On March 13 Amazon announced that it was increasing the price of Amazon Prime from $79 per year to $99 per year – a $20 price hike that we argued actually isn’t so bad, especially if you order products frequently, use Amazon Instant video services and more. Even still, any price hike comes with the risk of upsetting customers, especially those who haven’t seen the price change in the 9 years Amazon Prime has been active. A new survey found that customers are reacting negatively to the increased fee.
Data from Brand Keys shows that Amazon’s consumer loyalty and engagement dropped significantly. A February report found that Amazon had a rating of 93 percent, one of the best among all brands, including Amazon’s online retailer competitors. However, according to new data obtained by CNBC, the rating has since tanked to 83 percent.
“Based on immediate Prime member reactions, they may have underestimated the negative effects of the increase,” Brand Keys president Robert Passikoff told CNBC. Passikoff said customers weren’t expecting a price increase, though Amazon did warn one was possible when it published its fourth quarter 2013 earnings.
By some estimates, Amazon stands to make an additional $500 million in annual revenue with the increase in Prime prices. The company said it originally planned the bump to cover more expensive shipment costs, but we think Amazon is more likely going to use that money for new product roll-outs. Most rumors suggest the company is gearing up to release a set-top box that could double as a game console, and we’re also expecting an Amazon smartphone as well as an Amazon streaming music service sometime this year.
Each of those will no doubt add to the value of Prime in some way, but they also aren’t free to create and produce. Amazon will likely use the additional revenue to help it kickstart these other projects. Hopefully once its new investments bear fruit, the customer loyalty rating returns back to where it was.