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18/10/2022

D ECI SI O N SCI EN CES- I I

Amazon Case St udy
Prepared By: Group 4
Tavish Mina 2211036
jdesai
Rohit Bhangale 2211012
Yash Aditya 2211001
Surbhi
[Company Name] Prasad
| [Company Address] 2211059
Hemalatha Banothu 2217002
Table of Contents
Executive summary........................................................................................................... 2
Case Study Questions........................................................................................................ 3
Question 1 ............................................................................................................................... 3
Question 2 ............................................................................................................................... 4
Question 3 ............................................................................................................................... 5
Question4 ................................................................................................................................ 6
Question 5 ............................................................................................................................... 7
Question 6 ............................................................................................................................... 8
Question 7 ............................................................................................................................. 10

Appendix ........................................................................................................................ 11
 Executive summary
This report covers the analysis of a case study of Amazon Facing Low Customer Satisfaction
in Singapore by SMU. Amazon is a giant e-commerce platform based out of the US which
entered into Singapore market. It launched its Prime Now service in July 2017, offering
delivery within two hours of purchase. Singapore being a highly competitive market Amazon
was able to gain a market share of 11.5% whereas as market leader Qoo10 enjoys a 32.6%
share.
Amazon collected data on different parameters to analyze what drives customer satisfaction
and why consumers preferred Qoo10 over the e-commerce giant.

Research methodology and Data sorting

We analyzed the 50 variables and sorted the variable to be used in line with general consumer
behavior and tracking consumer journey towards online shopping. We used the mode of the
data in the column as the proxy of people who refused to give answers. The categorical variable
was used by putting 1,0 as dummy variables and taking one base variable.

Result analysis
We ran a linear regression considering all the variables initially. The regression excluded
variable having high correlation. The results of the regression indicated that the Overall product
quality and overall service quality are the major drivers of customer satisfaction in the case of
both Amazon and Qoo10. In the case of Amazon 7 variables were used and they explain 77.1%
(adjusted R square) of the variations in customer satisfaction. These results provide us with
managerial insights which will help in further investment decisions related to website, service
or promotion development in the future. The culture and taste of the people of Singapore are
significantly different and diverse from other markets that Amazon currently operates.
Therefore, We can also study what is driving customer satisfaction in the case of Q0010 and
try to gain insight into the consumer minds of the people of Singapore
 Case Study Questions
Question 1
Companies often benchmark themselves on various key performance indicators’ ratings.
How does Amazon perform on these metrics as compared to its competitors: (i) Customer
satisfaction; (ii) Willingness to recommend; (iii) Average customer spend; (iv) Frequency
of visit?

Company Customer Willingness to Average Frequency

satisfaction recommend customer spend of visit
Amazon 7.48 7.17 154.45 2.13
Qoo10 7.58 7.29 138.90 2.23
Taobao/Tmall 7.58 7.32 149.15 2.39
Zalora 7.74 7.27 149.99 2.19
Lazada 7.14 6.95 154.62 1.74
RedMart 7.45 7.55 292.73 4.27
Carousell 7.49 7.27 202.90 2.24
eBay 7.69 7.39 206.42 2.05

i) Customer satisfaction:

When compared to its competitor amazon is performing below par in the customer satisfaction
metric. Among 21 e-commerce sites, amazon ranks 14 in the customer satisfaction metric with
an average of 7.48 which is below the overall industry average which is 7.58

ii) Willingness to recommend:

Amazon ranks 16th among the 21 companies in the willingness to recommend metric with an
average of 7.17. This means that amazon customers are not recommending the website to their
friends, family, or peers. Amazon is performing poorly in this metric. And among its 7
competitors, it ranked last second in this metric.

iii) Average customer spend:

Among 21 companies Amazon is ranked 12 with an average customer spend of 154.45 while
the market average is 166.63. The highest and least among all are 635.33 and 75 respectively.

iv) Frequency of visits:

Among 21 companies Amazon is ranked 11 with an average Frequency of visits of 2.13 which
is close to the overall industry average of 2.25. so, amazon is performing comparatively good
as per the market standards in the frequency of visit metric, but among its competitors, it is
ranked second last in this metric.

Question 2
From the data, what are the various reasons for Amazon’s performance ratings? Which
areas did Amazon perform well/poorly?

Tracking your order, Security of website, Navigating the website or app

Amazon is performing well in the metrics like the ease of tracking your order, security of the
website, and navigating the website or app. In these three metrics, amazon is doing better than
its competitors. In these metrics, it has an average better than the competitor’s average.

The reason amazon performs better on ease of tracking your order, security of the website, and
navigating the website or app is that amazon is very focused on upgrading the new technologies
and its eCommerce Strategy largely derives from its innovative technologies and practices.
And it frequently updates the new technology in its app or website to provide customers
security and privacy. And they update to new technology so that customers can easily order,
track and get their order delivered with a few simple steps.

Customer satisfaction, willingness to Recommend and Frequency of visits

Amazon's performance is poor in customer satisfaction, willingness to Recommend and

Frequency of visits. Amazon has a lower average than the industry average in these metrics.

The average frequency of visits is low, indicating that the customers might not continue to
make other purchases post their first experience on the website. So, Amazon can look into
aspects like - making the website more visitor friendly, more product offerings on the website,
and availability of products should be ensured (as we can see that amazon's average availability
of products is 7.6 which is lower than the industry average which is 7.7) etc.

The average willingness to Recommend is low. Customers are not recommending Amazon to
their friends, family and peers. One of the reasons for this could be the attractiveness of
promotions and discounts offered. As we can see from the data, Amazon has a low average of
7.6 when compared to the overall industry average of 7.8 in the attractiveness of promotions
and discounts offered metric.

Question 3
Amazon would like to improve its customer satisfaction levels. Develop a regression
model that predicts customer satisfaction as a function of the remaining variables.
Perform various model enhancement procedures (e.g., removing insignificant variables,
etc.) to get the best model possible.

Regression Equation:

Y=-1.295 + 0.295 X1 + 0.184 X2 + 0.185 X3 + 0.187 X4 + 0.122 X5 + 0.104 X6 + 0.074 X7

Where,

Y= Customer Satisfaction
X1= Overall Product Quality
X2= Availability of feedback channels
X3= Ease of comparing products
X4= Overall Service Quality
X5= Security of website
X6= Availability of products
X7= Attractiveness of promotions and discounts offered
Regression Model Summary:

The R square for the above model turned out to be 0.779 & also adjusted R square improved
from .572 to .771 from model-1 to model-7 with the significance of the F-test being 0.000 (3
decimals). X7 has the maximum level of significance of 0.037 from the t-test. Also, adding any
other variables beyond these 7 variables fails the partial-F test. Complete details on the model
summary, variables considered, coefficients, ANOVA test, coefficient correlations,
collinearity diagnostics and residual statistics are attached to the report.

Question4
Can you ensure that your model developed in part (c) satisfies all the assumptions of
linear regression? What additional analysis needs to be done to verify the correctness of
the model?

Analyzing the P-P plot (fig. A), it can be inferred that errors are following a normal distribution.
Also, it can be seen that errors are almost similar for different values of Xi. (fig. B) Thus, it
validates the assumption on errors following a normal distribution.

Upon analyzing the plot on standardize residual vs standardized predicted value of Y (customer
satisfaction) (fig. C), it can be seen that graph is not following constant variance. Hence, the
assumption of constant variance does not stand true. It is also not a completely random scatter.
However, the P-P plot as illustrated in the P-P plot figure clearly shows that errors are following
a normal distribution
(fig. A) (fig. B)

(fig. C) (fig. D)

The correlation matrix plot for the correlation between variables used in the final regression is
illustrated in fig. D.

Question 5
Based on the regression output obtained from part (c), state the managerial implications
stemming from your analysis.

Regression analysis as represented in part (c) for Amazon helps develop core capabilities using
multiple relevant variables in order to best optimize the various processes within the entity.
Throughout the value chain, these insights give information pertaining towards the major
bottlenecks and value add elements to ensure maximization of customer satisfaction.

As can be seen from the regression model, quality variables pertaining to products and
services are of the essence for a successful business. On the other hand, variables like the
availability of promotions and offers as well as the availability of products help Amazon
develop an edge over its major competitors.

 The Great Singapore sale which lasts almost 2 months provides a good opportunity for
online as well as offline retailers like Amazon. Leveraging such events to capitalize on
Amazon’s strengths, managers can help develop lucrative models targeting specific
customer segments for capturing market shares
 Managers also help develop product lines with maximum growth opportunities using
the Amazon database of 3rd party sellers to either acquire or organically capture the
unexplored yet potential niche markets. The high level of customer satisfaction with
overall service and overall product quality would further such interests to give positive
long-term returns for Amazon

A manager is also implied to ensure optimum levels of performance parameters by

tracking key metrics in which Amazon significantly or even minutely lags would help better
performance levels, for example, Time taken to receive a product has a borderline acceptable
significance of 0.05 but was excluded in the modelling projections, thus, taking apt measures
can further help increase sales and thereby enhance growth for firms.

Question 6
Run a similar regression analysis for Qoo10 and compare its performance with Amazon
with regard to different metrics. Based on your analysis, what should Amazon do to
better compete with Qoo10.
Regression Model for Qoo10:

Y=-1.563 + 0.263 X1 + 0.158 X2 + 0.123 X3 + 0.133 X4 + 0.154 X5 + 0.087 X6 + 0.099 X7

+ 0.101 X8 + 0.095 X9

Y= Customer Satisfaction
X1= Overall Product Quality
X2= Overall Service Quality
X3= Return and exchange policies
X4= Ease of comparing products
X5= Availability of feedback channels
X6= Sufficiency of Product information
X7=Security of Website
X8= Satisfaction with the channels available to communicate with the seller(s)
X9= Clarity and usefulness of information on your delivery methods and fees

Unstandardized Standardized Signific

T Value
Coefficients Coefficient ance
B Std Error Beta - -
Constant -1.563 0.462 - -3.385 0.001
Overall Product Quality 0.263 0.043 0.313 6.188 0.000
Overall Service Quality 0.158 0.044 0.176 3.610 0.000
Return and exchange 0.123 0.05 0.112 2.472 0.014
policies
Ease of comparing products 0.133 0.041 0.147 3.288 0.001
Availability of feedback
0.154 0.039 0.158 3.920 0.000
channels
Sufficiency of Product
0.087 0.041 0.09 2.098 0.037
information
Security of website 0.099 0.042 0.092 2.371 0.019
Satisfaction with the
channels available to
0.101 0.041 0.092 2.451 0.015
communicate with the
seller(s)
Clarity and usefulness of
information on your 0.095 0.041 0.091 2.297 0.023
delivery methods and fees

The Adjusted R square for the above model turned out to be 0.761 (R square 0.772) with the
significance of the F-test being 0.000 (3 decimals). Complete details on the model summary,
variables considered, coefficients, ANOVA test, coefficient correlations, collinearity
diagnostics and residual statistics are attached to the report.

Comparing Coefficients for Amazon & QOO10:

As can be seen from the table below, the coefficients have a better degree of significance in the
case of Amazon as compared to the coefficients for QOO10.

QOO10 Amazon

Coefficient Significance Coefficient Significance

Overall Product Quality 0.263 0.000 0.295 0.000
Overall Service Quality 0.158 0.000 0.187 0.000
Availability of feedback
0.154 0.000 0.184 0.000
channels
Ease of comparing products 0.133 0.001 0.185 0.000
Security of website 0.099 0.019 0.122 0.004
The graph represents the average ratings for comparable significant parameters for Amazon
and QOO10:

As can be interpreted from the graph, Amazon performs better than QOO10 in 4 of the 5
parameters with it being significantly ahead in customer satisfaction towards the availability of
Feedback Channels. Moreover, as can be seen from the regression model for QOO10, the
relevant metrics which enhance the likeability of QOO10 are - Sufficiency of product
information; Return and exchange policies; Satisfaction with the channels available to
communicate with the sellers.

Therefore, in order to better compete, Amazon should:

 Facilitate better Return and exchange policies which would help build better trust
among customers, make the ease of access of such policies on the website easier and
be clear and concise with the same as well
 Enable multiple and better channels of communication with the sellers to help
customers get a better insight into the 3rd party platforms through which they are
pursuing their purchases
 Partner with tech and media influencers who can give a clear and sufficient product
comparison and information which will ultimately help customers make more informed
decisions. This would also help customers realize the true economic value of the
product and make comparisons among the different ranges of products available on the
platform

Question 7
Are there any counter-intuitive results obtained from your analysis? Clearly state your
findings and justify the use of regression as a tool for comparing performance of Amazon
with regards to customer satisfaction.

Ans. The counter intuitiveness can be derived from two forms

 1) Factors that were included but do not make much sense
a) VN_1009_TP12(Security of website): From the perspective of a consumer the
security of an eCommerce is not of the utmost importance. It might be good to
have but directly have no primary implication over customer satisfaction
b) VN_1009_TP18(Availability of feedback channels): The only major
feedback channel that matters for the consumer is the product reviews which is
a separate factor on its own. The other factors are very minutely used by the
customers and do not direct the majority of customer satisfaction levels

2) Factors that were not included but make more sense

a) VN_1009_TP02(Variety of products that meet my needs): The more choices
individual posses the more satisfied his brain feels due to human psychology
b) VN_1009_TP03(Ease of navigating the website or app): UI and the way we
interact with the app and data make the basis of our perception towards any app.
c) VN_1009_TP15(Ease of tracking your order): In the digital age the more
control and information a customer has about its deliveries the more content he
is.
d) VN_1009_TP19(Return and exchange policies): The ease of return is one of
the major factors that affect any customers buying decision

We wanted to find a function among 50 inputs which inputs provide us justification for
customer satisfaction in Amazon. The regression tool with the least square method provides a
way to get the best fit function to analyze the important coefficients and what is the magnitude
with which they affect customer satisfaction.

Appendix
1. DS2 project version 1 amazon
2. DS2 project version 1 qoo10
3. Copy of Amazon cleaned up for SPSS(5511).xlsx
4. Copy of Q0010 cleaned(5513).xlsx