March 13, 2014 — Amazon confirmed that it will increase the annual fee on it’s customer loyaly program Prime from $79 to $99 per year effective March 20th. In the Wall Street Journal, it is reported that analyts predict fewer than 10% of existing customers will drop their account (http://on.wsj.com/1gmt5tS). With customers rushing to sign up before the March 20th price increase and with the increased publicity Amazon Prime is getting due to the increase, there will be an uptick in new customer acquisition, perhaps even compensating for the loss.
As I stated on my prior post on February 15 “Really?? Comments on Re/Code “Amazon Prime Price Increase Could Crush Subscriber Base” (http://wp.me/p3NTND-3a), “the prediction of Amazon Prime demise due to a price hike is widely overestimated”. Early estimates of 40% of customers potentially not renewing their Prime membership due to a price increase seemed pessimistic, even allowing that this survey was done for a price increase to $119. Prime is one of the best values in the markets for active customers offering free second day shipping on millions of items, free video content, Kindle lending libary, sharing the membership between 4 other family members and potentially now, a music service. Amazon played a smart game floating a potential increase to $119 per year, and then coming back to $99.