What Amazon knows about customer satisfaction

The letter from Amazon’s CEO to its shareholders has been doing the rounds on social media, with various comments about what it says (e.g., those six-page narrative documents in lieu of power point presentations), as well as about what it doesn’t say (namely, about the rise in Prime subscription fees).

 

The bit that caught my attention was paragraph 2. Bezos writes:

One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. I see that cycle of improvement happening at a faster rate than ever before. It may be because customers have such easy access to more information than ever before – in only a few seconds and with a couple taps on their phones, customers can read reviews, compare prices from multiple retailers, see whether something’s in stock, find out how fast it will ship or be available for pick-up, and more. These examples are from retail, but I sense that the same customer empowerment phenomenon is happening broadly across everything we do at Amazon and most other industries as well. You cannot rest on your laurels in this world. Customers won’t have it. 

 

This simple paragraph illustrates two paradigms of customer satisfaction.

negative_online_reviews

  1. Customer satisfaction is dynamic

 

There are some features that, when added to a product, will create customer satisfaction. We call them satisfiers. Examples might include priority boarding by an airline, exclusive offers for loyal customers, or free wi-fi in your hotel. The presence of these features trigger delight (and, hence, customer satisfaction), and will lead to positive word of mouth. It is, therefore, important to identify these features.

 

 

The problem, as noted by Bezos, is that preferences change. And those features that were once a welcome surprise will soon become expected, and no longer lift customer satisfaction. Customer satisfaction is, after all, the result of exceeding customer expectations – or, what is called, ‘the disconfirmation paradigm’.

 

Marketing managers, therefore, face the challenge of needing to keep looking for new ways to delight their customers, which is compounded by the second paradigm…

 

  1. Customer satisfaction is relative

 

We are social animals and, so, when evaluating our own situations, we naturally turn to others for comparison. I.e., I don’t just look at how the waiter treated me and how long it took for my meal to be served, but I compare my experience with other customers’ experiences. Were they served better / faster / more attentively? Were they offered an option that was not presented to me?

 

As customers become aware of the product features made available to others, they expect the same features to be made available to them, even if they were not initially aware of, or interested in, them. This phenomenon is called the “unfairness perception”, and is even more likely in today’s highly connected society, amid all the social media updates and product reviews.

 

 

In his letter to shareholders, Bezos goes on to ask: “How do you stay ahead of ever-rising customer expectations?”. He says that the secret is a focus on high standards, and he might be right. But I think that their focus on the customer experience and, in particular, understanding and eliminating the customer’s pain points should not be discounted.

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