Standard marketing logic states that Amazon.com Prime members spend on average $1,400 annually, whilst non-Prime customers on average spend only $700. Therefore the users obviously feel the need to use the $99 Prime service to get that free shipping on most purchases. Non-Prime users need to pay for most shipping, often unless the total on the order exceeds $49.
So the marketing genius’ all pat themselves on the back at this cause and effect phenomena.
There are several reason why this theory is false and that Amazon.com could actually be losing business.
While it is true that Prime users purchase more from Amazon.com, it is not necessarily true that the purchase of an annual Prime membership causes the customer to justify more purchasing, or have the effect of increasing what they’d normally purchase with all other things being equal.
- Perhaps those who do more spending anyways, feel that they can afford the Prime upgrade, so they do so.
- Perhaps non-Prime shoppers knowing that if their purchases are totaling less than the $49 needed to qualify for free 5-8 day shipping, instead will place their order through the Amazon.com Prime account of a family member or friend in order to get the free 2-day shipping. This has the effect of artificially skewing the stats to show the Prime account buys more and that the non-Prime account buys less.
- Perhaps the non-Prime member who puts items in her shopping cart and is ready to buy, until realizing that the total is less than $49 – goes away until another day, until such time as the shopping cart accumulates items totaling more than the $49 amount. In the meantime that shopper might buy the items elsewhere, or just change her mind and not make the purchase at all. This has the effect of losing those sales, permanently.
- Similarly, when the non-Prime shopper sees an attractive deal-of-the-day, but her purchases for that day total less than the $49 level, she decides to give that day’s offers a pass. Again, resulting with Amazon.com losing that sale permanently.
A better solution: Amazon Prime should be marketed on a sliding scale. Such as:
- Past rolling 12 months purchases of $2,500 = Prime cost of zero
- Past rolling 12 months purchases of $1,500 = Prime cost of $25
- Past rolling 12 months purchases of $750 = Prime cost of $50
- Past rolling 12 months purchases of $250 = Prime cost of $75
- Past rolling 12 months purchases less than $250 = Prime cost of $99