This article is by Praveen Kopalle, professor of marketing at Tuck School of Business at Dartmouth College.
It was revealed recently that Amazon.com has obtained a patent for what it calls “anticipatory shipping” — a system of delivering products to customers before they place an order. As the Wall Street Journal reported, “Amazon says it may box and ship products it expects customers in a specific area will want—based on previous orders and other factors… According to the patent, the packages could wait at the shippers’ hubs or on trucks until an order arrives.” If implemented well, this strategy has the potential to take predictive analytics to the next level, allowing the data-savvy company to greatly expand its base of loyal customers.
Amazon is wildly popular because it does three things very well: it provides the convenience of a nearly one-stop shopping experience from the comfort of your home; it remembers what you bought and when you bought it; and it recommends other products you might like, based on your shopping history. Along the way, Amazon collects troves of valuable data about its customers’ preferences and habits. With anticipatory shipping, the idea is to use that data to predict what customers want and then ship the products automatically.
When it works, such a system basically outsources your shopping list to an algorithm so you don’t need to worry about it, and a worry-free customer is often happy and loyal. The convenience of knowing you’ll never run out of toilet paper, for instance, is sure to encourage you to do more shopping at Amazon, because it frees up your time to do other things. Let’s face it, most shopping is mundane and we wouldn’t mind someone else taking care of it for us. With anticipatory shipping, Amazon is basically absorbing that responsibility, and the consumer wins.
Convenience is a big part of the attraction of Amazon and anticipatory shipping, but it’s not the only one. Amazon is also the purveyor of the three-Ds of consumer psychology: delight, discounts and deals. Anticipatory shipping adds to these. Think of the feelings you get when you see that an Amazon package has arrived at your door—it’s delightful and exciting, even though you know what it is. I bet those feelings amplify when you don’t know what’s in the box. Remember the days when Columbia House shipped DVDs to your house? How many times did you actually return those packages? Probably not often. We like getting things in the mail, even if we didn’t ask for them.
Which leads to my point on discounts and deals. Amazon already has some of the lowest prices in the retail world, and if you’re an Amazon Prime member you get free shipping. Plus, if you live in a state where Amazon doesn’t have a significant physical presence, you pay no sales tax on the transaction. Saving money on price, shipping and tax makes people feel victorious in the battle between buyer and seller. Anticipatory shipping could augment that feeling by giving certain customers discounts—or even outright gifts—on products that customers received but don’t want. Amazon could use its data on household price sensitivity, and supply and demand, to decide which products and which households qualify for such deals. Amazon anticipates this in its patent: “Delivering the package to the given customer as a promotional gift may be used to build goodwill,” it said.
Free shipping is one thing. But free stuff? Amazon might be on to something here.
