What Amazon Prime Teaches Marketers About Price Increases

amazon-prime-logoToday I got a friendly email from the folks at Amazon. Perhaps you got one as well. It spoke of a price increase to my Amazon Prime membership. Not going to delve into the finer points of the message (screenshot below), rather I’d like to highlight what they did well and questions we can ask ourselves so, as marketers we can learn how to position ourselves for price increases of our own.

Important Assumption: It’s key to extract fair value for your product or service, a business must be profitable so that it can grow, expand, and continue to meet the needs of customers. A business that goes without a profit, unintentionally, for an extended period of time isn’t a business, it’s more like a passion or a hobby. Let’s plan to profit.

What Amazon Prime Teaches Marketers About Price Increases

In the case of Amazon, they went without a profit for years, and early on many experts thought they wouldn’t last. Yet here they are today as the top internet retailer who sells hardware solutions, owns the Washington Post and has more things in the pipeline.

1.) Amazon built a history of delivering amazing value

Prime has been around since 2005. During that time, they have refined the Prime offering from a “Get two day shipping free on one million products” to:

  • Two day shipping on over 20 million products
  • Unlimited access to 40,000 movies and tv shows
  • 500,000 books to borrow from the Kindle Owners’ Lending Library

All this for a mere $79 per year. That’s value, over the long haul.

2.) Amazon didn’t raise the price out of reach of most

Prime has been around since 2005. At the same price. I don’t know about you, but from what I can tell, since that time the cost of living has gone up noticeably. So has the cost of doing business. So raising the price is justified.

What was smart, is that they stayed under three digits, raising it $20 to $99. For the year, that is about $1.66 per month. This keeps the price within reach of most subscribers.

3.) Amazon reminded me of the benefits of prime, one I never new about

Amazon's Email Regarding Prime Price Increase (click to enlarge)
Amazon’s Email RE: Prime Price Increase (click to enlarge)

I’m on my second year as a prime subscriber. I did it for the reason some of my friends did. It was pre holidays, I wanted the convenience of buying online, but who wants to pay for all that shipping?

What I didn’t know was of all the benefits. I knew of the Prime Instant Video, but I am an existing Netflix subscriber and didn’t found the streaming from Amazon thus far to be sub-par. What I didn’t know of was the “over 500,000 books to borrow from the Kindle Owners’ Lending Library.”

This is something I need to check out (chime in the comments below if you have any experience with it, feedback).

Amazon build a pattern of value add without price increases, while not promised in the email, it’s clear they plan to continue this pattern.

Marketer Takeaways

Here are some questions I think of as a marketer in light of Amazon Prime’s price increase:

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  • How can I deliver amazing value now and in the future so that I can introduce a fair price increase at the right time?
  • When considering a price increase, what increase yields the business what it needs without burning the customer base, but yielding enough that an increase won’t be needed again for sometime?
  • When introducing the price increase, how can I position it so that customers are reminded of the value built into the program over time, which is available to them now (see the first point above), while justifying the price increase?

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How do you react to these points? Chime in the comments below.

Finally: [highlight]A price increase won’t kill Amazon Prime, and it won’t be the end of the world for your business either. [/highlight] (Tweet That) In taking pointers from Amazon if you practice delivering amazing value to existing customers, and position your increase properly, your price increase will be a near non-event. You may even profit from it!

Author: Travis Campbell

Husband. Dad. Marketing automator. Author. Educating and coaching others in their online business endeavors. Here's his Google profile.