Nurturing Customer Value: Investments in Content and Marketing for Amazon Prime Mean an Increase in Customers with a Tendency to Spend More

Image of an advertisement created by Amazon promoting the show Transparent as well as a special one day discount on an Amazon Prime subscription developed to commemorate the Golden Globes' 72nd anniversary.
Amazon has leveraged the critical acclaim received for its original series, Transparent in an effort to help drive Amazon Prime memberships.

An interesting article in The Drum discusses the reasons for a 53% increase in the past year in the number of Amazon Prime Memberships created worldwide. Specifically noting that beefed up efforts to advertise the benefits of Amazon Prime as well substantial efforts to improve the value proposition of the service played a significant role in the growth in memberships. The company has increased the amount of original content that it produces and increased the amount of non-original content that it has exclusive rights to show on its platform, providing users with more reasons to seek out the platform as a source of entertainment content. In addition, an increasingly significant amount of the organization’s resources have been allocated to improving the delivery of physical goods for Prime members as well as the technical performance of Prime Instant Video.

Marketers within the organization have done an excellent job of finding ways to drive membership to Amazon Prime. For both the marketing department and the organization, there’s good reason to focus on growing the service. According to Consumer Intelligence Research Partners, Amazon Prime members in the United States spend about 1500 dollars per year compared to the 625 dollars per year spent on average by non-Prime users. In other words Amazon Prime users are almost 2.5 times more valuable (in dollar terms) as non-Prime users.

Growing Amazon Prime memberships may also be vital to the strategic growth of the organization given that Prime has the potential to make customers stickier to the Amazon brand. The more time they spend within the website and the more they rely upon it, the more they end up spending and it stands to reason the harder it is for them to switch to alternative services providers to meet the needs they’ve come to depend on Amazon for. When Amazon announced that the price of Prime was going up from 79 dollars per year to 99 dollars per year some analysts speculated that they would expect churn rates (the proportion of customers dropping a service in a given period) to move to  somewhere between 5% and 15% depending on who you asked. Even at the high end of this rate the price increase can be justified, but higher churn rates do provide greater motivation for the organization to continue to find ways to improve their value offerings within Amazon Prime.

As touched upon earlier Amazon (like Netflix) has ventured into producing its own original shows to differentiate itself. Within the video streaming space consumers have a wide range of options available to them so there is an added benefit to offering content that can’t be found elsewhere. Most recently Amazon’s original series Transparent won two Golden Globes including best series, which was a first for an online series. This type of notoriety will most likely benefit Amazon as users can only access the show through the use of Amazon Prime.

An article in Adweek noted that on Monday January 24th (a little less than two weeks after the Golden Globes) Amazon made the decision to stream the show for free for the day. They also made the decision to offer a deal on an annual subscription to Amazon Prime at the lower price of 72 dollars in honor of the Golden Globes being in its 72nd year.

A subscription for Amazon Prime is normally 99 dollars and when considered in terms of monthly cost the discounted rate offered on the 24th equates to 6 dollars per month, an amount which is a just south of 3 dollars per month less than what Netflix has set its subscription rate to. According to Adweek, this rate is less than that of any other competitor in the video streaming space that has a subscription model. It’s also worth noting that Amazon Prime membership is paid in one lump sum as opposed to on a monthly basis so once a consumer subscribes they are committed to the service for the full year. This gives Amazon plenty of time to sell that consumer on the value of the service.

From a marketing management here are some questions to consider

  • As a marketing manager for Amazon which marketing channels would you invest in to promote Amazon Prime?
  • How important do you believe it is for Amazon to produce original content that receives critical acclaim? How would you measure the value of original content developed by Amazon?
  • What is one way that Amazon could seek to convert more of its current non-Prime user base into Amazon Prime members?