Amazon Prime Day Reveals the Future of Loyalty

In just a couple of years, Amazon has turned its one-day anniversary sale into arguably the most successful loyalty campaign ever created. From its humble beginnings in 2015, Prime Day has amplified July 10th and 11th into retail’s mid-year equivalent of Black Friday and Cyber Monday. And while this new holiday is difficult to replicate, Prime Day has cracked the code on customer loyalty in ways that should make marketers’ ears perk up.

When it comes to loyalty, Prime Day is designed to serve three key purposes – increasing incremental sales, attracting more members and celebrating Amazon’s most loyal customers. Sound familiar? Getting new customers, keeping them and increasing their purchase frequency is the not-so-secret formula to any successful loyalty program. But these goals are easier said than accomplished.

New customers want an offer they can’t refuse

Prime Day deals are reserved exclusively for Prime Members, which gives new members a reason to sign up for the program. However, in its first year, customers complained that the discounts they received focused only on Amazon’s own products like the Kindle and didn’t seem justify the pre-requisite $99 annual membership fee. Although the event proved a success in terms of sales, Amazon had some kinks to work out.

Expanding its catalog to nearly 100,000 sale items, Prime Day 2016 lead to more people trying Prime than any other day in the site’s history. And this year is poised to be even bigger, with Prime Day’s recent launches in India and China.

While a $99 fee can more than pay for itself in free shipping over the span of a year, customers have a short-term calculator when it comes to appraising value. Many loyalty programs take too long to see any real return. With its latest iteration of Prime Day, Amazon has mastered instant gratification, offering bigger and better deals on more items, as well as add-ons like Prime Video and Prime Music memberships, and more.

Long-term loyalty is a two-way street

Besides providing additional revenue from the annual membership fee, Prime members spend more money with Amazon throughout the year. According to Consumer Intelligence Research Partners, non-members spend about $500 a year, compared to Prime members who spend about $1200 over the same time span. 

While celebrating these loyal customers was the initial goal of Prime Day, one-day discounts aren’t the only thing keeping members around. Encouraging shoppers to not only sign up for a loyalty program, but also be active members requires continued incentives and an ultra-personalized experience.

Once a member is signed up for Prime, Amazon keeps the perks coming every time she checks out – through free two-day shipping, easy checkout, and its Video and Music services. By activating their treasure trove of data on shoppers’ past purchase, Amazon can also provide scientific, timely and tailored recommendations and deals to every customer. This understanding customers’ wants and needs makes it a no-brainer for them to continue buying with Amazon well after Prime Day is over.

amazon-reveals-future-of-consumer-loyalty.jpgMore discounts mean more purchases

Last year’s Prime Day added between $500 million and $600 million in incremental sales to the retailer’s topline sales. This is a 26 percent increase from their projected sales in 2015. Analysts such as Forrester’s Sucharita Mulpuru believe last year’s Prime Day success can be attributed to Amazon rolling out new discounts more frequently than the previous year. According to Mulpuru: “Naturally if you increase the number of offers you have substantially, you’re also going to increase sales volume substantially.” More frequency means more purchases. 

This is not just a tactic reserved for big brands. Smaller retailers are increasingly able to spin up new offers in minutes, leveraging an individual customer’s preferences, previous purchase history and other behaviors to algorithmically determine the right offer and deliver it at the right time on the right channel.

While most ecommerce sites can’t create their own version of Prime Day at Amazon’s scale, retailers can replicate the holiday’s underlying lessons in loyalty. Consumers want more than a punch card or a points system – they want exactly what they’re being promised: loyalty from the brands they love. Amazon has done an incredible job delivering on that promise. Now is the time for other brands to take a page out of Bezos’s book and do the same.