Lessons of Loyalty and Amazon Prime...

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Customer loyalty is overrated, brands should focus more on acquiring customers. It’s a fashionable refrain in recent years.

So I was struck by Jeff Bezos recent revelation that Amazon Prime now has more than 100 million members globally.

While Amazon keep the metrics surrounding Prime close to its chest, it’s a key driver of growth. According to Consumer Intelligence Research Partners, Prime customers spend nearly twice as much as other customers, and the retention rate comfortably exceeds 90%. Amazon’s CFO noted, “When a customer becomes a Prime member, they do step up their purchases considerably.”

The key reasons for Amazon Prime’s success with customers are instructive:

It improves the customer experience. As Jeff Bezos noted on introducing the program back in 2005: “No minimum purchase and no consolidating orders. Two-day shipping becomes an everyday experience rather than an occasional indulgence.” Covering 1 million items at launch, that experience is now available on over 100 million items.

It offers value. For regular customers it saves on shipping costs, but it also provides additional perks: exclusive deals and discounts, Amazon’s Prime Video streaming service, and other digital entertainment options.

It’s provides instant gratification. Unlike traditional loyalty programs, where points have to be accrued to earn benefits, the benefits are available instantly.

It’s unconditional. Rather than forcing customers to change their behavior to qualify for different levels of benefits, it's a simple flat-fee. Everyone is treated the same.

It keeps getting better. As Jeff Bezos is fond of saying, customer expectations always rise, and Amazon Prime has added more and more benefits over time. For example, same-day and one-day shipping options are increasingly available.

However, underlying this is a more fundamental lesson. Amazon has been successful by continually improving the experience for its customers, rather than chasing new ones. Its stated goal is to be “Earth’s most customer-centric company”.

When tempted to follow Byron Sharpe’s advice to “stop doing competitions and loyalty programmes, take the savings and spend it on reaching new and occasional buyers”, it’s an example worth keeping in mind...