You may be surprised to discover just how much an Amazon.com customer is really worth to the company. Amazon.com also has always determined its strategy according to its customer focus, such that it offers an array of services to keep them happy.

Amazon encourages an online community to develop and manage other customers’ questions. Customers and authors write product reviews constantly, giving potential buyers valuable information to support their decision making. Users who write reviews act as experienced but objective consultants. For example, Brad Shorr wrote the first review of the new book, The New Rules of Marketing & PR. Since then, 300 other readers have posted their impressions. People interested in the book might find Shorr’s insights so helpful that they check other items he reviewed. A real estate agent who writes a thoughtful review about a new real estate investing text thus can earn reputation capital and greater access to potential clients by posting an intelligent, compelling review.

Consider Amazon Prime, a service whereby customers pay an annual fee of $79 to receive unlimited two-day free shipping. The company estimates that in one year, it “loses” more than $600 million in shipping revenues that it would have earned if Amazon Prime did not exist. However, this service encourages customers to do more of their shopping with Amazon, because their membership fee pays for itself, assuming they buy often enough. Amazon’s 72 million active customers spend $184 per year on the site. A year before introducing Amazon Prime, this same group of customers averaged $150.

Sometimes a personal touch is needed though, especially in extraordinary circumstances. A customer ordered a $500 Playstation3, intending it to be a Christmas present. When the package did not arrive, the customer tracked the delivery and realized it had been delivered and signed for—though it was nowhere to be seen. The most likely conclusion was that it had been stolen. The customer told Amazon.com this story, and with minimal questions, Amazon sent another Playstation3, without even charging additional shipping costs. Amazon.com thus lost $500, plus shipping, on a mistake that was not its fault. But at the same time, the retailer saved the customer’s Christmas and likely made a loyal customer for life. In the end, this customer also told everyone he could think of about this extraordinary example of customer service.

Jeff Bezos, the company’s founder and CEO, admits his “obsession” with customers. The customer experience remains an important competitive advantage of Amazon.com, and the drive to keep the customer happy spans all of its strategic fields: online, and over the phone.

What is the purpose of online reviews for Amazon?

Evan Carmichael, “Obsess Over Your Customers—Jeff Bezos,”http://www.youngentrepreneur.com, April 7, 2009; Joe Nocera, “Put Buyers First? What a Concept,” The New York Times, January 5, 2008.

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