How much do customers value Amazon Prime — and which of its perks are most important to them? Two recent surveys offer some answers.
During Amazon’s most recent earnings call, CFO Tom Szkutak revealed that the company is considering raising the price of Prime, which offers unlimited two-day shipping, streaming video and other perks for $79 per year. “With the increased cost of fuel and transportation as well as the increased usage among Prime members, we’re considering increasing the price of Prime between $20 to $40 in the U.S.,” Szkutak said.
Obviously, Prime subscribers don’t want to pay more for the service. But will they, if they have to? The surveys — one from UBS, the other from deal-sharing site Slickdeals — claim the answer is no.
UBS’s survey of 300 Amazon customers, which analyst Eric Sheridan described in an investor note Wednesday, was conducted with securities research firm Consumer Intelligence Research Partners “to survey Amazon customers in the U.S. from February 4-7, 2014.” Sheridan was “negatively surprised” by the results:
“[W]hile 94% of Amazon Prime customers surveyed indicated a likelihood of renewing (‘definitely will renew’ or ‘probably will renew’) at the current $79 annual fee, these percentages dropped precipitously when price increases of $20 and $40 were introduced (to 58% and 24%, respectively). Our survey results call into question our prior views about the value that a broad set of consumers are applying to the current iteration of Amazon Prime. If Amazon were to raise Prime fees, such a fee increase might need to be accompanied by either a) a higher level of value in the service offering (additional media content, streaming music and/or Fresh (supermarket) offerings) and/or b) an increased level of marketing around the perceived value of Prime to the general public.”
The second survey, from Slickdeals, is much more informal. I ignored a press release I got about it a few days ago, since it sounded more sketchy than scientific. Yet the survey results — and comments from Slickdeals users — are largely in line with what UBS found.
About 87 percent of respondents to a poll on Slickdeals’ site said they would not “pay $20 to $40 more for Amazon Prime.” That was just 73 people, but subscribers also left a couple hundred comments in Slickdeal’s forums and on its Facebook page that seem to echo UBS’s findings about the value that customers see in “the current iteration of Amazon Prime.”
Get more to pay more
Prime already offers more than it did when it launched nine years ago: There are a lot more products are eligible for two-day shipping and members can now take advantage of Prime Instant Video, a library of streaming movies and TV shows. Those who own Kindles can also borrow one ebook a month for free, from a library largely consisting of self-published titles (along with some big series like “Hunger Games” and “Harry Potter”). In its third-quarter earnings release, Amazon said it had added “millions” of Prime subscribers during the quarter and attributed that in part to Prime Instant Video.
Yet a number of the comments on Slickdeals’ Facebook poll fit with UBS’s suggestion that members don’t find those perks alone worth enough to pay more for them, and a recurring theme is that some users don’t see video as being something they want to pay more for.
- “Probably not. I’d continue paying $79/year for the two day shipping which is what I originally signed up for.. They should offer a ‘shipping’ plan and a ‘shipping/lending library/VoD/etc’ package.”
- “It’s already too expensive for what you get. I just want the 2 day shipping. I don’t want to be paying for licensing fees to a limited selection of crap I’m never going to watch. Get back to the basics Amazon. You ship stuff. Let’s focus on that.”
- “I don’t care, as long as I get grandfathered into my current rate. If not, it’ll be a big fat no from me. Even a $20 price increase is faster than the current rate of inflation, especially considering they are adding ridiculous stipulations like ‘Add-on’ items. I love Amazon, but this is kinda like what Netflix did a couple years back. A total slap in the face to the customers who helped build their company up.”
- “Prime Shipping has been pathetic lately. If it was actually 2 days like it used to be, maybe. If you could share the movie and kindle benefits with guest accounts, maybe. They need to change a lot if they plan to increase it so much.”
- “If they changed it to one day shipping then maybe. Otherwise, no.”
The trend that emerges is different from what Amazon said on its conference call: Many users still seem to see Prime’s primary value in fast shipping (and there are plenty of complaints about delayed orders and “add-on items,” cheaper or lighter products that don’t ship out until a Prime member has $25 worth of stuff in their cart). At least some members see video as something they didn’t ask for and don’t want to pay more for.
Cutting video from a standard Prime membership likely wouldn’t save Amazon money, though. Szkutak cites fuel, transportation and increased usage as the reasons that Prime prices might need to increase. He does not mention licensing fees.
When push comes to shove…
There’s a difference between complaining about paying more and actually canceling your Prime membership if the price goes up. (Though as Publishers Lunch points out, the fact that members would have to be notified about the increase might remind some of them to cancel.) And even if Amazon doesn’t give longtime Prime members grandfathered status in the event of a price increase, there are already ways to get around Prime’s current $79-per-year price: Students pay $39 a year, for instance; American Express Blue Cash cards give members a year of Prime free; and Amazon Mom members (who don’t actually have to be parents) get three months of Prime free.
Nonetheless, the findings from UBS and Slickdeals suggest that some Prime members already see enough flaws in Prime that they’d seriously reconsider their membership if the price increases. CEO Jeff Bezos likes to say that some things never change: Customers are never going to want to pay higher prices, and they’re never going to want items to arrive more slowly.
Along those lines, it’s clear customers are never going to want to pay more for Prime — no matter how many perks it adds. But will they actually drop the service?