vary
depending on the company, therefore for the future research it would be interesting to
learn more how the three dimensions of theoretical, practical and customer perspectives
would interact with each other in case of a different company. Furthermore it would be
interesting to study deeper the relation between the three dimension and find out if there
is a causal effect.
.
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Is Amazon a Customer Focused Company

  • 1. LUT School of Business and Management A350A0050​ Business Research Methods Course Mentor: PAPER TYPE: QUALITATIVE RESEARCH 2016 Is Amazon a customer focused company: customer perspective. Case company:​ Amazon Date: 06.10.2016 ​Prepared by: Group 10 Md Zulfiqur Islam 0459285 Petruchuk Liisa Rohan Erava Sultan Islam Tatichek Gleb 0499290
  • 2. 1 Introduction 3 1.1 Research aim 3 2 Theoretical background 4 3 Case description 10 3.1 Introduction to Amazon.com 10 2.2 Customer focus and Amazon.com 11 2.2.1 Product stage 11 2.2.2 Experience stage 13 4 Research methods 14 4.1 Data collection procedure and process 15 4.2 Research Question & Research Structure 16 4.3 Limitation of the study 16 5 Primary data analysis 16 5.1 Survey overview 16 5.2 Data analysis 18 Conclusion 21 6 Reflection on each student contribution 23 References 24
  • 3. 1 Introduction It seems that there is a general consensus among business academics and practitioners that firms should be customer-focused in order to deliver a superior quality to the market. However, there is still quite a bit of misconception about the term “customer-focused” and its meaning. Many practitioners, including Amazon’s CEO Jeff Bezos as this paper will show, and academics tend to use the term “customer-focused” interchangeably with terms like “customer-oriented”, “market-oriented” and many others. The confusion got to the point that a Harvard marketing professor Benson Shapiro (1988) published a paper under the title “What the hell is ‘market-oriented’?” In the article Shapiro (1988) aimed to raise attention to the issue that everybody seemed to agree on, but no one could tell exactly what it meant. Therefore this paper takes an online retailer Amazon as a case study company for a qualitative study, which aims to learn more about the notion of the “customer-focused” approach from the customer perspective. This aim should be achieved using primary data via conducting of 30 interviews with Amazon’s customers, who are currently studying at Lapppeenranta University of Technology. 1.1 Research aim The aim of the research is to compare how academic literature defines customer-focused approach with the way Amazon’s customers define this approach. As a conclusion the research aims to combine the theory, customer perspective and secondary data, in order to answer the question: is Amazon a customer-focused company? It is important to note that the purpose is not necessarily to find a definite answer to the question, but to build a strong and logical understanding of the customer-focus approach. Since it may be the case that Amazon’s practices in reality (derived from
  • 4. secondary data) match neither customers’ perception of the company, nor theoretical framework. The purpose is rather to attain a better understanding of the customer-focused approach, while reaching the common ground between theory, practice and customer opinion. 2 Theoretical background As we mentioned in the introduction, terminology related to the customer-focused approach contributed to misunderstanding between practitioners and academics. The misunderstanding eventually led to contradictions, since different groups assigned different attributes to the term. Therefore for the purpose of the analysis it is important to first clarify the terminology. Dictionary of marketing and advertising (Rosenberg 1995, 80), describes customer-focus as: “The effort to comprehend the reasons, desires, and problems of the customer with the intent to use this information in fulfilling the customer’s needs, at the same time increasing sales and profits.” However, this definition does not reveal how should “the effort to comprehend the reasons, desires and problems of the customer” be realized in practice. What are the key features of this approach and how is it different to conventional marketing practices? For example, a renowned marketing scholar, Philip Kotler (2011), defines marketing as: “…the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires.
  • 5. Both definitions are very similar and it becomes extremely difficult to differentiate one from another. Narver and Slater (1998, 1999) offer a very different perspective on the issue. They argue that there are two different approaches to serving the customer needs and wants by a firm, while keeping customer in mind. First is a “customer-focused” approach and the approach concentrates on comprehending the ​expressed wants of customers and develops a product or service in order to fulfill these wants. (Narver and Slater 1998, p1000) Generally customer-focused business uses surveys and focus groups in order to obtain insights about the customer wants (Narver and Slater 1998, p1002). However, the key issue with this approach is what Hamel and Prahalad (1994) called “tyranny of the served market” when management perceives the world through the eyes of their current customers. Moreover, according to Hamel and Prahalad (1994) “customers are notoriously lacking in foresight”, hence it becomes difficult for companies to innovate (Christensen and Bower, 1996). Therefore many academics believe that conventional market research techniques such as surveys and focus groups are limited when the purpose is to create an innovative product or service. Customers tend to discuss either technologies that already exist in the market or technologies that would not be economically feasible in the near future. Too often customers are not able to formulate their wants and needs in a meaningful thus business is unable to act on these insights. In addition to that stated wants and desires maybe very different from what the potential market actually needs. (Leonard-Barton 1995; Lynn, Morone and Paulson 1996) Hence, according to Narver and Slater (1998 p1002, 1999 p1165), customer-focused approach is a short-term philosophy, which is reactive and adaptive in its nature. The main purpose of the philosophy is to respond to the customer’s feedback as quickly as possible in order to achieve immediate customer satisfaction. However the approach is not sustainable in the long run, because it becomes increasingly difficult to respond to
  • 6. customers’ wants and adapt firm’s production to every change in customer opinion. (Narver and Slater 1990, 1998) In relation to the research question one could say that the approach that Amazon is taking as articulated by the company’s CEO Jeff Bezos is far from being a reactive short-term strategy. On contrary in their approach to customer, Amazon is looking into the future customer wants as actively as it is looking into the immediate wants and desires. For example, senior management team meets twice a year for a two-day meeting where they discuss different ideas and explore the future. “Things discussed in those meetings are not that urgent – we’re a few years out and can really think and talk about them at length. Eventually we have to choose just a couple of things, if they’re big.” (HBR 2007, p76) This perspective set by Jeff Bezos does not look like a short-term approach. In fact the approach resembles what Slater and Narver (1990, 1998, 1999) call “market-oriented” approach. In their literature review Narver and Slater (1990) do not provide a strict definition of market orientation. Nevertheless the researchers conclude that at the core of market-oriented approach lies firm’s long-term focus and long-term profitability, see figure 1. The long-term orientation is derived from the theory of sustainable competitive advantage (Porter 1985, p15). That is in order for customer to buy product or service A the value to the buyer of the proposed product should exceed the expected value from any other alternative product or service. Moreover the delivered value should be sustainable in order for a firm to retain a competitive advantage.
  • 7. Figure 1. Long-term orientation adapted from Narver and Slater (1990). The long-term focus is a firm’s commitment to concentrating on three behavioral components of market orientation, which are customer and competitor orientation and interfunctional coordination, see figure 1 (Huston 1986; Narver and Slater 1990, p23). Narver and Slater (1990, p21) argue that a firm should have sufficient understanding of both current and future needs and objectives of its customers in order to attain long-term perspective. Similarly a market-oriented approach implies that the firm should be aware of its competitive environment, since competition directly influences customer preferences in the target market and thus affects long-term profitability of the firm (Narver and Slater 1990, p22).
  • 8. Lastly, Narver and Slater (1990) believe that additional value creation for the customer within a firm should occur at all stages of production, promotion and distribution. Consequently, any individual can contribute to the firm’s long-term success if only sufficient coordination infrastructure is in place. In other words development of firm’s sustainable competitive advantage through market orientation is the function of all departments and all employees within a company and not only of the marketing department. To recap, contrary to customer-focused business market-oriented approach is concerned with long-term orientation. The long-term orientation towards understanding both current and latent customer wants, while keeping in mind competition and marketing trends. This approach is realized through participation of all departments in the firm. Another group of researchers, who took up the challenge to answer Shapiro’s (1988) question - “what is marketing orientation?” were Bernard Jaworski and Ajay Kohli. Having studied writings on the subject for the period of 35 years and having conducted 62 field interviews with various managers within organizations Jaworski and Kohli (1990, p6) offered a definition of market orientation: “Market orientation is an organizationwide ​generation of market intelligence pertaining to current and future customer needs, ​dissemination of the intelligence across departments, and organizationwide ​responsiveness to it.” There are several points, which should be highlighted in this definition. First of all Jaworski and Kohli (1990, p3) use the words like “market orientation” not “marketing orientation”, and “organizationwide” in order to emphasis the fact that market-oriented approach requires involvement of all departments of the firm not only of the marketing department. Secondly, market orientation is all about the market intelligence. According to Jaworski and Kohli (1990, 1993), intelligence encompasses both customer and competitor
  • 9. insights that can be gathered through formal or informal channels by all the departments of the firm. Thirdly, the definition stresses the importance of the intelligence dissemination throughout the firm. It is often the case in large firms that only higher management is aware of the survey and other collected data results. At the same time insights possessed by ordinary workers, who face customers daily are not considered as important by the higher management. Thus different departments and levels of the firm live in a kind of own world divided by the lack of communication. (Jaworski and Kohli 1990, p5) Lastly, intelligence is of no use if it is not acted upon. Business practitioners tend to admit that often gathered intelligence or even strategic objectives remain such only on paper. Responsiveness includes target market selection, product or service design and production, distribution and promotion. Thus again, it is a process, which involves not only marketing department but all other departments. (Jaworski and Kohli 1990, p6) In brief the definition argues for an establishment of an organizationwide culture and processes that put intelligence generation, dissemination and responsiveness to it, as the core principle of a market-oriented firm. At the same time although the definition seamlessly show the way for establishing market-oriented processes within a firm the definition lacks an important dimension for all firms operating in capitalist realities - that is profit. It is important to note that in their articles Jaworski and Kohli (1990, 1993, 2000) mention profit as an obvious outcome of market orientation rather than an active part of it. The literature review revealed a peculiar fact about the terms such as “customer-oriented, -focused, -centric, etc.” All of these terms both in academia and in practice are being used interchangeably with other terms such as “market-oriented”; hence there is quite a degree of confusion about the terminology. As this literature review showed the CEO of the case study firm Jeff Bezos also uses the terms “customer-focused” and “customer-centric”, while obviously mentioning points about
  • 10. Amazon that would have qualified it as a market-oriented company from a strictly theoretical perspective. To conclude one could say that these approaches are by no means are mutually exclusive. It can be suggested that a market-oriented approach is just a deeper and more systematic perspective on customer orientation. Moreover one could argue that market orientation is the broader philosophy that uses some of the customer-focused approaches in product development, design, marketing and even in human resources while keeping in mind a long-term perspective. Main tools by which this philosophy is realized are intelligence generation, dissemination and responsiveness to it. In order to simplify terminology and avoid confusion we will be using two terms in this case study: short-term customer focus or orientation and long-term customer focus or orientation. The earlier will be related to a short-term view and concentrate on immediate customer wants, while the later will imply a more thorough organizationwide approach. 3 Case description The case description part of this report introduces the case company Amazon and its initiatives, which were undertaken in the process of implementing customer focus strategy & the processes of doing so. 3.1 Introduction to Amazon.com Amazon.com Inc., started as an online book seller in 1994 and has managed to transform itself from an online bookstore to one of the world’s key online shopping destinations. The company has developed from a start-up to a number 35 Fortune 500 company just within two decades. (Lindic and Silva, 2011)
  • 11. Throughout the time Amazon has penetrated the market of online retail, solutions providers, warehousing, distribution and many others. Nevertheless the main focus of the company is its retail website where online shoppers can purchase a variety of products. In this process of business the third party sellers are included, who sell their products on Amazon’s website. (Reuters, 2014) One could say that Amazon development strategy is based on the business model that allows for a continuous diversification of its product line. Amazon’s ability to look behind the horizons and the company’s forward thinking facilitated its successful performance. (HBR, 2007) 2.2 Customer focus and Amazon.com Customer focus has been one of the prime strategies and concerns all areas of Amazon. Being passionate about customers for Amazon means fast and reliable delivery, low prices, siding with customers if there is a disagreement with a third-party merchant. (HBR 2007) However, all these features are what the customer sees on the surface. In reality behind all of these customer benefits Amazon has built a robust organizational culture that supports the company’s success. The final value for the customer is derived from two separate stages: product stage and experience stage. (HBR 2007) 2.2.1 Product stage In relation to product innovation Amazon has made it open to all to come up with any innovative idea, which is beneficial to the company’s customer. Instead of restricting decision-making power, Amazon is empowering its employees to make decision that the company considers to be its internal customers. Now apart from this, Amazon has a senior management team to come up with product ideas, which meets every week for
  • 12. four hours and twice a year for two days. In these meetings, various ideas are evaluated and scrutinized keeping the customer focus in mind. (HBR 2007) Amazon works with a specific group of its customer base. In the interview Jeff Bezos (HBR 2007) spoke about their decision making process of not going to build a platform for auction like eBay. Amazon did not opt for this opportunity because it knows its customer better and it wants to remain efficient to its customer while providing the service and generate high revenue at the same time. The company does not want it customer to wait for the auction to close and then purchase which will be an inefficient way to make sale. Additionally, Amazon has a lot of data, which allows the company to learn about its customers. Amazon collects details about every transaction and about every online visitor in order to use this data in future product developments. (Shopify, 2016) This attitude correlates with the definition by Jaworski and Kohli (1990), who argued that a customer-oriented company with the long-term focus is essentially data or intelligence driven. Furthermore whenever a new product is being launched, the first question Amazon asks will this product stay in the market for the next five or ten years? This is a clear indication that the company is implementing a long-term vision along with the evaluation of customer need in the long-term perspective. (HBR 2007) The long-term approach once again correlates with the academic literature, which claims that a more thorough customer-focused company would always strive to plan its actions in for the long-term perspective (Narver and Slater 1998, 1999). For Amazon customer focus is in the center of every product, idea screening, development and implementation. One could argue that Amazon does not rush to implement every customer idea, but it considers every customer idea in order to gain insights for the long-term development.
  • 13. 2.2.2 Experience stage Not only in product, but also in experience stage, Amazon has worked a lot to make itself the number one online retail-shopping platform. Firstly, whenever a new feature in the web platform is introduced, Amazon tracks every movement of the users and then comes up with the follow up actions. If there is anything, which is not fulfilling the customer needs, the company modifies the content in accordance with customer needs. (HBR 2007) For example, the company’s data shows that a 0.1 second delay in the web page loading can turn into a 1% drop in customer interest. This is only one out of 500 measurable performance goal, which Amazon tracks daily. Out of these 500 measurable goals some 80% are directly related to customer experiences. (Forbes 2012) Secondly, Amazon has a policy for employees to work in the company’s fulfillment center; this program is created in order to put all employees onto the right track of customer orientation. After the period of one year, every employee works for two days a year in the fulfillment center. It is a branch of the company that specializes on scrutinizing customer wants and develops consequent approaches to satisfy them. The more employees interact with the customer data and opinions, the more they focus on customer satisfying these wants. (Forbes 2012) From all of the above features, one can see how Amazon is putting effort to implement the customer focus strategy. As a recap one could say that Amazon’s approach to building an organizational culture that facilitates customer orientation is in line with the current theory on long-term customer orientation. The company does not seek to satisfy customer’s immediate want, but rather aims to create a thorough understanding of the market and address the challenges in a coherent manner.
  • 14. However, as it was argued in the theoretical part of the case-study long-term customer-focus does not exclude short-term corrections in Amazon’s approach to customer. 4 Research methods The methods part will briefly introduce the research progressed and how primary and secondary data have been collected. This research is an exploratory ​research built on the primary and secondary data. In the research a ​deductive ​approach will be used. According to an online source, Kowalczyk, D 2003-2016 ​“exploratory research is defined as the initial research into a hypothetical or theoretical perspective or a new way of measuring something”. In this type of research, researcher has an idea and seeks to understand more about it (Kowalczyk, D 2003-2016). As it was mentioned in the introduction, there is a general and implicit agreement on the notion of customer focus. At the same time the implicitness of the agreement causes quite a bit of confusion, because in practice and in theory for different people the customer-focused approach means different things. Deductive approach in general, highlights the scientific principles and follows theory to data path. Using deductive method is also specified the theoretical based proposition and from that proposition can be built as well as analysis (Saunders, Lewis and Thornhill 2009, p502). The following research process has been used in this paper, see Figure 2.
  • 15. Figure 2​: An example of deductive method research. Source: Adapted from Saunders et al. 2009 4.1 Data collection procedure and process According to the Ghauri and Gronhaug (2010, p109), research procedures refer to a systematic, focused and orderly collection of data for the purpose of obtaining information from them to solve a particular research problem or to solve particular research questions. Thus, in this chapter we discussed about the sources of data we used for this study. For primary data we have conducted interviews of 30 students who have been the users of Amazon. All the questions were open ended in order to get insights into customer perspective on customer-focused strategy in general and particularly on customer-focused strategy of Amazon. For this particular study we believe that primary data provide or show the path for the solutions and it is more reliable since we collect data, which are relevant to our study. For secondary data sources we have used online articles, scholar reports and interviews. Secondary data sources are supposed to provide additional backing to our argumentation throughout the analysis.
  • 16. 4.2 Research Question & Research Structure After going through Jeff Bezos’ (2007) interview and analyzing it, we decided that using qualitative research methods, we will attempt to analyze the notion of customer focus of Amazon from the customer perspective. In other words do Amazon’s customers perceive the company as a customer-focused. More precisely our research question is: “Is Amazon a customer focused company: customer perspective” 4.3 Limitation of the study Our research topic aims to reach a vast area and is subject to analysis of large amount of data, from different countries and sources. Due to the time constraint it will be extremely difficult to perform a thorough analysis of the subject matter. At the same time since we interview only students of Lappeenranta University of Technology the sample size and its representativeness impose certain limitations. 5 Primary data analysis This part will briefly introduce the survey questions, interviewees’ demographical data and further proceed to the primary data analysis. 5.1 Survey overview In total questionnaire and interviews consisted of seven main questions, see Table 1. Plus, three general questions about personal information such as name, educational background and nationality. Questionnaire was built up and conducted within short period of time and was addressed to students of Lappeenranta University of Technology who were customers of Amazon online store and have purchased something from it.
  • 17. Total amount of participants is 30 people. Origin of biggest part of the respondents is 60% from Europe, and other 40% from Asia and other parts of the world. This helps to make an assumption that origins of respondents are wide enough to have different backgrounds and mind-sets. Age gap is from 20 till 35 years what makes relevant information being analysed and processed by present social conceptions. Educational background of around 80% of relevant respondents are Master’s degree students from program such as Marketing, Strategy, Engineering, etc. Basic questions What is in your opinion a customer-focused company? What customer-focused company must have or do? Have you ever ordered something from Amazon? Amazon related question Do you think that Amazon’s focus is customer service, why? Do all Amazon’s employees committed to listening, understanding and acting on the needs of each customer, why? Is it hard for Amazon’s customers to contact the company when they have a problem? If a customer submits a complaint, will Amazon do something about it, if yes then what? Table 1. List of basic survey questions.
  • 18. 5.2 Data analysis Most of the interviewees did not have a marketing background therefore in answering the questions respondents relied heavily on their feelings and own experiences with Amazon rather than on a specific theory. In line with findings from the literature review, field interviews revealed that most of the respondents are confused about the terminology when it comes to defining a customer-focused company and how this definition relates to Amazon. First respondents were asked to state what is in their opinion a customer-focused company without binding this question to Amazon practices. The aim of the question was to find out what is the general level of knowledge about the customer-orientation. Most of the answers are related to a short-term oriented customer-focused approach as defined by the literature review. For example, respondents defined customer-focused company as: ● “A company that satisfies my needs.” ● “...very friendly and customer-oriented company.” ● “A company that develops products or services with help of customer feedback.” ● “It is a company who takes care of its customers and does all decision based on the customer needs.” In relation to question, “what customer-focused companies must have or do?” most answers covered the topic of researching and addressing the customer wants. ● “Really good listening skills to suit the customers needs.”
  • 19. ● “...identify customers’ and shape their strategies according to them.” ● “Be flexible and alter and update products.” ● “Adjust internal processes and organization to support customer needs in most sufficient way.” One could argue that the question “What is the difference between customer-focused and non-customer focused company from your point of view?” made some of the respondents think deeper about the notion of customer orientation. Some of the answers were mentioning organization structure, trained personnel and communication with customers. ● “Organization, processes, way of communication and decision making.” ● “...customer focused company makes all its strategies keeping in view the needs of the customer while the non customer focused one produce products and then introduce those to customers.” ● “Customer-focused company pays attention on what kind of effect their decisions have on customers and non-customer focused company can pay more attention on the revenue and other factors not so close related to customers.” As an interim conclusion one could claim that in general, interviewed students did not mention any of the features of the long-term customer orientation. Majority of the respondents describe customer orientation very generally in terms of processes that take place prior to the value delivery, which is the most fundamental part of the long-term customer orientation. At the same time almost every answer was concerned with “getting what the customer wants”. This fact maybe interpreted in a way that
  • 20. customers are less concerned with what companies do as long as customers are getting what they want. At the midpoint of the interview respondents were asked to assess whether or not they perceive Amazon as a customer-focused company and to comment on the experiences they have with Amazon. Most of the interviewees claimed that they believed that Amazon is a customer-focused company. Here are some of the comments from the interview: ● “I feel like they are always trying to facilitate the customer.” ● “Yes, because of its service quality (reliability, fast to deliver).” ● “Yes, because they provide many options like CoD and money back guarantee etc.” ● “Yes, customer excellence is one of their core principles.” ● “Yes, for example, replace a non-working Kindle.” ● “No, customer service is sometimes unable to solve problems or give the right answers.” In relation to the particular case of Amazon the answers were also rather short-term oriented, in other words, customers perceived Amazon as customer-oriented company if the customers did not have issues with delivery, payment or money back procedure. In fact, this is exactly what Jeff Bezos aims to deliver to the customer as per interview in the Harvard Business Review (2007). The respondents seemed to be rather satisfied with Amazon’s price policy and just in general with with the complex of services that Amazon has created.
  • 21. None of the respondents mentioned that in his or her opinion Amazon was a customer-oriented company, because Amazon has established and effective system of communications throughout the company. Thus the interest of the customers lies on the surface and mostly related to practical issues. The major finding of this case-study is that customers are primarily concerned with immediate quality, rapidness, pricing and availability of service or product. Customers define customer orientation by these factors and if all of the factors mentioned above delivered the expected value to the customer, then he or she was ready to call the company a customer-oriented one. In most of the cases customers are not interested in the processes within a company, when asked specifically about customer orientation. Conclusion Firstly the case has established that customer orientation can defined differently when looked at from different perspectives. Academic literature perceives two major approaches to customer orientation: short-term customer orientation and long-term customer orientation. The primary difference between the two is concerned with kind of customer wants the company aims to satisfy. The short-term approach is aspiring to satisfy immediate customer wants in order to achieve immediate customer satisfaction. At the same time the long-term approach seeks to satisfy both current and future wants of the customer. Since the process of satisfying future wants is much more complex, companies need to establish a more complex system of communicating and organization within the firm itself, while keeping the focus on the customer. As argued in the paper Amazon combines both approaches since they are not mutually exclusive. The company tries to look over the horizon of five to ten years by planning future products that are ahead of their time. Simultaneously the company keeps focused on immediate wants regardless of the product, which are prices, convenience and fast service. In fact Amazon has a well-established communication and implementation
  • 22. culture engraved in the company’s structure, while the simplicity of the service and customer benefits (what customer actually sees) is the result of the long-term processes that shaped company for years. Results of primary data show that Amazon can be seen as a customer-focused company. Although the customers take into consideration more immediate benefits than the academic literature suggest. However the major finding of this report is that the notion of the customer-orientation is a multidimensional one. Although the case of Amazon shows that the company meets theoretical, practical and customer criteria to be called a customer-focused company it does not mean that other companies would follow the suit. These criteria may vary depending on the company, therefore for the future research it would be interesting to learn more how the three dimensions of theoretical, practical and customer perspectives would interact with each other in case of a different company. Furthermore it would be interesting to study deeper the relation between the three dimension and find out if there is a causal effect. .
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