THE BLOG
01/22/2015 01:23 pm ET Updated Mar 24, 2015

Amazon Prime to Add 7 Million Paying Members

Strong Conversion Rate from 10 Million Trial Members Expected

Consumer Intelligence Research Partners (CIRP) released additional analysis of consumer behavior for Amazon, Inc. (NASDAQ:AMZN) customers.

Amazon announced on December 26 that 10 million new Amazon Prime members "tried" it in the 2014 "holiday season." Based on CIRP analysis of prior Amazon Prime member conversion and retention, we estimate that 7 million of these customers will pay for a one-year Amazon Prime membership. We further estimate that almost 6 million of these customers will then renew their membership after their first year.

CIRP data suggests that 70% of customers who sign up for Amazon Prime purchase a full-year membership at the end of their 30-day free trial. Amazon Prime's first retention -- or, more accurately, conversion -- point is after the initial 30-day free trial. Amazon allows any customer to join Amazon Prime for 30 days, and to access all the available benefits. At the conclusion of the 30-day period, Amazon charges $99 for a one-year membership. So the 7 million trial members who we anticipate will convert to paid members should generate almost $700 million in membership-fee revenue for Amazon in the coming weeks.

CIRP estimates that 84% of paid Amazon Prime members renew their membership after one year. This rate implies that of the 7 million new, paying Amazon Prime members from the 2014 holiday season, approximately 5.9 million will renew for a second year.

The first-year (really thirteen-month) Amazon Prime drop-off rate of 41% combines the 11% of all starting members who do not renew their membership after one year and the 30% of trial members who never convert to paying membership.

CIRP bases this analysis on surveys of 1,500 US subjects who made a purchase at Amazon.com in the 90 days preceding three surveys covering the period from January-September 2014. Among these subjects, CIRP estimates Amazon Prime membership trends for 987 US Amazon customers who started an Amazon Prime membership among the 1,500 US subjects.

For additional information, please contact CIRP.