AMAZON HAS FOUND A BETTER WAY
While some people may think of Amazon Prime as a loyalty program, it’s really a subscription. Amazon doesn’t give you points for making purchases or give you discounts for spending a certain amount of money.
In fact, they do the opposite. As a Prime member, you pay a subscription fee of $119 per year to gain access to benefits such as free two-day shipping, Amazon music and video, etc.
Even though Amazon Prime requires their customers to pay a fee in order to receive the benefits, they have massive penetration in the market. There are over 200 million Amazon prime members worldwide, and 147 million of those are in the United States alone.
Another difference that sets Amazon apart from traditional loyalty programs is that Prime memberships actually bring in revenue for Amazon. Just from the subscription fees alone, they generate over $25 billion in revenue per year.
To put that number in perspective, if 100% of Amazon’s revenue came from their Prime subscription fees, they would be #60 on the Fortune 500 list.
Not only does Prime generate subscription revenue for Amazon, but it also influences their customers’ behavior, resulting in an even greater economic impact.
Research shows that Amazon Prime subscribers place an average of 25 orders per year, while non-members only make 14 purchases per year.
Prime members also spend double the money that a non-prime member spends, on average. Additionally, research shows that Prime members increase their purchasing year over year by approximately 12%.
By turning the idea of a loyalty program on its head, Amazon has created a true loyalty program with Prime, even though it’s a subscription where customers pay them money. Studies show that Amazon customers who find a similar product available elsewhere for less money will usually still buy the product from Amazon. That’s loyalty.