Why 98 Percent of Amazon Prime Members Keep Renewing

Access, speed and convenience. One day free delivery with free returns - or at least the promise of that (since it often takes an additional day or two) - keeps Americans hooked. JL

Shira Ovide reports in the New York Times:

150 million Americans are members of Amazon Prime’s shopping club, making it one of the most popular paid tech services in the US. Prime’s most recent cost increase in the U.S. was four years ago, when the price rose to $119 from $99 for most people who pay annually. The prior Prime price increase was four years before that, meaning that it might be time for another bump. People walk away from some products when prices go up, but almost no one quits Prime. Among Americans who have been Prime members for at least two years, 98% renew.

An estimated 150 million Americans are members of Amazon Prime’s shopping club, making it one of the most popular paid technology services in the United States. Most Americans are members, and many can’t imagine giving up the ability to order stuff on a whim and have it delivered quickly for no added cost.

Here’s a question for you die-hards: Would you stick with Prime at any price?

I’m asking because some of the financial experts who follow Amazon have been speculating that the company may soon raise the price of a U.S. Prime membership.

Prime’s most recent cost increase in the U.S. was about four years ago, when the price rose to $119 from $99 for most people who pay annually. The prior Prime price increase was four years before that, meaning that it might be time for another bump. (Amazon hasn’t said one way or another, and its public relations department didn’t respond to my questions on Tuesday.)

People walk away from some products when prices go up, but it seems that almost no one quits Prime. Among Americans who have been Prime members for at least two years, nearly 98 percent of them keep renewing, according to Consumer Intelligence Research Partners or CIRP, which surveys people for brands and investors.

Prime is one of America’s most resilient consumer products. It seems to defy our price-conscious tendencies. And Prime is another example of the power Amazon and America’s other tech giants have to rewire our brains.

Perhaps the most (or least?) surprising behavior among Prime members: Michael R. Levin and Josh Lowitz, the co-founders of CIRP, told me that they believed that when Prime prices went up, some people ordered even more from Amazon. This trend might be explained by a need to make a more expensive membership feel worth the money. (Maybe you work out more when the cost of your gym membership goes up, too.)

But not even Prime is completely immune to the effects of higher prices. Levin and Lowitz say that when Amazon increases the cost of Prime, some people will defect to alternatives like Walmart’s shopping club. They also said that Americans who paid for monthly Prime memberships tended to stop and restart more often than the people who bought annual Prime memberships.

Prime was a project that Jeff Bezos has said was a contentious idea at Amazon when it first started in 2005. Amazon’s money nerds were horrified at the shipping costs the company sustained from early Prime members who bought relatively low-cost items and ordered often.

Over time, the service has proved its usefulness to Americans — and to Amazon. Perhaps more than any single decision by the company, Prime has been what has hooked Americans on Amazon.

Shipping still costs Amazon a fortune, but Prime members mostly shop online exclusively at Amazon. An analysis last year by Morgan Stanley estimated that households that are Prime members typically spent more than $3,000 a year with Amazon. Those that didn’t belong to Prime spent half as much on Amazon.

Prime is one of the ways that Amazon has bent America to its will. Another example: When Amazon in 2019 said that it would start to shift the standard delivery time for U.S. Prime members from two days to one, Americans began to order immediate needs like phone chargers on Amazon instead of going to the store, company executives have said. This change in the behavior of millions of Americans was noticeable almost immediately in Amazon’s sales.

I talk a lot in this newsletter about the need to be more aware of the influence that tech companies’ choices have on us and our world. Facebook’s tinkering with its software has led political parties to decide to make their campaign messages more negative and prompted more Americans to sign up to vote. Apple’s way of earning income from apps has dictated the digital services that are available to us, and we don’t know if an alternate reality might be better.

Americans have shown that they are attached to Prime. We’ll see if a possible price change affects that.