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.