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5 Reasons Amazon Prime Is The World’s Best Customer Loyalty Programme

by Simon Spyer on May 11, 2016 8:54:11 AM

You Can’t Buy Customer Loyalty But Can You Sell It?

5 Reasons Amazon Prime Is The World’s Best Customer Loyalty Programme 

A loyalty scheme is just a tactic.

A loyalty programme is a commitment to better customer experience and continuously growing customer loyalty. Amazon Prime is one of the world's best customer loyalty programmes.

In this post we explore why we think it's one of the best and what it means for every other brand.

How Amazon Prime Works

For the uninitiated customers join Amazon Prime for £79 ($99 in the US). In return members get a host of benefits ranging from free next day delivery and returns to access to the Kindle lending library to unlimited streaming of videos and music.
 
In his latest letter to shareholders, Jeff Bezos talks unequivocally about the the role of Prime saying:
"We want Prime to be such a good value, you'd be irresponsible not to be a member."
So let’s look at what makes Prime so compelling - both for Amazon and for its customers.

Why it works

Maximises share of wallet

There is a very clear value proposition and indeed a value exchange between the customer and Amazon (you pay X and you get Y). And this value exchange is key to Prime’s effectiveness.
 
Having paid something the customer is committing to Amazon but is also committing to getting value from the purchase.
 
This manifests itself in Amazon being the destination for Prime members - Amazon is already highly competitive on price, range (supported of course by other customers’ reviews) and service and Prime removes (or significantly reduces) any further friction.
 
Share of wallet, the proportion of your customers’ spend in your category that you capture, is an under-used marketing metric but one that Amazon have understood and designed a proposition for: Amazon Prime. 

The Flywheel That Maximises Weight Of Purchase

For many Prime members, the initial interest in Prime is piqued by the promise of free next day delivery - if you purchase something from Amazon every month then Prime will save most people money over the course of the year.
 
However it gives Amazon the ability to promote other categories and services to members. This increases their weight of purchase and bonds the customer even more to Amzon.
 
As Bezos says:
"[Amazon Prime Video] shows are great for customers, and they feed the Prime flywheel – Prime members who watch Prime Video are more likely to convert from a free trial to a paid membership, and more likely to renew their annual subscriptions."
And more likely to buy different products and services from Amazon. 

Does the simple things better

Amazon Prime relieves pain at key points in the customer journey.
 
For any e-commerce business, the delivery experience is a key moment of truth and Prime turns it into a moment of glory - or at least reduces the friction.  With same day delivery and the testing of drones this pain point will be relieved even further.
 
And this is just one example. Free returns removes another barrier to purchase and again delivers a superior customer experience. 

Adds utility and entertainment

The best loyalty programmes get the basics right (see the point above) as well as adding utility and entertainment. Amazon have added utility and entertainment to what can be routine and unemotional purchases.
 
What could be more entertaining than all-inclusive streaming of video and music and unlimited photo storage?

Rooted in the best of the brand

"Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online." Bezos again.
I would argue that the Amazon brand is differentiated on the basis of the product selection, its totally customer centric approach and price.
 
Prime reinforces these attributes and makes Amazon’s brand values personal. Amazon have created a virtuous circle of customer loyalty where every touchpoint for Prime members is understood and aims to bond the customer to Amazon even more.

An opportunity for Amazon Prime

The best loyalty programmes do the simple things better and add utility and entertainment - just as Prime does.
 
But they also create surprising interruptions not timetabled broadcasts.
 
This is an area where Prime, and Amazon in general, can improve. Customer communications tend to be highly timetabled and seemingly generic.
 
Amazon have experimented with initiatives like Prime Day and the focus on pull rather than push messaging is admirable. Yet there is an opportunity to really use the insight it holds about Prime members to generate a little more surprise and unpromised rewards.

The Results 

What data is available shows unequivocally the strength and outstanding performance of the Prime programme. Here some headlines according to research from CIRP:
  • Prime members spend more than non-members -- about $1,100 a year compared to $600 for shoppers who don't join;
  • Amazon retains approximately 95 percent of them after one year'
  • Membership grew 51% last year - including 47% growth in the U.S. and even faster internationally. 
Apply some of these principles to your customer marketing with our new guide - 10 Ways To Step Change Customer Loyalty.
10 Ways To Maximise Customer Loyalty

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This post was written by Simon Spyer

Co-founder & Insight Partner at Conduit, professional insight-monger, dad, lover of all sport and Spurs.

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