Before you double over laughing and consider me one of the funniest ladies in marketing (aw, shucks, thanks!), let me explain. Or rather, my colleague and fellow editor over at sister brand Dealerscope, Rob Stott who wrote the article, "Why Prime Day is Crucial for Amazon, and How You Can Launch Your Own" on July 12. He explains that Amazon Prime is not some unicorn of the retail and marketing worlds. It's a loyalty program, pure and simple.
Target Marketing’s Quick Take: According to Amazon, its second Prime Day was the biggest sales day for it ever, with global orders increasing 60 percent compared to the previous Prime Day, and U.S. orders up by more than 50 percent. And while not every marketer has the muscle to create its own successful holiday, it is possible to create a strong loyalty program relevant to your customers, providing them with great value. Read on as Rob walks you Prime Day and how you can be inspired by the big "A."
To celebrate its 20th anniversary in 2015, Amazon hosted their first ever Prime Day. The event, dubbed Black Friday in the Summer, involves literally hundreds of thousands of deep discounts for individuals enrolled in Amazon’s Prime membership, which was coupled with free shipping and other discounts and perks. It wasn’t clear whether the event was a one-time deal, but after seeing their stock hit a record high and sales eclipse those of Black Friday 2014, it was a no-brainer for Jeff Bezos and co. to bring Prime Day back for 2016.
In 2015, Amazon averaged around 398 items sold per second and raked in somewhere between $375 million and $400 million. As for 2016 estimates, at least one firm, MKM Partners, expects that once all the pennies have been counted, the single-day revenue figure will double.
But it’s not just the deals and discounts that were and are important to Amazon. Rather, for the event to be considered a success in their mind, there needs to be a significant bump in the number of Prime members. They never did release official Prime Day signups for 2015, but Amazon did report at the time that they realized a single-day signup record. And, over the past 12 months, they’ve added an estimated 19 million subscribers — Amazon Prime memberships cost $99 per year. The share of U.S. Amazon customers that are also Prime members eclipsed the 50 percent mark this year, according to data from Consumer Intelligence Research Partners. And as of the second quarter of 2016, the number of Prime subscribers in the U.S. grew to 63 million.
Loyal Through and Through
The reason why that number is so important to Amazon is because of one simple but crucial statistic: Prime members spend nearly 2.5 times as much as non-Prime members — $1,200 per year vs. $500 per year, according to CIPR. Further, not only are Prime members spending more, they’re also renewing their memberships at an incredibly high rate: 96 percent of users who’ve been prime members for two years, re-up for year three; and 76 percent of users on the 30-day free trial eventually become full subscribers.
As important as those numbers are to Amazon, they should also be setting off major alarms in your own head as you digest them. Not warning alarms. Rather, alarms reminding you that you should have set up a loyalty program in your own store, like, yesterday.
At its core, that’s what Amazon Prime is — a loyalty program. Users pay for access to benefits like Amazon Video, free shipping thresholds, Prime Day deals, and more. And in return, Amazon gets assured that these individuals will shop their site on a fairly consistent basis.
The concept of loyalty programs isn’t (and shouldn’t) be a new one to you; they’ve been around for quite some time and have existed in a variety of forms. But maybe you haven’t necessarily been sold on them. They’re not worth the time and effort, perhaps. Well, if the stats about Amazon aren’t enough to convince you, consider some of these:
- There are 3.3 billion loyalty program memberships in the U.S., for an average of 29 per household. (Colloquy)
- Millennials are more willing than their Baby Boomer parents or middle-aged Generation X consumers to switch retailers (78 percent) or brands (55 percent) in order to earn fuel savings rewards. Their preferred brand loyalties differ from older consumers by rates of 10 percent to 17 percent (Excentus)
- 46 percent of retailers say loyalty programs are the best sales drivers (Forrester)
- 57 percent of mobile users admitted that loyalty programs and points are the top feature in a mobile wallet, with 56 percent giving that title to discounts and deals (Forrester)
They add value, there’s no question about it. And, even more importantly in this 21st century of retailing, they’re attractive to and effective with millennial shoppers. So, even if you’ve already ruled them out of your store, they’re absolutely worth a second look. After all, there are myriad options for how loyalty programs can be designed.
Check out the rest of Rob's article over on Dealerscope!