Raising the Price of Amazon Prime Was a Great Decision

CommanderFrank

CommanderFrank

Cat Can't Scratch It
Joined
May 9, 2000
Messages
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It was definitely a high stakes gamble, but Jeff Bezos was able to raise the price of Prime by $20 bucks and actually increase Prime subscriptions by 50%. In any business circle anywhere, that would be considered a big win in anyone’s book.

On a base of tens of millions, worldwide paid membership grew 53 percent last year — 50 percent in the U.S. and even a bit faster outside the U.S.
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Great decision for whom? Clearly the customers are all out an extra $20. The article goes on to say that Amazon lost $241 million in 2014 due to costs for Prime shipping and paying for content. Would they have had more subscribers at $79 vs. $99?
 
kirbyrj said:
Great decision for whom? Clearly the customers are all out an extra $20. The article goes on to say that Amazon lost $241 million in 2014 due to costs for Prime shipping and paying for content. Would they have had more subscribers at $79 vs. $99?
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Well it went up 20 and had 53% growth so while the hike didn't entice new members itself they obviously fell the package is worthwhile. It has more or less replaced Netflix with the added bonus of the shipping component for me at under $10 a month.
 
Amazon Prime, especially with Instant Video and recently added Music, is a friggin bargain at $100 per year. And now that Amazon loosened the reins and allows video streaming on all non-Kindle/Fire Android devices, there's even more value-add to the Prime services.
 
I ended up signing up for the streaming service after the latest hike by Netflix. Amazon Prime is now cheaper than the Netflix subscription on an annual basis and has a similarly broad selection of content. The free two-day shipping is just a bonus for me. So far Prime is easily worth the extra $20 annually over the old rate. That doesn't mean that I wouldn't mind getting it for $80 again...Chalk it up to keeping pace with inflation I suppose :D
 
DejaWiz said:
Amazon Prime, especially with Instant Video and recently added Music, is a friggin bargain at $100 per year. And now that Amazon loosened the reins and allows video streaming on all non-Kindle/Fire Android devices, there's even more value-add to the Prime services.
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It's more of a bargain at $80 a year which it was until last year.
 
They also simultaneously reduced the quality of the service and lowered costs, but using smartpost with FedEx to where they drop it off at the post-office 2days and hope your post-office will actually deliver the package (mine often won't, you have to wait in 30 mins in line after driving down to the PO). Other times they directly ship with the post office, with the same issues.

Most of the benefit of prime was also that you didn't need a minimum order amount, which they also bumped from $25 minimum order to $35 minimum reducing quality of service, but that is mostly gone since most inexpensive items are now "ADD ON" products, where they won't ship by themselves regardless prime or no.

But since when were consumers shown to act rationally? https://www.youtube.com/watch?v=75b2hTl2T2E

Jimmy Kimmel shows that most shoppers actually simply buy into heard mentality. When Amazon Prime was a good deal, the heard started moving that direction. They can then sour the milk, but the heard will usually keep following. In the case of "organic juice", people said they'd pay $20 for a bottle of organic juice which was just ground up skittles and water.
 
kirbyrj said:
It's more of a bargain at $80 a year which it was until last year.
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Yes, and as a long time Prime subscriber, I'm not bitching about the $20 increase due to everything that Prime comes with. Even at the current price, $8.25 per month for 2 day shipping, video streaming service, music streaming service, plus exclusive offers and discounts...nothing really to complain about, IMO.
 
Ducman69 said:
most inexpensive items are now "ADD ON" products, where they won't ship by themselves regardless prime or no.
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That is my one and I think only major complaint about Prime. The "ADD ON" items I sometimes need, but unless I get something else it won't let me check out. That to me is idiotic. That item flag should only apply to people who aren't Prime members otherwise those items should just be like any other item on the site that ships via Prime.

So far I haven't paid $99 for prime yet. In March I was suppose to renew, but I got in on that deal for $72 a week ago so my price for prime is actually lower this year than last time ;).
 
pothb said:
.... correlation isn't causation.
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infamy is almost as good as praise relative to obscurity. I think the hubbub made some oblivious people understand what prime offered.

OTOH, as more and more people by more and more often from Amazon it just makes sense.
 
I jumped ship and stick solely with Netflix. Netflix still has a better selection for videos and I don't buy nearly as much as I used to from Amazon now that they charge sales tax and Newegg doesn't so the shipping bargain is pretty much worthless for me. Because of all that, a $20 bump was just enough to put it in the "not worth it to me" category.
 
I've had it for years but between the price increase prime item prices being bumped high than non prime and their poor movie selection I will not be renewing plus my state Illinois now charges tax so I'll shop local or somewhere else online.
 
And yet Amazon managed to lose $241 million in 2014 compared to showing a profit of $274 million in 2013. It's thought that the losses may be because of the increased Prime membership.
 
I thrash my Prime Subscription hard. I reckon I've saved several hundred quid in next day delivery alone. I can order on a Saturday and get it delivered on a Sunday! I reckon that would cost around $25 otherwise.
 
MacLeod said:
I jumped ship and stick solely with Netflix. Netflix still has a better selection for videos and I don't buy nearly as much as I used to from Amazon now that they charge sales tax and Newegg doesn't so the shipping bargain is pretty much worthless for me. Because of all that, a $20 bump was just enough to put it in the "not worth it to me" category.
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I believe it's sales tax if the item ships from a warehouse in your state. I also wasn't glad to see the price increase but that's coming from a free year they give students.
 
Amazon had $200 profit on $30,000 in sales. Would you even consider this a viable business? The IRS wouldn't if you filed a Schedule C 5 years in a row reporting this.
 
pothb said:
.... correlation isn't causation.
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Doesn't matter at all, we're not talking about a scientific study. All they care about is that the price increase didn't cause a large percentage of customers to quit. Actually, since the service doesn't really make money and the increase just offsets losses a bit more they may not have cared if everyone had quit.
 
xX_Jack_Carver_Xx said:
Amazon had $200 profit on $30,000 in sales. Would you even consider this a viable business? The IRS wouldn't if you filed a Schedule C 5 years in a row reporting this.
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You don't need a single dollar of profit to be a viable business.

For example, lets say I have a business selling cupcakes. I sell 5 million cupcakes a day with a total revenue of 8 million. I use 4 million to expand my business driving out competitors, give myself a 2 million dollar a week salary, another 1.99 million on actual expenses to do business, I have virtually no profit.

But I'm getting wealthier than you could ever believe and building an unbreakable foundation. If I'm not relying on investors for revenue because my business already floats on its own, who gives a shit about profits for the stockholders?
 
JJ Johnson said:
And yet Amazon managed to lose $241 million in 2014 compared to showing a profit of $274 million in 2013. It's thought that the losses may be because of the increased Prime membership.
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That and half of their customers don't have Prime which means $35 minimum to get free shipping. Those people are just going to spend less or go elsewhere.
 
For example, even non-profit "charitable" companies make a ton of business sense. Ted A. Beattie last year awarded himself a $3,394,434 salary for running a non-profit educational indoor aquarium (like a water-museum/zoo of sorts). Would you like to make over $3 million a year, even if your business technically makes no profit?

Or would you like to tell Alabama football coach that makes $7.3 million a year that football isn't a viable business because its non-profit?
 
Ducman69 said:
They also simultaneously reduced the quality of the service and lowered costs, but using smartpost with FedEx to where they drop it off at the post-office 2days and hope your post-office will actually deliver the package (mine often won't, you have to wait in 30 mins in line after driving down to the PO). Other times they directly ship with the post office, with the same issues.
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I know I'm in the minority here, but I actually prefer smartpost/surepost. I've never had anything not arrive in two days with these services. More importantly, when USPS delivers a package, it's delivered to a locked mailbox. When UPS/FexEx does, it gets left outside my front to sit in the snow.
 
Viper87227 said:
I know I'm in the minority here, but I actually prefer smartpost/surepost. I've never had anything not arrive in two days with these services. More importantly, when USPS delivers a package, it's delivered to a locked mailbox. When UPS/FexEx does, it gets left outside my front to sit in the snow.
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All depends on the situation. Surepost takes about 2 days longer for me.
 
kirbyrj said:
All depends on the situation. Surepost takes about 2 days longer for me.
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Yeah, I know. I'm not surprised that there are a lot of people unhappy with it. I think I'm a unique case in which it's beneficial.
 
JayteeBates said:
Overall it is still a good value. The shipping is just a bonus for me.
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Pretty much this, though for me, the video was the added bonus. The free shipping was why I became a prime member in the first place. Overnight shipping costing only a few dollars is a big savings as well.

For the cost of Netflix, I get the free videos (very comparable to Netflix on selection), the 2 day shipping, Prime Music, The lending library in the Kindle store, cheap overnight shipping, and unlimited photo storage. Well worth the $99 a year.
 
For frequent online shoppers, Prime is an incredible bargain even at $99. It saves me that much on shipping alone in less than 2 months. The streaming video/audio content is a nice bonus, too.
 
kirbyrj said:
Great decision for whom? Clearly the customers are all out an extra $20. The article goes on to say that Amazon lost $241 million in 2014 due to costs for Prime shipping and paying for content. Would they have had more subscribers at $79 vs. $99?
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The Customer's aren't out of anything. If customers think that Prime isn't worth the $99 they would not renew the service. The fact that they significantly increased subscribers after raising the prices demonstrates that people know it's still a great value. It's just not the Crazy steal it was at $79
 
Ducman69 said:
For example, lets say I have a business selling cupcakes. I sell 5 million cupcakes a day with a total revenue of 8 million. I use 4 million to expand my business driving out competitors, give myself a 2 million dollar a week salary, another 1.99 million on actual expenses to do business, I have virtually no profit.
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But what happens in case you face some kind of business disruption. You lose a store due to fire and the insurance is slow to pay. You don't have cash on hand to rebuild while waiting for the claim to process thus losing revenue while waiting on the insurance check. Or you face a law suit because some people got ill supposedly from your cup cakes, you lose and have to pay up a big sum. Maybe an opportunity to buy a new location or another cup cake business comes along but don't have the cash on hand. So you go to borrow but because you do have enough liquidity for collateral you get charged a higher interest rate. Or maybe you just face some rough times and the business looses money for a few quarters but you have no reserves to ride it out.

There's lots of benefits to having cash on hand for a business that's mirrors many the same benefits for individuals. As long as the money comes in and nothing too bad happens you can make it paycheck to paycheck. But if the paychecks get reduced or do cover all the expenses then you're in some trouble.
 
griffinhart said:
The Customer's aren't out of anything. If customers think that Prime isn't worth the $99 they would not renew the service. The fact that they significantly increased subscribers after raising the prices demonstrates that people know it's still a great value. It's just not the Crazy steal it was at $79
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I don't understand how you people aren't more upset at just giving Amazon an extra $20. Sure it's still a deal anyway, but you got the same service for $20 cheaper last year. Netflix tried this 2 years ago, and I canceled. Same argument was made, "But it's a good deal even after the price hike."
 
kirbyrj said:
I don't understand how you people aren't more upset at just giving Amazon an extra $20. Sure it's still a deal anyway, but you got the same service for $20 cheaper last year. Netflix tried this 2 years ago, and I canceled. Same argument was made, "But it's a good deal even after the price hike."
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Maybe because $20 over a year just isn't a lot of money. If it had been $20 per month I would have canceled instantly.
 
daglesj said:
I thrash my Prime Subscription hard. I reckon I've saved several hundred quid in next day delivery alone. I can order on a Saturday and get it delivered on a Sunday! I reckon that would cost around $25 otherwise.
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The last few order's I've made have arrived on Sunday! I ordered an HDMI splitter and a VGA to RGB cable on Friday and got it today on Sunday. A $17 order where I just selected my usual free shipping. And you are right, $5 for overnight shipping racks up the savings pretty quickly.
 
kirbyrj said:
I don't understand how you people aren't more upset at just giving Amazon an extra $20. Sure it's still a deal anyway, but you got the same service for $20 cheaper last year. Netflix tried this 2 years ago, and I canceled. Same argument was made, "But it's a good deal even after the price hike."
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I don't understand what you don't understand.

You don't think it's worth it, so you cancelled. Someone else thinks it's still worth it, so they didn't. What's the mystery? BTW, I also dropped Netflix after the price hike. Others who thought it still worth it didn't. That's their decision, and perfectly understandable.
 
There's nothing even worth buying. All the Prime service does is encourage you to buy shit you don't need. For the essentials and the odd entertainment product, I can just go to Target or BB and get it immediately.
 
JJ Johnson said:
And yet Amazon managed to lose $241 million in 2014 compared to showing a profit of $274 million in 2013. It's thought that the losses may be because of the increased Prime membership.
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More likely it's the dud that the Fire Phone was last year.
 
heatlesssun said:
But what happens in case you face some kind of business disruption. You lose a store due to fire and the insurance is slow to pay. You don't have cash on hand to rebuild while waiting for the claim to process thus losing revenue while waiting on the insurance check. Or you face a law suit because some people got ill supposedly from your cup cakes, you lose and have to pay up a big sum. Maybe an opportunity to buy a new location or another cup cake business comes along but don't have the cash on hand. So you go to borrow but because you do have enough liquidity for collateral you get charged a higher interest rate. Or maybe you just face some rough times and the business looses money for a few quarters but you have no reserves to ride it out.
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That's what insurance is for, and I'm sure they have a lot of it. ;)

posting 0 profit while having a successful business could also be a strategy. Drive stock price down so you can buy it all back.
 
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