![]() So, once customers get into the habit of streaming free videos, Amazon has a chance to sell them on renting or buying videos that aren’t available for free. However, Amazon has discovered that Prime members who use the free video streaming service are 10 times as likely to rent or buy movies from Instant Video as non-Prime members. Prime Instant Video doesn’t actually make the company money. Prime Instant VideoĪmazon Prime members have access to Prime Instant Video, which lets them stream popular shows, such as “Transparent,” “Boardwalk Empire” and “Girls,” along with movies like “The Big Lebowski,” “When Harry Met Sally” and “Mad Max: Fury Road.” According to Fortune, Amazon Prime has become a tool for acquiring new customers and building loyalty, so the company can make money off members in other ways, like video streaming and cross-selling. Still, this program isn’t a direct money-maker for the online retailer. According to the report, Amazon Prime members spend a jaw-dropping $1,500 a year with the retail giant, compared to non-Amazon Prime shoppers, who spend just $625 a year. Once you pay for an Amazon Prime membership, you will likely stop shopping at other stores in order to take advantage of all the benefits. As a result, they can take advantage of incentives like free expedited shipping, same-day delivery in certain areas, unlimited video and music streaming, early access to lightning deals, access to the Kindle Owners’ Lending Library and discounts on diapers, video games and more. According to a report by the market research firm Consumer Intelligence Research Partners (CIRP), 40 million people in the U.S. Amazon Prime MembershipĪmazon Prime is a customer loyalty program that was originally designed to get customers to spend more. Revenue from these incentives offsets Amazon’s annual shipping costs, which Forbes estimated at $11.5 billion for 2015. The idea behind the free shipping offers is to incentivize customers to pay extra for Prime Memberships or get them to increase the number of items in their carts. If you don’t want to pay for an Amazon Prime membership, you can spend at least $25 on books - or $49 on other qualified items - for free shipping.įree shipping isn’t free for Amazon, and the company has to make up its losses somehow. You can pay $99 a year for an Amazon Prime membership, which gets you free, two-day shipping on most items and free, two-hour delivery in certain areas. Free Shipping OffersĪmazon offers customers a few different ways to score lightning-fast shipping. Read More: 16 Luxury Hotels That Offer Free Perks 2. In fact, Amazon attributes 35 percent of its revenue to cross-selling. “Not only did I enjoy the books, but I never would have known about them without these recommendations.” ![]() “As an avid reader, I buy lots of books on Amazon, and on many occasions I have taken advantage of its ‘Frequently Bought Together’ and ‘Customers Who Bought This Item Also Bought’ features,” said Bichutskiy. The company has access to data that allows it to analyze behavior from customers and use this information to recommend products to other shoppers with similar profiles.Īccording to Vadim Bichutskiy, director of data science at Innovizo, Amazon has pioneered a data-driven strategy for cross-selling and upselling. Data-Driven UpsellsĪmazon uses a highly sophisticated algorithm to recommend the right products to the right customers, at just the right times. Here are a few sneaky ways the company gets you to bust your Amazon budget. In order to stay profitable, Amazon employs a number of strategies designed to incentivize customers to spend more. Sales in 2015 rose 20 percent to $107 billion, but profit margins at Amazon remain tight, with the company’s net income totaling just $596 million, according to Fortune. Offering millions of items for sale, competitive pricing and free shipping deals, Amazon has had a significant impact on the way we shop for retail goods. Amazon is one of the largest retailers in the world.
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