Survey: Amazon Prime Price Hike Hurts Brand18 Mar, 2014 By: Erik Gruenwedel
Amazon’s recent decision to raise the Prime membership $20 to $99 annually dropped the brand’s consumer satisfaction rating 10%, according to a new survey.
In a survey of more than 1,000 Amazon Prime members conducted March 14-16 by Brand Keys, the 25% membership price hike dropped the e-commerce behemoth’s customer satisfaction rating out of the top spot to 83%. Amazon has headlined the Keys customer satisfaction ranking since its inception 16 years ago.
"Based on immediate Prime member reactions, [Amazon] may have underestimated the negative effects of the increase," Dr. Robert Passikoff, president of Brand Keys, said in a statement. "Consumer expectations are always on the increase, and when it comes to online retail, they operate in a 'what-have-you-done-for-me-recently?' paradigm. Price increases weren't what Prime Members were expecting."
Amazon attributed the price hike to increased shipping, fuel costs and related expenses related to the Prime membership that affords free two-day shipping on myriad products, in addition to free streaming access to more than 40,000 TV shows and movies. The company recently disclosed it has 25 million Prime members.
Analysts say the price hike will add upwards of $150 million in annual revenue for Amazon.
While Amazon didn’t directly attribute the hike to its Prime Instant Video streaming service, which has significantly upped content spending as it competes with Netflix, the proof is in the pudding, according to Fiona Dias, chief strategy officer with ShopRunner.com, an e-commerce competitor to Amazon backed by American Express.
“Amazon is passing on the cost of video to a bunch of people addicted to buying online,” Dias told The New York Times. “Maybe it sticks in [Prime members’] craw that they’re now being asked to pay more for stuff they don’t want.”
To up the ante, ShopRunner.com has dropped its annual $79 membership fee to Amazon Prime members switching over. ShopRunner offers free two-day shipping on purchases from more than 85 retail brands.
In a comparison with Amazon on its website, ShopRunner, which doesn’t offer streaming videos, simply suggests members stick with Netflix for their SVOD needs.
“We all know Netflix is better,” the site says.
Brand Keys’ Passikoff said the survey underscores the emotional attachment Prime members have with the brand despite Amazon’s arguably justifiable reasons for the hike.
"When a brand misses the mark when it comes to consumers' expectations, 'expectation' quickly becomes 'disenchantment,' and based on these assessments. Prime members seem really disenchanted with the Amazon brand right now," Passikoff said. "Amazon should have expected that.”
Regardless, Amazon.com and Sam's Club remain tops delivering the best customer experience, according to the Temkin Group's annual ranking of companies based on a study of 10,000 U.S. consumers.
Sam's Club narrowly beat out Amazon.com for the top spot, receiving an 81% rating and an overall rank of 8th out of 268 companies across 19 industries. With ratings of 79% each, Costco, PetSmart, Ace Hardware, and BJ's Wholesale Club also earned high marks from customers. At the other end of the spectrum, RadioShack and Foot Locker tied for last place among 45 retailers. This is the fourth straight year that RadioShack has been at the bottom of the industry.