Amazon knows that Prime is a loyalty package like no other
Alberto R. Aguiar, from Business Insider, called me a few days ago to talk about the recent Amazon Prime’s price increase in Spain, and how this will affect Twitch streamers, who receive a good part of their income from Prime subscribers who follow them (Spanish language article here).
We continued talking about the structure of Amazon Prime as Amazon’s flagship product and about its value for the company in terms of loyalty, which prompted another piece (also in Spanish) about how Amazon Prime’s new price barely covers 10% of the value of everything it offers.
Amazon Prime is at the center of any discussion about Amazon in business schools: the company discovered early that many customers abandoned their shopping cart when they reached the end of the process and saw the total amount of their purchases plus shipping costs, which while expected, still came as a shock.
In response, in 2005 the company came up with the idea of a flat shipping rate, which met with remarkable success. It was originally launched for the United States, limited to the 49 mainland states, at $79, which was considered very cheap considering the average logistics costs of such a large country; and despite successive price increases, it is still considered cheap, partly because of the dilution of that amount among all the…
