Outside Innovation

Amazon's Prime Day Experiment

Amazon Prime Day, which celebrated the 20^th anniversary of the Prime members’ program on July 15, 2015, has taken a lot of flack as a bad customer experience, based on negative tweets and members’ frustration about the quality, availability, and accessibility of the items featured in the sale.

Prime Day Spoof posted on Reddit by Blue Mosquito

However, we suspect that the first annual “Prime Day” yielded the two major results that Amazon intended. It attracted many new Prime members. It gave Amazon and its retail partners an opportunity to stress test its infrastructure before the 2015 holiday season.

Boosted the number of Prime members

The mid-summer Prime members-only sale served to boost trial Prime memberships during an otherwise quiet retail period. Amazon reported that it added “hundreds of thousands” of new Prime Trial members to its current base of Prime users worldwide. We assume that at least 70% of these trial users will probably convert to becoming loyal, repeat Prime members, based on previous analysis. (Consumer Intelligence Research Partners stated in early 2015, commenting on the estimated 3 million new Prime users Amazon gained over the 2014 holiday season, that “the average number of members who pay after the 30-day trial stands at roughly 70 percent.”)

How many Prime Users are there?

The estimates for the number of Prime members globally range from 50 to 60 million. Amazon does not divulge the number of its Amazon Prime members; that official number remains elusive.

Business Insider's estimates of the number of Amazon Prime members as of December 2014 is about 53 million.

Just before Prime Day, according to Tricia Duryee at Geekwire, Consumer Intelligence Research Partners released another report in which they asserted that Amazon had 44 million Prime members in the U.S. alone:

“Consumer Intelligence Research Partners estimates that Amazon now has 44 million Prime members in the U.S., who spend an average of $1,200 a year, compared to about $700 a year for non-members.”…

CIRP put the total number of Amazon Prime users at 43 million before Prime Day.  Note the second quarter increase in year over year domestic growth. These estimates do not include the "several hundred thousand" new Prime Trial members acquired on Prime Day.

Jeff Bezos doesn’t confirm or deny any of these speculations. Amazon’s official press releases continue to say that Amazon currently has “tens of millions” of Prime members. It’s also hard to discern these numbers from Amazon’s published financials because of the accounting treatment that Amazon uses:

“Amazon Prime membership fees are allocated between product sales and service sales and amortized over the life of the membership, according to the estimated delivery of services."

The mid-July boost in $99/year Prime memberships by featuring a “members-only” sale and encouraging trial membership is a good strategy. However, due to the way it was structured--around Flash Deals--Prime Day attracted primarily bargain hunters rather than long-time, loyal customers.

Stress Testing

We believe that one of the main reasons for Prime Day (aside from celebrating the 20th anniversary of the Prime program), was e-commerce stress testing. “Prime Day” created a large sales event in mid-summer which gave the Amazon infrastructure teams a chance to test out many of their processes early enough to fix glitches before the big year-end holiday spike. Amazon promoted it as a day to “find more deals than Black Friday, exclusively for Prime members.” The volumes were huge:

“Customers ordered 34.4 million items across Prime-eligible countries, breaking all Black Friday records. Greg Greeley, Vice President, Amazon Prime, said: ‘Customers worldwide ordered an astonishing 398 items per second …. Worldwide order growth increased 266% over the same day last year and 18% more than Black Friday 2014.”

Fulfillment by Amazon

The other infrastructure Amazon was stress testing was its “Fullfillment by Amazon (FBA)” service.

Prime Day gave retailers an ability to test out Amazon’s fulfillment chops before the make or break holiday season. Retailers have to nail down their e-commerce and fulfillment infrastructure by the end of July in order to be ready for the November/December retail holiday shopping season.

Contemplating Amazon’s Fire Phone

I haven’t gotten my hands on the new Amazon Fire Phone yet, so I can’t really comment on its most dramatic feature: what Jeff Bezos refers to as “Dynamic Perspective” – the 3D effect of its unique user interface. But, without the benefit of first hand experience, I tend to agree with Sean Madden of Wired, whose excellent post, “Amazon’s Fire Phone May Be Too Magical for Its Own Good,” talks about the trade-off between magical and practical UI features. Sean points out that, while “magical” works for seldom-used features, it becomes annoying when applied to things you need to do all the time.

“The ideal balance is one that Apple, Samsung, and Google have all zeroed in on after much trial and error: confine the “magic” to occasional interactions and celebrated results, and get the obstacles out of the way for frequently used ones with clear goals.”

~ Sean Madden, Executive Managing Director of Client Experience at Ziba Design

Here’s Sean’s sketch of why the lower left quadrant works best for frequent and practical actions:

 

Amazon’s New Fire Phone’s Mayday Service Will Raise the Bar for ALL Customer Service

What’s the biggest differentiator for Amazon’s new Fire Smartphone? It’s not the 3D “we know where you’re looking” user interface, IMHO. It’s the tight integration of Amazon’s Mayday instant chat with someone who can help you do things on your phone 24x7. How many times have you tried to do something on your mobile phone and given up in frustration? It may have to do with accessing the carrier’s services (my voicemail is suddenly full of old messages), or understanding how to use a feature of the phone itself (how do I look up someone’s contact info while I’m talking to someone else on the phone?), or concerns about privacy (if I leave location awareness on, who sees that information, and is it stored somewhere?), or help using an app (how do I clip an FT article from the FT app using Evernote?). According to Darrell Etherington of Tech Crunch,

“The Mayday service offers one-tap access to customer service agents who can talk to phone users via video chat, and take over the screen on their devices to show them exactly how to do something, complete with annotations. The service is available 24 hours, and service representatives will respond to requests within 15 seconds, Amazon CEO Jeff Bezos said on stage.”

Amazon’s Faux Pas Comes at a Bad Time

This week Amazon announced Amazon Prime Music—1 million songs/tracks available for free for Amazon Prime users. The company also announced more seamless integration between listening and reading to e-books. You can be reading on one device, hop in your car and listen on your phone, picking up where you left off. Pretty nifty.

Amazon is also poised to announce new capabilities and broader reach for its e-payment system—a move we foreshadowed in October 2013 in my article: Why “Pay with Amazon” Is a Big Deal.

This is all part of the run up to the expected release of an Amazon smartphone/music device/e-reader/shopping buddy as early as next week.

The one problem with all this upbeat activity surrounding the Amazon brand is the lingering bad taste left in our mouths from the public airing of Amazon’s contractual disagreements with publisher Hachette. Because the two companies apparently couldn’t come to terms on Amazon’s profit margin or the selling prices for Hachette’s e-books, Amazon retaliated by slowing deliveries of Hachette’s (and other publishers’) hardcover books. This cost Hachette sales, angered authors, and frustrated customers who were waiting for their new best sellers. While we understand that companies often have differences over margins and rights, it was not smart of Amazon to publicly punish Hachette by slowing sales of its books. Customers found out about this bullying tactic, and began to react by pasting these “I didn’t buy this at Amazon” stickers on their books. Amazon’s customer-friendly brand has been tarnished.

When you are about to announce a blockbuster product, you really don’t want your customers and your suppliers annoyed at you. What was Jeff Bezos thinking?

Can IBM Deliver Customer Clouds?

We all walk around with the cloud in our pockets. Our mobile devices are our connection to the cloud. Computing resources, networking resources, storage, content, applications, and even business processes now run using cloud computing. That means that the actual data we’re accessing is sitting on one or more secure database arrays in one or more locations somewhere in the world. The computers whose cycles we’re accessing are spinning up and down in various server farms somewhere in the world. We don’t care where. We don’t need to care where. Except that, if the data we’re accessing includes personally identifiable information, we DO care. That’s information that we don’t want to cross borders. That’s information we want to know is encrypted. That’s information that we don’t want bad guys to steal or government spies to tap into.

So, the location(s) in which customer data resides does matter. But that doesn’t mean companies should eschew the use of cloud computing for their customer information. In fact, customers’ information is among the first information that belongs in the cloud because customers want access to their information 24x7 from anywhere in the world and from any device. Customers want their information and customer-impacting business process to be synchronized across all the devices they may use to complete actions and to monitor activity status.

How We Co-Design Customer Co-Design

Many of the articles we write and many of the consulting, training, and mentoring projects we do involve improving customer experience and/or designing new and/or improved products, services, and business models. Like all consultants, we have a set of methods and tools we use. We call ours Customer Co-Design, and it includes a method for facilitating workshops including customers and cross-functional stakeholders who co-design new experiences and/or products and services together. We call this workshop Customer Scenario^® Mapping. We use it within organizations to help internal employees build consensus about the ideal customer experience they want to deliver. When used in this way—Customer Scenario Mapping is most similar to the technique of Customer Journey Mapping. We also use this method to facilitate co-design workshops with end-customers (business and/or consumers), partners, internal stakeholders, and external stakeholders. What’s fun and useful about this approach is that it’s “customers all the way down” – you start with the customers designing their ideal way to “do their jobs” and then all the supporting layers and business processes neatly align around the customers’ key moments of truth and success metrics.  

This week, Ronni Marshak shares the stories of how our Customer Scenario Mapping technique has been co-designed with our clients and their customers for almost three decades now.

The History of Customer Scenario^® Design
Co-Designed and Evolved with Customers
By Ronni T. Marshak, EVP and Senior Consultant, Patricia Seybold Group, March 20, 2014

 

 

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The Holiday Delivery Debacle: How Do You Recover Customers’ Trust When Your Entire Ecosystem Has Just Failed Them?

Gift delivery issues plagued last-minute online shoppers this holiday season (and some not-so-last-minute shoppers). As Ronni Marshak explains, the 2013 holiday season created a perfect storm of anomalies that blew apart even the best designed fulfillment and delivery systems.

Design for Screw-Ups. I never cease to be amazed when our business processes and well-designed systems can’t adapt to “sh*t happens.” In my experience as both a customer experience designer and a business and consumer customer, stuff ALWAYS happens. Things ALWAYS go wrong. So, the first lesson to be learned from debacles, like hundreds of thousands of Christmas gifts not arriving in time for Christmas, is this: Why don’t we design for exceptions?? Since exceptions ARE the norm, why do we keep trying to design smooth-flowing processes that rely on everything working within spec? Why don’t we design systems that are based on uncertainty? Why can’t we make our processes more adaptive and empower our people to be more creative and resilient? While it’s true that every company puts in place belt and suspender back-up plans and systems for high-volume periods, it’s also true that we’re still relying largely on straight through processing with exception handling. What if we changed our paradigm and decided that everything is a potential exception? Would we design different systems and processes? I’m sure they would be more loosely-coupled and more resilient than the ones we’re using today.

Design Within and Across Ecosystems. I’m sure that logistics experts design holistically. They take everything into account: weather, seasonality, advertising and promotions, supply chain logjams, and irrational customer expectations. But how many designers are thinking in terms of customer scenario-based ecosystems and the cumulative impact when Amazon’s ecosystem + Target’s ecosystem + Wal-Mart’s ecosystem + lots of little mom and pop shops selling online are all combined to deliver a single customer scenario: getting the right gifts to the right people on time? If Santa can do it, why can’t we?

Recover Gracefully. Customers are actually quite forgiving, particularly when weather and logistics—things beyond your control—are involved. But you need to make amends proactively, with elegance and grace in order to assuage angry customers. Ronni Marshak offers some good tips in her article—things you can do throughout the year, whenever the unexpected happens. (And it happens a lot!)

Recovering from the Crisis of Missed Holiday Deliveries
How Well Are Etailers and Shippers Dealing with Customers’ Anger?
By Ronni T. Marshak, EVP and Senior Consultant, January 10, 2014

(Read the short sample and download the full article in PDF.)

 

Amazon’s Drones & Healthcare.gov

Jeff Bezos pulled off an amazing PR coup last week. Bezos seduced the 60 Minutes TV program into giving him a coveted feature spot on the Sunday evening before Cyber Monday—the biggest online shopping day of the year. He promised 60 minutes a newsworthy scoop. After the usual puff piece extolling the virtues of shopping at Amazon.com, and emphasizing the infrastructure that Amazon has in place to support online shopping for everything, came the promised exclusive. Bezos took the camera crew into one of the top secret Amazon labs and showed the prototype of the helicopter drones that will purportedly be able to deliver a package from a distribution center direct to your doorstep within 30 minutes. Bezos was careful to say that this drone-based delivery service is probably years away, because they would need to get FAA approval and ensure they have all the kinks out. But the novelty and oddity of the idea got everyone buzzing, reinforcing the Amazon value proposition of rapid, predictable delivery. 

As most Americans know, the flawed healthcare.gov website was promised to be fixed by this past weekend, so that uninsured Americans would be able to shop for health insurance over the long holiday weekend, in time to select a plan and to sign up before the end of the year. How well did the rescue team do? They apparently did improve the web site’s response times and tweak the workflow. But they haven’t yet addressed the handoff between the front end (shopping for health insurance) and the back end (signing up for health insurance).

My favorite cartoon this week combines both of these news items:

Credit: Mathliability

Pay with Amazon from Your Mobile Phone?

Sometimes when my spider-sense tingles, it’s hard to back it up with concrete evidence. So I may be going out on a limb this week by suggesting that Amazon’s rebranded payment service (yawn) “Pay with Amazon” could become a major player in mobile commerce.

Why do I think that this seemingly innocuous announcement, which took place at a payment systems conference, Money 2020, on October 8th, 2013, is an important 3D chess move by Master Bezos? First, I’m not the only one who found this announcement significant. Nigel Powell of RedFerret fame blogged that Pay with Amazon “will completely change the face of online retail.” But I’m sticking my neck out a bit further (with no real evidence) to say that I believe that Pay with Amazon is coming soon to your mobile phone.

What I like about the idea of using Pay with Amazon on my phone to pay for things I buy is that it leverages the investment I’ve already made in entering all my credit cards and payment info and account information into Amazon—a trusted shopping partner I’ve been using for years. And I won’t have to worry about the fact that, if I lose my phone, someone can gain access to my money or my credit cards. They remain securely locked away in Amazonland.

When Mobile Phones Are Free….Where Will Most Innovation Come From?

Rumor has it that Amazon’s next mobile phone will be free—presumably subsidized by the increase in impulse downloads and purchases we do from our handy phones. On Tuesday, September 10, Apple announced its lower cost iPhone 5C. Technology analysts quickly reported that the low-cost phone is still too expensive in China.

But, guess what, phones and phone service are already getting really inexpensive in the developing world. I was listening to a 2010 TED Talk by Nathan Eagle on Mobile Crowdsourcing, in which he reported that, in Kenya, you can buy a phone, complete with a SIM card and airtime for $15. I highly recommend this TedTalk. Nathan points out that “in reality, the vast majority of web surfers live in the developing world. There’s more people using mobile phones, living in rural villages in developing countries than every western white collar worker on earth. The mobile phone is a developing world technology. It’s their technology. They represent the vast majority of the users and ultimately it has impacted their lives far greater than it has impacted our lives.”

Nathan Eagle points out something that I have observed in my semi-annual peregrinations to Uganda--that everyone in every rural village now has access to a mobile phone, and the applications they use include many that are more sophisticated than what we have—such as the ability to easily and securely pay for things and to transfer money from person to person.

So, as we watch the jockeying for position between Apple, Amazon, Google, and Microsoft in the mobile phone space over the coming months. Let’s remember: the REAL battle is for the pockets of the billions of people who live, work and play in the developing world.