Is Amazon underestimating how many Amazon Prime subscribers it will lose if it increases the subscription price as much as it says it may?

Amazon CFO Tom Szkutak dropped a bit of a bomb on the company’s recent earnings call when he told Wall Street analysts that Amazon was considering raising the price of its two-day shipping service to somewhere between $99 and $119 annually. Prime subscriptions currently cost $79 a year.

The company hasn’t raised the price since it launched Prime nine years ago, but fuel and transportation costs have risen since then, Szkutak said. Over that time, Amazon has also added a giant library of movies and TV show episodes that Prime subscribers can watch in a streaming format for free.

Yet, a new survey conducted by Chicago-based research firm Consumer Intelligence Research Partners found that as many as 52 percent of current Amazon Prime subscribers said they would “probably” or “definitely” not renew their subscription if the price increased to $99. Separately, 40 percent said they would “definitely” not renew at $119.

CIRP’s survey includes responses from 300 people who made recent purchases at Amazon, 45 percent of whom identified themselves as Amazon Prime members. That’s not a huge sample, but one that the firm says is statistically sound. This survey also largely corroborates the findings of one other recent study.

The other big caveat to consider is one that a lot of surveys deal with when asking people what they may or may not do in the future. That is, people may say they would do one thing, and then do the opposite when the time comes.

CIRP estimates that there are 26.9 million Prime subscribers, while Amazon only has said “tens of millions” globally. Either way, even if you cut some of the study’s results in half, Prime could be set up to lose millions of customers with a price hike, depending on the severity of the increase.

In the end, that may actually be just fine with Amazon. You’d have to believe the company is modeling in subscriber losses when it comes up with the new Prime price.

But no one truly knows how big of an effect it’ll have until the hammer drops.



6 comments
MC2188
MC2188

Just throwing this out there, but Costco executive membership fee is currently where prime increase will most likely go and they don't have any problems retaining those customers. The majority of prime customers are upper middle class and above, I don't think an extra 20-40 bucks is going to kill them.

Ken Esq
Ken Esq

It's a great deal if you use the shipping like we do. If they raised it to $99 I wouldn't be thrilled, but I'd keep the program. The video and books are kind of a nice bonus for us, but really have no bearing on why we have the service.


Unless the polling companies are breaking that demographic out the results are going to be skewed.


Amazon has been more right than wrong over the past 15 years...I wouldn't bet against them.

Bob_jingle
Bob_jingle

I'm one of those people who wouldn't renew because I know the real behind the price increases. All of the new price increases will go toward content royalties to pay for prime instant video. I already have a netflix account and didn't ask amazon to add on a VoD service so I refuse to pay extra for something that I don't use.


I would prefer that amazon separate the video service from the prime shipping service and if they refuse to do so then I'm canceling my subscription.

blakemitchell
blakemitchell

 I always turn to Amazon to buy things because I am a Prime member. I am not necessarily a Prime member because I want to shop at Amazon so badly. $79 to $99 jump isn't much in difference, but it's harder to stomach. $119 is just crazy. I just renewed a month ago and I will keep my account at this price but if they go up in price, they will lose more than my Prime account as I may be more prone shop elsewhere. On top of that, I don't see much talk about some of the other changes they seemed to have made recently. I have had a few smaller items show up as ad-on items (meaning shipping was free if other items were ordered too) that weren't that way before. Prime is attractive because it's a good deal. It's a good deal because it's saving money. 


Keep your video service Amazon and don't raise the price.

gprovida
gprovida

I signed onto prime many years ago for the no charge 2day delivery. If you use Amazon a lot for things from books, chicken broth, linen, toe nail clippers, back braces, appliances, etc., then the shipping saving payback is easily within 1 month not to mention time saved doing shopping by car. The judgement is the payback time for shipping saving based on any price increase.

The movies etc., are a recent interesting, but basically nice to have option. If a person signed up for prime as a media subscription service they may be hyper price sensitive, just like the NETFLIX fiasco, however, if it's shipping saving it's an entirely different calculation.

Lots of options for Amazon including price hike, prime and prime plus, media subscription separately, etc., my bet is prime and for small additional charge prime plus $30 per year for media subscriptions.

MC2188
MC2188

Also a 300 person sample is a great sample size to make inferences from...not

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