The Amazon Prime Directive

Moving away from the light....and into the darkness of night
Creative Commons License photo credit: mendhak

What did you learn from – and change in your business – after Amazon launched Amazon Prime?

If you aren’t aware, Amazon Prime is a membership-based service that provides access to Amazon video-on-demand and free Kindle books from the Kindle lending library – but more importantly, it upgrades all purchases to from regular ground shipping to free two-day shipping.

The question remains – what did you take away for your business from the launch and subsequent success of Prime? Did it provoke you to change anything about your business and how you work with customers?

Even if you don’t do retail, there are lessons to be learned from what Amazon is doing.

The Fresh Prime of Bel-Air

Plenty has been written about the success of Prime and what it’s done for customer loyalty.

One quote from the Small Business Trends piece (linked above) that might get your attention – a comment from a Morningstar analyst who researched Prime:

What we found is that, generally speaking, last year Prime members spent about twice as much as non Prime members. (emphasis mine) They spent about $1,200 dollars compared to $600 for non Prime members. What’s also interesting is that the average person shopping online last year spent approximately $1,000. What that says to us it that Prime members generate more incremental revenue per than non Prime shoppers. They are doing most of their online shopping on Amazon as opposed to going to other sites. Prime members generate more income.

Recently, Amazon took the service a step further with the introduction in Los Angeles of Amazon PrimeFresh, which expands upon their Seattle-based test program.

What can you take away from this and implement at your business? Do it for them. Deliver it for them. Automate it for them, as appropriate. All with more personal touch than Amazon can afford to do *in your community* and *in your market* with *your customers*. Yes, automation *can* result in more personal touch.

The key is the emphasis on your community, your market, your customers. I’m not suggesting that you try to clone Amazon.

Behavioral shifts

There’s much more to this than automation allowing you to buy produce via your web browser. Customer behavior is central to what Amazon does.

When Amazon saw that Prime members behaved differently, then they could work differently with them. Simply by buying a membership in Prime, a buyer is telling Amazon “I am going to buy more, more often.”

If your customers could send you a signal in advance like that, how would you use it to improve what you do for them? How do you care for your best customers? How do you encourage new customers to take advantage of what you offer like your best customers do? How do you make buying friction-free and easy?

Now reverse that. If you look at customers who buy more and more often from your business, what are you doing to take care of them? What if you did those things for more of your customers – would it turn some of them into Prime-like customers?

Amazon, WalMart, You

We’ve talked repeatedly about “When Wal-Mart comes to town“. Amazon’s taken WalMart’s game and made it more convenient and logistically efficient.

Take from them what makes sense for your business and implement it a step at a time, even if your implementation looks completely different. The lesson is doing what matters for your customers, rather than blindly cloning what Amazon or WalMart do.

For example, let’s say you sell high quality, organic meats that your area’s chain grocer doesn’t carry.

Do your customers forget to stop by your place? When they’re at the grocery, do they grab something there because it’s in front of them? That convenience can cost you a $25 sale. How many can you afford to lose each week?

While you probably can’t afford to provide same-day delivery like Amazon does in Los Angeles, you can serve your neighborhood or small town in a similarly convenient way. Maybe you deliver on Thursday evenings so people have their weekend meat supply for campouts and family gatherings in advance of their weekend grocery shopping. A part-time employee could deliver their pre-paid orders.

You don’t have to cover the whole state 24 hours a day, just your market area (or part of it) as convenient.

Make quality, local buying easy. That’s the local Prime Directive.

Borders and homemade apple pie

Recently, Borders book stores reported that they were closing their remaining 399 stores, including our local store here in Kalispell, Montana.

The store has about three months, enough time to liquidate their existing stock.

Survival of the fittest demands that some prosper, some get by and some die. Borders was not one of the fittest booksellers around, and few businesses have a chance of getting up after taking a one-two punch from Amazon and Apple.

Still, there are takeaways for the rest of us.

Homemade Apple Pie?

When you go to an online store, you KNOW when they’ve just tossed up a store so they can say they have one, kind of like how your mom knows when a local restaurant makes their own apple pie or serves a food service vendor pie.

In one case, it’s a labor of love. In the other, it seems like it’s just there because it has to be.

It’s not unlike Borders’ technology, eCommerce and eBook efforts. Once they got around to it, they served food service pie.

Who to blame?

They can’t blame Napster and peer-to-peer sharing. The music business can try, but you don’t see music acts starving. The same can’t be said for their the stuck-in-the-50-60-70s music management houses. Ask a Canadian or European about online music listening from US-based services. You won’t hear many kind words. Inertia and lack of vision killed many of them and took the local music store down with them. Napster was simply the messenger and peer-to-peer the medium. There’s no equivalent in the book business.

They can’t blame their store staff. In the Borders stores I’ve visited, the staff is well-trained and eager to help. Maybe reading fans self-select as Borders job applicants. Regardless of how their stores found their front-line employees, I can’t think of one who wasn’t helpful, knowledgeable etc. I can’t ever remember being tempted to write about them due to bizarre or off-kilter treatment there.

They can’t blame Amazon or Apple. Sure, they can point to the Kindle, the iPad, the Amazon and iBook store (and these two behemoth companies) as what killed them, but blame? Nope. Amazon and Apple offered a great example, partnering opportunities and millions of potential buyers.

Meanwhile, how many of your friends have a Kobo reader? Did you know Borders has an iPhone reader for their Kobo ebooks? Both are food service apple pie. When you’re competing with the likes of Kindle and iPad, you have to be easier, better or cheaper.

They CAN blame C-level management. Certainly Amazon and Apple were a major challenge, but without strategic vision and execution speed, the results were obvious and inevitable. As the Inc. article notes, they had a weak online retail presence and addressed technology change as if it was a chore, not a differentiator.

Management and strategic direction just happens to be your job. How are you addressing those two things?

Serve homemade pie

You may not have to worry about Amazon or Apple, but that doesn’t mean you have nothing to worry about.

Many independent bookstores have failed in the shadow of Barnes and Noble, Borders (and later, Amazon and Apple). But NOT all of them. What makes those stores different? Why are they “immune”? The reality is, they weren’t and still aren’t immune.

The survivors didn’t stare at the door, wondering why more people aren’t randomly deciding to enter their store. They did something about it. They transformed their businesses into one that Amazon or the Apple iBook store will never be: A specialty store delivering amazing personalized service while delivering a product few others will “trouble themselves” with, within the bounds of a business plan that is designed to survive an Amazon/Apple book selling world.

Each one of them uses their online presence as a strategic advantage.

Even if you sell tractors, chainsaws and weed whackers, people are going to search online for info about you and your products. If your online presence offers them the equivalent of the food service apple pie, their next purchase might be at Chainsaws.Amazon.com.

Does your business leverage technology, or use it only when forced to?

Serve homemade apple pie.

Paper. Ink. Electrons. Winston Churchill. Charles Manson.

grulla
Creative Commons License photo credit: kekremsi

Recently, the New York Times published a story about changing prices for books in print and how those prices compare to prices for electronic books.

In particular, the story focused on comparison pricing occurring at Amazon.com for books published both in paperback and for the Kindle, a very popular eBook reader manufactured and sold by Amazon.

The story teaches a very valuable lesson. It starts by quoting customers who automatically assume a lower manufacturing cost for an electronic book, since the incremental cost of producing extra copies appears to be (or close to) zero.

Customers, unaccustomed to seeing a digital edition more expensive than the hardcover, howled at the price discrepancy, and promptly voiced their outrage with negative comments and one-star reviews on Amazon. â??Really, James Patterson?â? wrote one reader from Elgin, Ill. â??Why would it possibly cost more for a digital download than printed and bound ink on paper?â?

Nowhere

Nowhere does anyone say anything about the fact that the reader gets the same VALUE from both books.

Nowhere does anyone say anything about the fact that the reader can read the Kindle version on their PC, Jerry’s iPad, Dad’s Blackberry, Joe’s iPhone, Sandy’s iPod Touch or their brother’s Mac.

Nowhere does it talk about the ability to share comments/annotations, read a page on one device and find it in that same place when they start reading the next time on a totally different device.

For that matter, nowhere does anyone note that the value of the book has nothing to do with the cost of ink, paper, binding or electrons.

Neither should the author of a book, regardless of the means used to deliver it.

Oh the cost of it all

Yes, I realize that the printed book seems like it ought to cost more.

After all, someone had to put it in a box, put it on a truck and deliver it to the local bookstore. There’s the cost of the driver, the truck, the fuel, the paper, the ink, the brick and mortar that built the store and so on.

The difference to most is that people typically don’t see the costs invested to deliver the electronic form, all they see is that 1 copy costs no more than 2 copies because it’s just another download.

When people howl about the price of an electronic book, no one considers the amount (much less the cost) of research and development necessary to design the Kindle device and have it manufactured and shipped to the U.S.

They don’t marvel at the costs of the servers and software to support the book’s transport to a wide range of devices and software viewers.

They don’t consider the boardroom and engineering efforts to work out deals with cellular carriers so that the device can download newly purchased books and sync anywhere in the world without so much as a login.

But none of that matters. It’s great evidence. Great talking points.

But it doesn’t matter one bit.

What matters

The value of the content inside the book is what matters.

What if you opened that book and in two hours of reading learned something that changed your life, changed your business or cured a problem you’ve had for years?

Is the allegedly zero incremental cost of that electronic book in any way relative to the value you received from it? No way.

Are professional baseball bats priced like a 2×4? Are a PGA champion’s golf clubs priced like stainless steel and graphite you might find in an auto parts store? Of course not.

So why is it so easy to assume that a printed book is worth more than an electronic version?

Because no one put any effort into convincing you that the electrons (or the paper and ink) don’t even begin to set the value.

98 cents

Your body is worth about 98 cents in “ingredients”.

Going by that measure, Winston Churchill and Einstein are each the equivalent in value of mass murderer Charles Manson.

I don’t think so.

Never let your products/services get to the point where the value you deliver is calculated primarily by the container it’s delivered in and/or the material it’s made of.

Choices are more important than talent

Our local swim team’s coach has a saying: “Hard work beats talent when talent doesn’t work hard.”

He’s telling the kids to make a choice to work hard to improve themselves rather than just assuming those Eastern Montana farm kids are going to swim faster by default. They still might not beat that incredibly talented swimmer, but they will swim better – and perhaps their very best – if they put in the effort to improve.

Amazon.com CEO Jeff Bezos has similar comments in his Princeton commencement speech. Have a listen. In particular, check out the 4.5 minute anecdote about his grandmother that starts at 6:29 into his talk.

With 1800 employees, Hsieh is still an entrepreneur

Headwaters
Creative Commons License photo credit: quinet

Today’s guest post is an interesting Inc. Magazine interview with Tony Hsieh about why Zappos sold to Amazon.

What makes it most interesting (to me, anyhow) are the discussions about the culture and differences between the two businesses.

I think there are a few take-home items for anyone who owns a business of any size – as well as some tidbits for those who are under the impression that all corporations are evil.

Enjoy.

Where were you when the iPhone and Kindle were being designed?

Indian Sign
Creative Commons License photo credit: truedudi

As we discussed yesterday, anti-competitive businesses sometimes do “unfair” things.

Occasionally, they commit illegal acts to gain an edge. Commonly mentioned examples include bribing officials to get contracts or have them look the other way on enforcement or quality issues.

Sometimes the unethical things are illegal, such as refusing to sell spare parts to repair shops that compete with the manufacturer’s repair department.

The CPSIA/Mattel inspection situation is an example that surely makes you wonder. Legal (perhaps), but unethical handling by both Mattel and the CPSC.

Ultimately, competitive behavior has two sides. Let’s discuss a few examples…

Where were you when Pittsburgh, Tokyo and Guangzhou were investing in internet and manufacturing infrastructure?

  • Were you talking about how your infrastructure/facilities were “good enough”?
  • Do you (or did you) laugh at the quality of products that say”Made in China”? Do you find better alternatives locally?
  • When other companies moved call centers to India, did you follow suit in order to cut costs? Or did you follow suit because they provided better service to your customers?

Where were you (and what were you up to?) when Apple was designing the iPhone? When Amazon was designing the Kindle?

  • What – besides stare and/or cuss – have you done to respond to those “threats”?
  • If you aren’t the most strategically advanced vendor in your market – what have you done about that this year? Next year, will you be in a higher position strategically than you are now? How will you get there?

Where were you in the 90s when Amazon was investing in the long term, developing their e-commerce platform and despite their youth, doing e-commerce far better than anyone else? Note: “investing in the long term” often called “losing tons of money” on Wall Street.

  • Did you spend any time figuring out how your business could incorporate e-commerce – or if it even made sense to do so?
  • When the Kindle came out, did you buy one to better understand the competition that just popped you in the mouth with a right cross?
  • When Costco and WalMart started offering best sellers at or below your wholesale cost, did you complain about unfair competition or did you do something to make your business a better place for readers to buy books?

Where were you over the last 30-40 years as Wal-Mart laid the foundation for today’s domination? (and then continued to improve upon it – and did so right in front of your eyes)

  • Were you making it easier to buy?
  • Were you making it easier to park and enter your business?
  • Were you making is easier to pay your invoice, shop, ship, get a refund, repeatedly place an identical order, or talk to customer service?
  • Were you giving your customers more reasons than ever to come to your store instead of the local box store?
  • Did you start to build(or enhance) a high-value relationship with your customers that no minimum wage employee in a blue vest could *ever* break?

Where were you when Mumbai built business centers out of slums, trained tens of thousands of workers, and built a modern communications infrastructure?

  • Were you enjoying your existing legacy, built 40-50-60 years ago? (Ask Woolworth where that got them).
  • Were you letting your city or your manufacturing plant rot while holding out for another government bailout or sweetheart contract with a government entity?
  • Did you spend more on lobbyists in the last 5 years than you did on educating your employees?

Where were you when colleges and secondary schools in China and India were ramping up the quality and technological level of the training they deliver?

  • Were you complaining about your school taxes or local school boards?
  • Were you complaining about the parking problems caused by the local university?
  • Were you whining about the foolishness of having a local community college?
  • Did you sigh in disgust after interviewing yet another unqualified prospective employee?
  • Did you complain to your CPA or another business owner about the cost of training your staff?
  • Were you still running Windows 95 in your schools?
  • Were you ignoring the fact that most of the local school’s students are more technologically savvy than their teachers or administrators (much less their parents)?
  • Have you ever looked at the budget for your local school board? For that matter, do they make it readily available?
  • Have you thought to yourself “Yeah, but we can’t do that here, this is *your town’s name*?”

When things go south

When things go south, our culture (I’m speaking of the U.S., primarily) is to find someone to vilify…to blame. Generally speaking, we must point the finger at someone because it can’t possibly be our fault.

You’ll be glad to hear that I can save you some time there.

If you insist on laying blame, the person who can pull you out of it is the same person can blame: You.

Tomorrow, we talk about that and the ROI (return on investment) of blame.

After 3 days, we’re finally going somewhere positive and useful with all of this.

Stunningly reasonable, efficient, and customer-oriented service

Sunrise Paddling on the North Canadian River
Creative Commons License photo credit: FreeWine

In four minutes. On a Sunday morning.

Something like that can be hard to find these days, but that’s exactly what Chris Matyszczy found when he contacted Amazon recently.

Sunday morning aside, is your staff providing 9am Monday morning service all week long?

Even at 4:45pm on a Friday?

Think about this – where will he buy his next book, or perhaps, the majority of books in the future?

Now you have a reason to provide service like this, if you didn’t already. If you need motivation for providing this kind of service (you shouldn’t, if you think about it): ask yourself this question…

Why should they buy from you instead of everyone else who sells what you do?

If you own the local bookstore in Chris’ town, what do you have to do to keep him from going to Amazon, Books a Million, Borders, Barnes and Noble, Powells and any of their online counterparts?

That’s a question on the minds of customers who haven’t been given a reason to want to spend their $ in only one place.

At least not yet.

*Which* fries do you want with that?

So I’m on Amazon to pick up a copy of “Coaching Salespeople into Sales Champions: A Tactical Playbook for Managers and Executives“.

Like any good salesperson would, the Amazon cart reminds me…

“Wait! You need to add $5.23 to your order to qualify for FREE Super Saver Shipping”.

Fair enough. But what would fit that bill?

Amazon shows me a few things in my “Saved items — to buy later” list and it also shows me some things that other people bought when they bought this book.

But it doesn’t show my Amazon Wishlist.

And it doesn’t show me the most recent items on my Wishlist (or Saved Items) that cost $5.23 or more.

You know the thought process: If I need to spend $5.23 to get free shipping (worth about $5), I’m going to be more willing to spend $5.23 than I am $15.23.

So why don’t they show me those items that are most likely to get me over the edge?

Now, put on that Amazon hat and look around your store or your online shop.

What can you do to push them over the edge and make it easier to buy?

You have 2 choices: Listen or Die

cartoon like
Creative Commons License photo credit: strochka

Anyone who has listed items on eBay on a regular basis won’t find today’s guest post from Henry Blodget the least bit surprising. 

For years, eBay Power Sellers have been complaining about the company’s sales-unfriendly tactics and persistence in ignoring their feedback. 

The stories in the comments section of today’s guest post are not unusual.

This is what happens when you forget who the customer is, why they matter, ignore their feedback and treat them like an easily replaceable commodity.

Overstock.com 1, New York State 0

New York state’s legislature recently passed a law declaring that any company with affiliates in New York must collect sales taxes on purchases made in that state, effectively inventing sales tax nexus out of thin air. This was the budget balancing brainchild of now humiliated former Governor Spitzer, and unfortunately, his successor pushed the bill along and got it passed.

Under this law, Amazon or Ebay or whoever must collect and remit sales tax, and file the appropriate paperwork for every sale they make to a New York state resident/business. Given that every town, county and who knows what else has their own little sales tax, keeping track of this and reporting it is a nightmare.

Numerous pundits on the net predicted that companies with affiliate programs would start tossing out all the NY-based affiliates. Some thought those predictions were a joke, but it was clear to me that it made perfect sense. Plus it would be a great way to tell NY where to stuff it.

So this week, Overstock.com became the first (known) major internet commerce site to terminate the contracts of all affiliates in New York State.

The law of unintended consequences is one that misguided legislators cannot help but violate.