Amazon (NASDAQ:AMZN) has a lot of secrets regarding how it decides what products customers see. In some cases, like book recommendations, it clearly factors in what you have read before and the purchases other people who have read those books have made. In other situations -- like the ads displayed on Kindle e-readers and tablets -- the formula is less clear. The online retailer has never shared many details about the algorithms and other rules that decide which products are shown when a customer searches.
Some, like the "Sponsored" and "Best Seller" designations, are self-explanatory. The first is an ad being served to you because of your search, while the other has been a popular choice in that category (though exactly what that means is not defined).
One category, "Amazon's Choice," has always been a bit more vague. Now, the company has expanded the information it displays on some products bearing the "Choice" designation.
What has Amazon done?
On some Amazon Choice products, the company is showing three reasons that have earned the item that designation. On the company's website, the reasons are listed under the Amazon Choice logo. On its app, the retailer has a link to "Why we love this product" next to the logo.
Clicking on the link brings up the same three reasons that appear on the web version as a popup overlay that comes up from the bottom of your phone screen. A search for "microphone" brought up Fifine's USB Microphone as an Amazon Choice, and the following reasons appeared explaining why:
- Low Return Rate: 38% fewer returns than similar products
- Highly Rated: More than 80% 4 star and 5 star reviews
- Popular Item: Popular with customers searching for "microphone"
That's useful information that gives the shopper added insight. It also makes it clear that the Amazon Choice designation isn't something companies pay for -- it has actual meaning based on the metrics the company uses.
What does this mean?
Amazon has not yet updated all Choice listings, according to Geekwire, which first reported this story. The change, however, comes after a CNET story questioned how the selection process worked. That article initially established that companies could not buy the designation. Amazon has not shared any information about the choice program beyond this sentence on the Choice homepage: "Amazon's Choice recommends highly rated, well-priced products available to ship immediately."
That tells you something, but the new, expanded Amazon Choice listings offer more usable details. Explaining that a product has a low return rate, for example, lets shoppers know that consumers are happy with the item. That's an important tool, especially when even very popular items on the site tend to have at least a few very negative reviews.
What this means for Amazon's business
The online retail leader doesn't just want to drive sales. It also wants to drive customer satisfaction. Helping consumers make more informed choices should drive that.
Amazon, of course, retains the ability to drive sales to products that it wants to sell. It controls what information is shared, and whether that's algorithmic or controlled by people to influence sales choices.
This is a smart play by the company that should help customers make product decisions with more confidence. It should drive more sales to the products that have proven to drive the most customer satisfaction. That should help Amazon by requiring it to process fewer returns and offer less customer service help.
This isn't quite transparency, but it's a step toward it. That's big for Amazon, and actually a bit surprising, but it should drive sales for the company while keeping its customers happy.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.