THE CLARUS Blog

100 Million Reasons to Think About Premium Loyalty Programs

With 100 million members officially, Prime serves as the gold standard among all premium loyalty programs.

For Amazon, the strategy has always been pretty simple. Figure out the pain points and take them away. It began with its ability to truly listen to its customers.

Back in 2005, customers told Amazon that shipping costs were their biggest pain point. As a result, Amazon removed those costs by launching Prime. For a $79 annual fee ($99 today), customers enjoyed  free two-day shipping and competitors scrambled to compete.

Amazon’s effective listening led to a keen understanding of what truly resonates with its customers.

How Much Does Prime Resonate with Consumers?

On Wednesday, Amazon CEO Jeff Bezos shared his annual letter to shareholders.

Not only did Prime membership eclipse 100 million members globally, Bezos mentioned several other milestones in 2017 as well.

  • Amazon shipped more than five billion items with Prime worldwide.
  • More new members joined Prime than in any previous year.
  • Prime expanded to Mexico, Singapore, the Netherlands, and Luxembourg.
  • Prime Free Same-Day and Prime Free One-Day delivery is now in more than 8,000 cities and towns.
  • Prime Now is available in more than 50 cities worldwide across nine countries.
  • Prime Day 2017 was Amazon’s biggest global shopping event ever (until surpassed by Cyber Monday).
  • On Cyber Monday, more new Prime members joined Prime than any other day in Amazon history.

It all happened because Amazon is laser focused on its customers. While Prime still offers members free two-day shipping, it hasn’t rested on its laurels.

Amazon officials have kept the program fresh and attractive by adding benefits over the years. Included are unlimited video streaming, limited music streaming, unlimited photo storage, one free e-book per month, free audio books, and free games.

In his letter, Bezos said that there’s no single way to stay ahead of ever-rising customer expectations, but at Amazon high standards play a major role.

From several discussions with loyalty industry experts in the past, I believe that Amazon has been able to unlock true loyalty with a balance of rational, emotional, and utility-driving connections that, combined, deliver greater value and stronger brand advocacy.

While rational benefits are critical in figuring out the complex customer loyalty puzzle, emotional benefits are necessary as well.

Amazon Prime has been able to fill the gap between what people expect from these kinds of programs–on both a rational and emotional basis–via innovation and technology.

A Prime Day to Become a Member

Amazon launched Prime Day in 2015 and, while it continues to see massive financial success, it is more of a key retention and recruitment vehicle.

Our CEO Tom Caporaso shared his views about Amazon Prime Day in an article we wrote last year.

“I don’t think the survival of Amazon or Amazon Prime is tied to Prime Day,” Tom says. “It is much more of a promotion and an awareness play. I think at the end of the day, if they didn’t have a Prime Day, there’s still going to be multi-millions of people in Amazon Prime as a program and also shopping on Amazon.”

One of the many amazing aspects of Amazon Prime is once consumers join the program, they rarely leave, and their spending at Amazon increases each year.

Amazon Stays Hungry, So It Bought Whole Foods

Amazon has shown an affinity to venture into other sectors also, evidenced by last year’s $13.7 billion acquisition of Whole Foods.

For Whole Foods, Amazon represents millions of potential new customers, including the invaluable and highly engaged Prime Members. Amazon’s foray into the grocery sector puts pressure on big-box retailers like Walmart and niche grocery alternatives like Blue Apron.

In February, Amazon introduced free two-hour delivery on orders over $35 for Prime members in select cities, followed by additional cities in March and April.

For Whole Foods, the potential to tap into the sheer volume of new customers via the Amazon Prime premium loyalty program is unprecedented and could change the grocer’s trajectory.

What’s more, Amazon Prime members can now buy Whole Foods’ private label brands, including 365 Everyday Value, Whole Paws, and Whole Catch, through Amazon’s Prime Pantry and Prime Now food delivery programs. In addition, Prime members can order food items online at Amazon.com and pick them up at an Amazon Locker located at their nearest Whole Foods store.

Everything Amazon touches seemingly turns to gold. So why not tackle the grocery industry and elevate the public profile of Whole Foods, with a little help from Amazon Prime?

Brick-and-Mortar – Amazon is Coming for Retail Castles

Leave it to Amazon to push the technological envelope and customer experience to its limits.

In January the online behemoth opened Amazon Go, a new kind of convenience store with no checkout required. Customers simply use the Amazon Go app to enter the store through security gates, take the products they want, and go! No lines, no checkout.

Their Amazon account automatically gets charged when they pass through the gates on their way out. All that’s needed is an Amazon account, the free Amazon Go app, and a recent-generation iPhone or Android phone.

In his letter to shareholders, Bezos said many customers referred to their shopping experiences at Amazon Go as “magical.”

Brick-and-mortar locations remain a retailer’s biggest asset to compete against Prime and Amazon knows this. It will be interesting to see how Amazon pursues this avenue.

Rethinking and Redefining: Premium Loyalty Programs

I think the need to rethink loyalty has never been greater. Retailers only need to look at the power and allure of Amazon Prime. They can see what it’s built and achieved in the past 13 years.

Creating a seamless customer experience, based on mutually rewarding customer loyalty, is why brands find success and strengthen their consumer relationships.

For many now the premium loyalty model is a shining example of how brands are rethinking customer loyalty. They are creating programs tailored to their specific needs, supporting their brand messaging, impacting the customer experience, and delivering results.

Amazon Prime redefines loyalty in that customers want to become members, stay engaged, and espouse brand advocacy.

This shift toward premium loyalty programs is real. Consumers understand the simplicity and can easily see the attached value proposition.

Loyalty is destined to move far beyond just a points currency for future discounts or redemption. Instead, it may very well be defined by how brands listen, understand, and engage with their best customers. After all, 100 million consumers are delighted by Prime.

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