Magurianu Eduard

HOW AMAZON IS USING CRM

Introduction
Amazon provides all kinds of products customer needs in one place and the purchase process
on website is made easy by the company through features like one-click purchase and card
storing for future purchases. Other benefits that add to the user experience on Amazon website
include product recommendations based on buying patterns, giveaways, kindle services like
Prime and library and so on. Such innovative features and ideas that can capture the audience
attention and increase their retention on the website result from analysis of the CRM data.
In the background, Amazon uses a very high-end advanced CRM system that captures
customer data including their personal details and previous purchases so that their experience
can be tailored to their preferences to engage them on website. This paper explores how
Amazon makes use of the CRM system to formulate marketing strategies and how the
customers are affected by these.
Amazon CRM system takes care of some key functions in an organization including customer
support, marketing, executive information, Enterprise Resource Planning (ERP) integration,
data synchronization, sales management and time management.

CRM Functions Deliverables

Incident management; problem management, order

Support systems management; contract management, dispatching; real time
information transfer

Campaign management; opportunity management; market

Marketing
segmentation; lead generation and tracking

ERP integration Web data sources; 3rd party information

Mobile synchronization; synchronization with company

data synchronization
database and application servers

time management Scheduling; emailing

Contact management; account management; order

Sales management management; forecasting; sales cycle analysis; territory
alignment; reporting

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Company Background
Jeff Bezos found Amazon.com in 1995 with a vision to build a virtual book store at start.
Initially, Amazon sold books directly and by 2000, it became a platform for reseller of different
products. Now Amazon.com provides platform to four types of customers including sellers,
content creators, organizations and individual customers. It now provides many more services
in addition to the bookstore that include music, video products, games and other products are
sold on the portal by resellers (Celep, et al., 2013).

Amazon Operations
Amazon uses an interactive technology on its website such that whenever a user comes online,
a direct marketing principle is used for recognition of the customer through the information
saved in cookies of the user machine. Based on this data, Amazon customizes
recommendations for users using calculations done on sophisticated statistical software
running in the background. Every product listed on the website carries information about the
category they belong to and when this information is matched with data found in cookies,
automatic recommendations can be made by the software tool such that customers are provided
recommendations based on his or her interests. Besides this, customers also receive
communication from Amazon through emails including purchase recommendations tailored to
their personal characteristics or information. Amazon also allows customers purchasing from
their website to put reviews on products which allow users to interact with each other. Amazon
also gives special rewards to customers who provide valuable reviews.
Amazon was one of the first retailers to adopt data efficiency and highest level of customer
services through optimization of product information on the portal pages. This information
included product details, inventory status, price comparisons, delivery and payment options,
promotional offers, fulfilment options, user reviews, cross-selling products, and more. All this
information was provided through a single user interface that helped buyers take informed
decisions. Amazon systems analyse the transaction details of customers and their product
search histories to come up with personalized and optimized sales pages. Amazon uses
Customer Relationship Management techniques for managing their customer
expectations (CDW, 2009)

Amazon Information System

Initially Amazon has been using separate systems for order fulfilment and website management
but in the year 2000, Amazon invested $200 million to develop a new comprehensive system
which included “Epiphany” analysis software, “manugistics” logistics solution, Oracle DBMS
and Excelon B2B integration system. Amazon had its own cloud solution called Amazon Web
Service (AWS) which it used for managing information about its customers and products. It
also builds a SAS (Smart Analysis Search) for tracking the frauds in the ecommerce space
which works through analysis of the patterns of the user behaviour they display. This makes it
possible for the organization to measure customer usage patterns and personalize their
experience for providing better services.

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Amazon runs its operations over a Service Oriented Architecture (SOA) based decentralized
information system that is both robust and scalable. The information system of Amazon
includes:
Transaction Processing System: For ordering products, Amazon makes a visitor create an
account on the website which starts the process of collection of the customer data. Based on
this data, a personalized experience in provide while using features like shipping cart, wish list,
and single click ordering are used. Moreover, the CRM data is also utilized for promotional
purposes in which email communications are send to customers. Registered users can also store
their payment and credit card details to later use for fast purchases reducing the time lag
between the intension to purchase and checkout and thus increasing the probability of a
purchase and reducing probability of change of decision.
Recommendation System: Based on the behaviour of a consumer over the website including
their search and purchase patters, a recommender system, which involves linking and data
mining procedures, is triggered which comes up with product purchase recommendations. For
instance, in case a person is buying a fiction book, the recommender system would through
recommendations on related books. This makes Amazon appear like an interactive platform
and increases customer engagement and satisfaction from experience.
Supply Chain Management: Amazon runs an automated warehousing and supply chain
management system which is linked with the CRM system.
Enterprise Resource planning: Oracle ERP systems are used by Amazon for storing customer
and other organization related data. This system allows execution of an automated order
management process in which the system searches for nearest distribution centre, the moment
a product is ordered by a customer and triggers the logistics processes for distribution. Because
of automation in order processing system, human errors are avoided and these least instances
of wrong deliveries or other order related issues.
Customer Relationship Management: The CRM system maintains a database in which a huge
amount of data about customers and their usage patterns is stored including payment card
details, transaction records and histories, order histories, personal profile, browsing history,
customer feedback, wish list, product reviews. Order processing systems makes use of the
transaction records stored in the CRM databases to process orders and execute triggers delivery
applications for initiating shipment. Further, the CRM data is also used for triggering automatic
communication with customers through email or direct messages. Customer services, sales
systems and communication management systems are integrated through this CRM system
which is used by the three as a common database to work with.

CRM Strategy
CRM is not just about the implementation of a technological solution but also about developing
strategic relationships and analysing CRM data to understand customers. Amazon uses a 10
step CRM strategy that includes following steps:
Investment: Amazon makes investments into its operations based on the value created for
customers. It has invested $200 million to build its CRM system and uses other technologies

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that are integrated with the system including warehousing systems, order processing, ERP,
recommender system and more.
Relationship: The customer relationships are optimized by Amazon in various ways.
Reputation: While creating marketing messages, Amazon appropriately communicates its
value and positioning
Relevance: Every customer community is provided services in appropriate ways. The
recommender system makes use of the CRM data to come up purchase recommendations
having list of products that are most relevant for a specific customer profile.
Values: A value that is enduring is created for customers of Amazon. The CRM system of
Amazon works on three main ideas for value creation that include limitless inventory, high
margin at lowest price and excellent customer care.
Touchpoints: Relationships between different kinds of consumer touchpoints are identified
and managed by employees of the organization. The company uses various touchpoints to
connect with the customers including cart, emails, checkout, mobile application, social media,
call centre, registration, search and so on. For instance, an area containing cart and surrounding
area is called as a “ready to buy” area by Amazon as it is the point at which the customer is
ready for a purchase. At this point Amazon communicates with the customers through some
assurance messages like “You can always cancel”, additional purchase options and other
information such as related products, other products, bundled offers, delivery details and so on.
Imagination: Imagination is used to provide a unique customer experience. Promotions offers
like Best Buy, Today’s deals, lightening deals, Amazon Prime and more can help retain
customers on website.
Learning: Amazon captures data about consumers and analysis the same to learn something
useful for the company from customers. For instance, Amazon allows users to add items they
like to purchase in future in their wish lists that helps company understand the interests of users.
This information can be used while doing direct marketing such that customers about
communicated about offers based on their interests in various products (IMRAN, 2014).
Technology: Amazon uses sophisticated technology for managing CRM. On the first entry on
the website, featured products are the first to see but after a registration already happens,
subsequent visits are responses by messages coming from recommender system based on the
customer interest and understanding of personality.
Stakeholders: While managing CRM, key stakeholders who can be affected are also
considered (Jenkinson & Sain, 2005). When Amazon gets reviews from customers on various
books sold over the platform, the same is also shared with its other shareholders including
authors and publishers which can help the organization to make more profits (Dalfard, et al.,
2012).
Amazon Loyalty Model
Amazon runs a loyalty program which delivers additional benefits to its customers through a
Prime membership. On the website, A Prime Explainer page in maintained that clearly
communicates the benefits those customers would receive from the membership. These
benefits are decided based on mapping done between customer preferences and Amazon’s
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capabilities. Some of these benefits include free two-day shipping which is the most preferred
speed at which customers would like to receive their products.
With the loyalty schemes running on Amazon, many of the first-time purchasers come back
for a repurchase and the investment that the company must make for repeat customers is lesser.
For instance, for book purchasers, the average earning for Amazon is $50 per book for first
time purchase and $40 per visit after that (Srivastava, 2001).
The loyalty program is built by anticipating the needs of customers, stimulating the same and
providing them assistance in searching for the items they need. Amazon also provides them
information on products and recommendations based on their search so that they can evaluate
product and takes a decision on purchase. Once a customer goes in to purchase area, the
assurance messages and additional information is also provided as the system us optimized.
Post purchase, Amazon had additional offers and communication for engaging them.
For running the loyalty scheme, Amazon makes use of several strategies such as:
A 0.16 cents system on Amazon.com in which customers are returned with a cash back of 0.16
cents if the price of an item falls after making a purchase. The amount promised is very small
for Amazon, but it does create a feeling of having integrity in the customer bringing in more
loyalty.
Amazon Prime targets the customer pain points and solves them in the membership program
by adding them as benefits such as free shipping, lower priced items, and free kindle books and
so on.
Conclusions
The paper explored the case study of Amazon and made an attempt to understand how they use
their CRM systems for managing customers. It was found that the company uses a highly
sophisticated CRM system which is integrated with its other information systems including
ERP, Order Processing system, and Warehousing system. It also runs a recommender system
in which the data about registered customers is used to understand their preferences to make
recommendations on products that have highest possibility to making a sale for specific
customer as the recommendations are personalized. The CRM data is also used for the purpose
of marketing and direct promotion such that based on the customer buying and search patterns
on the website, customized communication is sent to them over emails.