THE BLOG
02/20/2014 06:59 pm ET | Updated Apr 22, 2014

Amazon Prime Pricing: A Sensitive Subject

Churn Data Belies Intent to Renew Memberships
Loyalty Depends on Video, Other Factors

Consumer Intelligence Research Partners released new survey analysis of member loyalty and price sensitivity of Amazon Prime members from Amazon, Inc. (NASDAQ:AMZN). This analysis indicates that Prime membership is growing even as customers already cancel memberships at a higher-than-expected rate, and a price increase could dampen membership growth.

Based on our survey analysis, we estimate that as of February 7, 2014 Amazon had approximately 26.9 million Amazon Prime members, an increase from our estimate of 16.7 million as of September 30, 2013. Amazon Prime members account for 45% of all Amazon customers (see chart). Among Amazon buyers, 32% are not and never have been Amazon Prime members, while 23% previously had a Prime membership that they did not renew.

Amazon Customer Prime Membership Status

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Almost a quarter of Amazon buyers in the survey period had a Prime membership, but let it lapse. One way to look at this is that Amazon Prime is not for everyone, but trying out Amazon Prime is for almost everyone. About three-quarters of those that did not renew their membership did so because of cost.

Among Amazon Prime members, almost all intend to renew their current membership at the current $79 price. 94% of survey subjects "definitely" or "probably" will renew their membership (see chart).

Intent to Renew Amazon Prime

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CIRP also checked the renewal intent at the proposed $99 and $119 prices, and found dramatically different results. At $99, under half of subjects think will either definitely or probably renew. And at $119, 40% of subjects say they will definitely not renew their membership.

Frequent use of Amazon Prime free Instant Video seems to be the most powerful lever to promote loyalty. Among frequent users of the Amazon Prime Free Streaming Video service, defined as those that use it at least once a week, 100% say they will "definitely" or "probably" renew their Amazon Prime membership, assuming the current price. At $99, 69% of frequent video users say they will "definitely" or "probably" renew, and at $119, 29% say they will "definitely" or "probably" renew.

Amazon has created a set of loyal customers using both free shipping and free streaming video benefits of Amazon Prime. Yet it seems that even these dedicated customers have their limits, and a 50% price increase to $119 could push a significant portion of them away from Amazon Prime.

CIRP based these findings on its survey of 300 subjects who made a purchase at Amazon.com in the three-month period ending February 7, 2014.

For additional information, please contact CIRP.