Be the marketplace of choice
From an aesthetic viewpoint, I’ve never been the biggest fan of Amazon’s website. I find it rather overwhelming; effervescent ads cavorting in all directions and giving an overall impression of a discount warehouse containing shelves piled high with stock. The point is, of course, that that is exactly what it is attempting to be – a discount warehouse – or, at least, to convince customers that it is a place of highly competitive pricing, easy accessibility and instant access. Well, it looks like they got it right.
As with Amazon, any multivendor site’s ultimate aim is to maximise profitability, with third party vendors’ sales contributing a substantial proportion to this result. However, the model only works when all multiple third party vendors benefit from the value-added of the site e.g. for Amazon, the perception of competitive pricing, accessibility and instant access so integral to the brand. If only a few third parties gain from, say, favourable terms and priority treatment, then the others will soon leave. Then, the favoured third party will demand better terms and reduce profitability for the site owner. Hence, the multivendor looking for long term success needs to find ways to add value to all their third party vendors’ sales. This is achieved via processes that are integral to the site’s modus operandi and don’t favour only individual players.
Sales funnel design is tricky as a single vendor trying to encourage conversion at all possible points without coming across as too pushy or ‘salesy’. It gets far trickier when you have multiple vendors for whom to facilitate sales. Priorities are constantly being challenged by multiple stakeholders, like dogs grappling over a piece of raw steak. Much time and energy could be wasted on friction and individual dealmaking, all of which will make the site less profitable and ultimately, unsustainable.
The multivendor must therefore be slick when it comes to facilitating customer sales choices. This means understanding the psychology behind why customers convert and using this to make those sales happen. Clearly, this is fundamentally what vendors are paying for when they decide to join a third party site. If we consider Amazon’s site, we can see some ideas of how to successfully achieve this.
Although it may not always seem this way people, like most living organisms, prefer to conserve energy when it comes to performing actions. This principle extends to cognitive functions, like thinking. If we can use automated processes we already have stored in our brains, instead of having to rethink every time we need to make a decision, then that is exactly what we will do.
This principle, called cognitive ease, is a psychological phenomenon that means that we are much more likely to do things that we find easy, versus those that we don’t. Amazon have successfully incorporated this concept into their site in a number of different ways.
The company facilitates sales by categorising purchase decisions (CTA’s) very simply; according to Jeff Bezos, there are two types of decisions, Type 1 and Type 2. Type 1 decisions are irreversible and need to be carefully considered, since there is no going back on them. Conversely, Type 2 decisions are reversible and therefore can be made quickly. What Amazon has done is to create a very simple and easy purchase/ call-to-action (CTA), with customer details already recorded, as well as even having ‘Buy Now’ functionality. Sounds obvious, right? However, this isn’t the clever bit.
What is clever is that Amazon have then given customers several easy ways to reverse a purchase, the first being via free and easy returns using a choice of convenient courier services (as done by most savvy companies these days). However, they also, despite very tight lead times, offer customers the ability to cancel the order for a short window, perhaps a few hours after commitment and sometimes right up almost to the point of delivery on your doorstep (or in your hedge, your bin or at some random house in a neighbouring street – but, that’s another story). In other words, the Amazon brand has become synonymous with facilitation of Type 2 decision making i.e. going far beyond the standard ‘free returns’ offering from competitors. This kind of added value is why third parties are prepared to pay large commissions and be part of the retail giant’s empire.
While most ecommerce companies would find it hard to replicate this sort of logistical freedom, it is worth considering other ways in which Type 2 decisions can be made easier. Without much extra expense, one idea would be to offer a home collection service as an option. This could even be a chargeable add-on by the third party, although it may turn out that very few customers actually end up actioning this service, especially for generic purchases. The important point is not that they will actually decide to return the item, rather that in having the choice, they will feel happy to purchase in the first place.
Amazon’s ‘make decision making easy’ mantra takes on other forms, too. The company has invested in filtering algorithms using a collaborative method. Hence, instead of matching a customer to another similar customer to filter out possible suitable recommendations, Amazon links individual items to find recommendations. Thus, when a customer purchases a specific item, this triggers a search process to find the strongest relationships to other items and offers these, rather than going down the route of seeing what the other (similar) customer bought e.g. offering a matching light bulb with the patio light, rather than the barbeque fuel that the other customer happened to need at the same time.
While both approaches have their benefits, this one appears to be highly effective for the quick buy, often day-to-day, lower value purchases made on Amazon. Furthermore, since the customer can also choose to filter the recommended list by product or subject, Amazon once again facilitates a purchase decision being reached as the customer is not overwhelmed with too much choice. Top this off with a description of why the product is being recommended to them which adds a personalisation akin to a virtual word-of-mouth comment and Bob’s your uncle.
Not ones to give up, Amazon then follow up with highly personalised emails, reiterating recommendations and giving those people who didn’t buy at the time of the original search the chance to make the purchase now. All this exemplifies Bezos’ belief that customer, as opposed to competitor focus, will win the day.
Finally, Amazon also employs more standard techniques, such as creating scarcity i.e. showing a limited number of items available, so as to encourage customers to purchase now in case the item runs out and anchoring, via visually discounted pricing, to further incentivise customers to act now. While these are common tactics, they become all the more powerful when combined with the reversibility factor.
Much of what Amazon does is replicable, at least in part, by other multivendor sites, even if it is done in a more financially realistic manner that gets the gist of the benefit across. The key lesson, however, is that Amazon has taken a multi-faceted approach to service, offering an extra layer of facilitation versus competitors, making their Type 2 decisions just that little bit more ‘Type 2’ than everyone else’s. Clearly understanding the priorities of the target customer base and finding multiple small (and financially viable) aspects of your offering to ease these purchase decisions can strengthen your third party offering and add real value to your brand.