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Amazon Prime trial users turn into paying customers 73% of the time

June 2, 2016 01:35 PM
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U.S. shoppers who take Amazon.com Inc. up on its 30-day free trial offer to try Amazon Prime end up paying the $99 annual fee to become a member 73% of the time. That’s the highest conversion rate recorded by Consumer Intelligence Research Partners LLC in its quarterly survey of U.S. Amazon shoppers since the online retail giant raised the membership price from $79 in March 2014.

CIRP survey data also shows Prime customers renew their memberships at a high rate. At the end of the first year, 91% renew their membership, CIRP estimates. Second-year customers renew 96% of the time.

“Once Amazon Prime members renew for a second year, Amazon appears to have attracted them for the long haul,” says CIRP co-founder Joshua Lowitz.

Amazon does not say how many Prime customers it has, but in January said the number of Prime members in the United States grew 47% last year. Industry estimates for Prime customers vary, but most say at least 50 million U.S. consumers are customers. The loyalty program includes free two-day shipping, streaming video and music, online photo storage and early access to select shopping deals.

Speaking earlier this week at the Recode Code conference, Amazon founder and CEO Jeff Bezos described Prime as a physical-digital hybrid program “unlike anything else.”

“Prime members, once they pay the annual fee, [think] how can I get more value out of the program,” Bezos said. “So they look across more categories, they shop more. A lot of their behaviors change in a way that is very attractive to us as a business.”

Figures from Internet Retailer’s 2016 Online Shopping Survey show how Prime membership makes consumers coalesce their online shopping with Amazon. The consumer survey taken in late April shows Prime customers are more frequent online shoppers, with 64.8% making at least two online purchases a month versus 51.6% of all consumers. Further, 63.6% of frequently shopping Prime members say they placed more than half of their online orders over the past 12 months with Amazon, versus 36.1% of frequent shoppers who are not Prime customers. 59.4% of the 535 survey respondents said they or someone in their household is a Prime member. (For more survey results, see Internet Retailer magazine’s story “Cause for alarm” in the June 2016 issue.)

Bezos this week also said consumers who take part in the 30-day trial who consume Prime Video content convert to paid customers at a higher rate than those who do not view videos. He did not reveal specifics. Amazon Prime customers, in addition to getting fast shipping, can stream thousands of videos, including an array of Amazon original programming, for free.

Amazon spent $12.54 billion on technology and content last year, up 35.1% from $9.28 billion in 2014. This includes fees for licensing content for Amazon Video, and for Amazon Studios, the company’s in-house production studio. Amazon had 65.2 million video users in the United States in 2015, according to eMarketer Inc. estimates. The research company projects that number will increase to 73.2 million by the end of 2016.

Amazon is No. 1 in the Internet Retailer 2016 Top 500 Guide. Amazon accounts for about 30% of U.S. online retail sales when factoring in the sale of products it stocks and sells itself, and the value of goods sold by merchants selling through the Amazon marketplace.

 

 

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