Customer Retention 101 – One of the Many Recipes of Amazon’s Success

Whenever we look at starting our own business, the first few key things that we anticipate are capital, an office space, computers & other necessary equipment, inventory, staff, expected overheads, and the like. We do think about marketing and customer acquisition too. But do we give customer retention its due importance?

Customer retention is the ability of a company to retain its customers over a long period. A research by Harvard Business School states that “Increasing customer retention rates by 5 percent increases profits by 25 percent to 95 percent.”Moreover, it costs a company less to retain its existing customer base as compared to getting new customers. When it comes to customer retention, there cannot be a better example than Amazon, a company that has built a multi-billion dollar business based on its ability to retain customers from all over the world. In this article, let us take a closer look at Amazon’s customer retention strategies and how we can apply them to retain customers.

As we all know, Amazon’s business model is completely customer-centric. This is a defining point of the company’s proposition and culture. The prime focus of most companies is on sales and profit, followed by efficiency in operations, and customer acquisition, retention, & satisfaction probably come third in the hierarchy. However, in Amazon’s case, customer centricity is no.1 on their list of priorities. The company believes that repeat buyers make business growth more predictable. The following strategies are implemented and recommended by Amazon for successful customer retention:

  1. Focus on delivering the best customer experience

Since its inception in 1994, Amazon has focused on not only meeting, but also on exceeding the expectations of its customers. The company not only strictly adheres to delivery schedule, but also delivers quality products and has easy return, exchange, & refund policies. There have been setbacks, but on the whole, the company is one of the most popular e-commerce giants with respect to the abovementioned factors. As of April 2018, the company reported to have over 100 million Amazon Prime subscribers worldwide. Through the Amazon Prime service, the company offers free express delivery as well as same day delivery for certain categories of products, free streaming of music, videos, & TV shows, e-book rentals, video games, offers on groceries & other items, and many more for just USD 99 to USD 199 a year.

  1. Creativity:

Take a close look at the product listings of Amazon. They contain attractive images and a well-written brief about each product and how it can be used in a number of ways. Moreover, the website is very user-friendly. Its search function allows users to search products of their choice as well as see other similar products, what is commonly bought together, and deals for the same, owing to which customers are tempted to buy multiple products instead of just one. Thus, a wide variety of products available with different sellers are served to customers on a platter to chose from, compare prices, and look for the best deals & fastest delivery.

  1. Partnership with bloggers & website owners through the Amazon Associates program:

Amazon launched the Amazon Associates program in 1996, through which website owners and bloggers can generate relevant content and create links to products available on and earn referral fees if customers click those links and order them. Through this program, Amazon has connected with a number of bloggers worldwide who are experts in different categories of products available with the e-commerce giant. These blogs feature recipes, DIY crafts, fashion, DIY makeup, skincare, & the like, and have links to products that they have used for these purposes. Depending upon the number of followers and the frequency of the articles they post, some drive more traffic to Amazon than others and earn more money as well. This way, it is a win-win situation for the company as well as the third parties endorsing it.

  1. Amazon Smile – A chance for customers to donate to a good cause of their choice:

Amazon Smile is an initiative as per which the company donates 0.5 percent of the price of eligible purchases to charitable organizations chosen by users. The price of the product and services associated with it (delivery etc.) remains the same. This gives users a chance to donate to a good cause without any extra effort or the need to spend extra money, which increases their level of satisfaction with respect to their purchases.

  1. Responding directly to the reviews & questions of customers:

There is a “Comments” section at the bottom of the page of each product listed on Amazon. It provides an interactive platform for customers to post their reviews as well as questions and sellers respond directly to these comments & feedback. The sellers on the website are highly responsive to these comments and they are given utmost importance. This boosts customer engagement and is another strategy that has paved the way for the company’s success over the years.

  1. Sharing of values:

Customers are more likely to keep coming back to a certain company if their values align with those of the company’s. Amazon recommends that the sellers using its platform include labels such as “cruelty-free,” “eco-friendly,” “recyclable,” and the like, which are likely to encourage buyers who strongly believe in these philosophies to opt for these products. For instance, there is an increasing trend toward the adoption of cosmetic and other products that are not tested on animals. Hence, cosmetic products that carry the “cruelty-free” label are more likely to sell. “Organic” and “vegan” are also trending at present. Thus, appealing to the value systems of consumers is also another powerful strategy adopted by the e-commerce giant that can be easily adopted by any other business.

The points above elaborate Amazon’s ability of thinking out-of-the-box when it comes to customer retention. Other businesses too can incorporate some or all of the above-mentioned strategies to successfully retain their customers. In addition to these strategies, one can also opt for customized Customer Relationship Management (CRM) software to manage customers effectively as well as acquire new ones. Do leave a comment about some other effective strategies that you have successfully incorporated to retain your customers.

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Jamie Larson