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Is Amazon Raising Prime Price?

Posted on February 15, 2014

Amazon’s recent statement that it’s contemplating raising the price of its free-two-day-shipping membership program by $20 to $40 from its current $79 annual rate has ignited a firestorm of sorts and led to a UBS stock downgrade on Wednesday that cited concern that a significant percentage of existing Prime members won’t renew at a higher price level.

Instead of debating the magnitude of the Prime price hike, it may be time for Amazon to unbundle the 9-year-old program, argues Rafi Mohammed, a pricing-strategy consultant and author of “The 1% Windfall: How Successful Companies Use Price to Profit and Grow,” in an article in Harvard Business Review. He suggests Amazon look at cellphone companies that offer variable pricing based on consumer usage levels.

“The key lesson in pricing for any company is to understand that customers are different,” he said in an interview with MarketWatch, adding that Prime membership is a key marketing tool for Amazon, with Prime-member purchases representing about 36% of Amazon’s $74 billion in annual revenue. “There’s so much more to pricing instead of a simple two-lever, up-and-down strategy. There’s a lot of ways you can slice that pricing. Let people self-select the shipping and pricing option. The notion of offering customer choices is something that becomes standard in all industries. Most companies should offer good, better and best prices.”

Mohammed offered the example of Red Lobster, whose bottom line was seriously damaged when it offered an Endless Crab promotion in 2003, as a cautionary tale for companies offering any unlimited plan.

Continue Reading on blogs.marketwatch.com

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4 thoughts on “Is Amazon Raising Prime Price?

  1. living on a fixed income of $1200.00 dollars per month I would have to think twice about the prime membership. I have cut back on my extra spending because of increasing food, gas, heating (fuel), increasing electric rates, and obamacare huge healthcare costs. I used to buy four (4) or more items each month; only (1) this month; only two (2) for april; none so far for march. I might be better off paying for shipping costs as the total amount of goods I order go down. every time I go to town costs me $6.00 dollars. if I drive to the next bigger town it costs me $30.00 dollars if I compare that against shipping costs. I would pay reasonable shipping costs.

  2. Prime is a good deal if you use it fully. We use the 2 day shipping, and other features such as streaming video. I use my Prime membership as a tool for purchasing decisions base on shipping costs and price. Prime is usually the winner. We love the ability to stream the British Detectives and the X-Files (all seasons) and selected movies for free. I also use it to manage my Kindle account, purchase books, and download Library books I have rented. Right now, at the current price, I will certainly renew this year. I will probably also not be deterred by a slight increase. However, a $20-40 increase would certainly cause me to take a look at the numbers. There are alternate ways to accomplish most of our use that are cheaper, just not as convenient.

  3. Money, money, money, money. Everyone is feeling the pinch. When I make orders with Amazon, I always get it to the free super saver shipping. I just got a Kindle Fire and was planning on getting Prime to stream content. Even so, just one of the series I want to stream would cost me more than the cost of Prime so it would still be worth it although I hope they don't do it.

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