Amazon and the phenomenon of the captive (or captivated) customer
A study by RBC Capital Markets reveals that Amazon Prime customers, who pay an annual fee of $99 in return for unlimited, two-day free delivery, access to movies and television series, as well as a list of more than half-a-million free books, spend on average $530 a year on the site, compared to the $320 expenditure of its regular customers, a difference of 68 percent. The Prime service not only creates faithful customers, but also practically makes them captive — or even better, captivated.
Amazon Dash, which we have discussed recently, follows the same strategy: its customers in Seattle and California pay a fixed annual amount giving them unlimited free delivery, as well as receiving a device they can use to order their grocery purchases from Amazon Fresh, thus increasing the amount they spend at the company considerably, and generating a powerful substitution effect over traditional supermarkets: just scan in or say the name of the product you need, and they’ll be at your door within hours.
Amazon’s captive client strategy works on several levels, all of them highly successful. Its Top Reviewers program offers people who are prepared to review company products a wide variety of free products, along with advantageous conditions in the form of discounts and gift vouchers, which improve in proportion to the number of reviews.
At this point, I should say that I am an Amazon Prime captive customer: as an academic, I read a great deal, most of it on Kindle. The value proposition here is clear: on the one hand I have an online repository of everything that I have noted or underlined in my reading.
Equally, the convenience of being able to access all my books from whichever device (I have the Kindle app installed in my computer, tablet, and all the smartphones I use, allowing me to use my time to the maximum advantage.
The third reason is that using my Amazon Associates program allows me to keep between €100 and €200 in my Amazon.es account, which covers the cost of my book purchases, and those of my family, simply for using the Amazon.es personalized link each time I mention a book on my site (anybody who is a regular reader of my blog will know that I do not cite books to increase my earnings, but only when I feel they are of real interest).
For every person who enters Amazon via a link of mine, I receive between 5% and 10% of the price of their purchase, and not just from the item I have linked. I have been an Associates member since the time I lived in the United States, and have always converted any earnings into vouchers, but this only really began working for me when the company set up its Spanish subsidiary.
Easier and more convenient reading for my kind of use, and free books through a transparent system that allows me to see at all times how much a given link has generated, and how much Amazon has sold as a result. It is easy to see why I consider myself a captive customer at Amazon: any other company that might want to obtain part of my spending along these lines would find it impossible unless they made some kind of similar offer. This is a very interesting deal: generally, captive customers tend to be so against their wishes, typically based on some kind of contract. In this case, Amazon’s captive customers tend to be happy with the level of service they get. This is a well-designed value proposition, and an offer few people would refuse.
(En español, aquí)
