Amazon Prime’s customer loyalty program celebrated its 10th anniversary this year and recently eclipsed 41 million members.
The program’s astounding success is well documented, along with how valuable Amazon Prime members are.
So, why is the Amazon Prime customer loyalty program so popular?
Robert Passikoff, president of Brand Keys, a research and marketing consultation agency that focuses on brand loyalty, customer engagement, and behavior metrics, shared his thoughts about Amazon Prime’s appeal with Loyalty360.
“I think that Amazon Prime is so popular because it manages to exceed expectations consumer have about such programs,” Passikoff explained. “Most programs play ‘catch-up’ with brands that are able to innovate. Amazon Prime has been able to fill the gap between what people expect from these kinds of programs–on both a rational and emotional basis–and does so via innovation and technology. If you can do that in any category, you generally end up the preferred provider with very, very loyal members.”
Bill Hanifin, Founder and CEO of Hanifin Loyalty, told Loyalty360 that when Amazon launched the Prime loyalty program there were divergent opinions about how it would fare.
“Some pundits made the assertion that creating a paid membership program with a central benefit of free shipping would do no more than attract a group of self-selected Amazon customers, namely those that shopped so frequently already that they saw clear payback of the membership fee via the free shipping offer in no time flat,” Hanifin explained. “Others, notably a Piper Jaffray analyst, proclaimed that Prime ‘may be the most ingenious and effective customer loyalty program in all of ecommerce, if not retail in general.’’
After viewing the results of Amazon Prime in market for several years, Hanifin believes “it’s safe to say that the analyst had the best view of the crystal ball.”
Hanifin documented results in 2013 that showed the annual spend of Amazon Prime members was $1,515, or almost five times that of non-members ($307.80). First-year sales growth among members on average was significant, and 92% of members surveyed plan to renew their membership.
Between 2009−2011, Hanifin said Amazon Prime membership grew at an outstanding rate of 250% and at the end of 2011, the five million total members represented only a 4% penetration of the total customer base.
“The potential for growth seems to have a long runway, and Amazon shared with Piper Jaffray that every one million new Amazon Prime members could yield a 1.5% increase to total revenue,” Hanifin explained.
Hanifin said that Amazon Prime is, in fact, one of the most effective customer loyalty efforts based on its financial returns to the business.
“Interestingly, some in the loyalty industry might not define Prime as a loyalty program in the traditional sense as it is not currency-based and weighs more heavily on club-like benefits than a balanced value proposition,” he said. “In my opinion, Prime is an example of how brands are redefining customer loyalty and are creating programs that meet their specific needs, support their brand messaging, impact the customer shopping experience, and deliver results.”
Kerry Bodine, Keynote Speaker, Customer Experience Coach, and co-author of “Outside In: The Power of Putting Customers at the Center of Your Business,” shared her thoughts with Loyalty360 about why she believes the Amazon Prime loyalty program resonates so intensely with people.
“Nobody likes paying for shipping and the cognitive task of weighing different shipping options has the potential to delay an online purchase or derail it altogether,” Bodine explained. “Rather than creating an artificial economy of loyalty points and rewards, Amazon examined the customer experience, removed this major point of friction in the purchase process, and created a compelling value proposition: Pay us once a year, and that pain point vanishes.”
In reality, Bodine said it’s even better than that.
“Yes, the pain point vanishes, but it’s replaced with a little moment of delight, a false (but still very real) sense of getting something for free,” she added. “The tiny burst of endorphins that accompanies that feeling can get addictive. And that’s exactly what a loyalty program is designed to do. Amazon Prime has expanded, of course, beyond free two-day shipping—but at its core there remains a strong sense of value for customers. In short, Amazon created a loyalty program that doesn’t feel like a loyalty program.”
Loyalty360 CEO and CMO Mark Johnson believes that the Amazon Prime loyalty program uses a process that speaks to and executes against the unique and disparate expectations of its customer base.
“The uniquely bundled experiences of video, audio, free shipping, and effective product/service offerings create a unique relationship between the customer and Amazon,” Johnson said. “Amazon has terabytes of data on its customers, yet where it succeeds is its ability to listen to and understand what resonates with its customers. And Amazon uses that understanding to create mutually beneficial engagements between the customer and the brand, which is quite unique and still very challenging to a good many in the marketing arena today.”
Amazon Prime membership is $99 per year for more than 20 million items, as well as Prime Instant Video, which includes unlimited streaming of videos and TV shows. What’s more, there is a Kindle Lending Library, which allows members to borrow thousands of books for free.