Amazon understands one of the fundamental truths of retailing, and they’ve demonstrated that with their amazingly successful Amazon Prime program. For years, now, the industry bean counters have been looking side-eyed at the program that offers shoppers free two-day shipping and streaming of digital content in exchange for a one-time annual flat fee payment. It looks like a system designed to fail.
An Amazon Prime membership costs $79 annually. Researchers have found that the average Prime customer was using $90 worth of shipping and streaming services per year. The math seems pretty simple; 90 – 79 is 11. Amazon loses, the customer wins.
Does anyone reading these words really believe that Amazon, the company that tracks customer behavior so closely that they can make personal recommendations to each and every one of their 615 million customers, didn’t know this was going to happen?
Of course they knew. That brings us to the next question: Why would you pick a fight you know you’re going to lose?
Cult Branding: Know Your Customers As You Know Yourself
This is the only time you’ll ever see Donald Trump quoted in this space. “Sometimes by losing a battle, you find a new way to win a war.” Amazon, the company named for a nation of fierce warrior women, is performing a classical tactical maneuver. There are times when allowing your enemy to gain ground moves them into position to be surrounded. $11 may be lost, but a customer who is becoming increasingly habituated to choosing Amazon as their default retailer is gained. The average Prime member spends over $1,200 with Amazon annually. The non-Prime Amazon customer spends less than half that amount.
Amazon knows one of the secrets of retail. We may love our customers, but our customers don’t necessarily love us back. There’s an uneven power dynamic inherent in the relationship, and the customer feels like they’re getting the short end of the stick most of the time. Given a chance to even the scales with—or to even get one over on—a business, the customer is going to take it.
Understanding this aspect of human nature allowed Amazon to craft an irresistible offer. They’ve taken on the role of the giant and just handed over a slingshot. In an economic, social environment rife with depressing overtones for the typical buyer—average income growth for 90% of the American population was $59 over the past 45 years—opportunities to come out ahead in the game are few and far between.
We want to embrace our customers, and that can lead us to presume that our customers—especially the best ones—want to embrace us too. But things are more complicated than that. Human behavior is motivated by a wide range of emotions. Not all of these emotions appear attractive or noble at first glance. It’s hard to see the appeal in an adversarial relationship. It can seem counter-intuitive and extremely uncomfortable to consider the entirety of our customers’ perceptions of the brand.
Do we, as retailers, want to do what’s comfortable, or do we want to do what works?