Amazon Prime Day: A Key Battle In The War For Customer Loyalty

The gloves are off for Ama­zon and Wal­mart in the com­pet­i­tive world of ecom­merce. But is there a new kid on the block?

Pat Hong By Pat Hong from Linkdex. Join the discussion » 0 comments

Ama­zon Prime Day is, by many accounts, a bid by the ecom­merce behe­moth to stir-up sum­mer spend­ing by intro­duc­ing a sec­ond day of mass dig­i­tal dis­counts in the vein of Black Fri­day. How­ev­er, the deep­er sto­ry involves a fierce bat­tle for cus­tomer loy­al­ty and mem­ber sub­scrip­tions that is break­ing out in the ecom­merce are­na.

Today Ama­zon is cel­e­brat­ing Prime Day, a one-day-only glob­al shop­ping event that will offer, in the ecom­merce retail­er’s own words, “more deals than Black Fri­day”. Cru­cial­ly, there is one key dif­fer­ence between the two: today’s Prime Day deals will be avail­able exclu­sive­ly to Prime mem­bers, Ama­zon’s $99/year pre­mi­um-mem­ber ser­vice.

Wait… Did Amazon Just Make This Up?

While dig­i­tal mar­keters have long used sea­son­al pro­mo­tions as a means of boost­ing sales, since when did it become accept­able for a brand to cre­ate an event-based sales day around exact­ly that (their brand) and that alone?

Jonathan Alder­son, founder of, a web­site that aims to “bring all of the world’s weird, fun­ny, won­der­ful and bizarre hol­i­days under one roof,” is no stranger to brands look­ing to lever­age “event days”. How­ev­er, there is a obvi­ous risk to Ama­zon’s Prime Day strat­e­gy. Just slap­ping your brand and a hash­tag on a cal­en­dar date or sea­son­al event and expect­ing the asso­ci­a­tion to res­onate is going burn bridges and rep­u­ta­tion pret­ty quick­ly, accord­ing to Alder­son.

If you’re cre­at­ing your own ‘days’, it’s best to decide up front whether it’s essen­tial­ly just a brand­ed sale, such as Prime Day, which does­n’t antic­i­pate build­ing any kind of broad­er com­mu­ni­ty, longevi­ty, or equi­ty in its own right, or whether you’re look­ing at some­thing big­ger. As more brands fill more of them up with their own shal­low ‘deal days’, they’re going to mean less and less – you’re encour­ag­ing con­sumers to be deal-dri­ven and to shop/switch around, rather than build­ing brand asso­ci­a­tion and con­nec­tion,” Alder­son said.

If you’re think­ing big­ger, about start­ing or engag­ing with an event with a wider mean­ing, then it’s impor­tant to under­stand that event days and micro-hol­i­days are cre­at­ed cel­e­brat­ed and shared ‘as a democ­ra­ti­za­tion of time itself’. These events are, at the heart of it, col­lec­tions of peo­ple who are carv­ing out a place to define, reflect upon, or cel­e­brate the things they hold dear to them,” Alder­son said. “To blunt­ly apply inter­rup­tion mar­ket­ing tech­niques to an estab­lished com­mu­ni­ty won’t cut it. Tread light­ly, and earn a voice in a con­ver­sa­tion which is about more than just you, your prod­ucts, and your cut-price bar­gains.”

While Ama­zon Prime Day will clear­ly have its detrac­tors, the brand has a strong track record in the field. After all, Ama­zon has become one of the biggest brands offer­ing Black Fri­day and Cyber Mon­day dis­counts, and has in recent years tak­en to offer­ing an entire week of heav­i­ly cut price deals.

Exclusive Discounts: A Risky Move?

Exclu­sive to Prime mem­bers. At the risk of sound­ing like a bro­ken record already, this one detail is crit­i­cal to under­stand­ing the rea­son­ing behind the event. It opens up a whole host of ques­tions about the retail­er’s strate­gic moti­va­tions.

First­ly, there’s the nat­ur­al fall­out from con­sumers who feel left out, or who are sim­ply down­right resent­ful of the con­cept of mem­bers-only dis­counts. In the past, con­sumers have made their feel­ings clear about the retail­er’s deci­sion to have one treat­ment for Prime mem­bers, and anoth­er for reg­u­lar users.


While mem­bers-only dis­counts undoubt­ed­ly work effec­tive­ly for retail­ers such as Cost­co, there is a clear con­tin­gent that feel that it isn’t fit­ting for a retail­er that prides itself on cus­tomer-cen­tric val­ues, and pro­vid­ing an excep­tion­al user jour­ney that has tra­di­tion­al sought to make low prices, a diverse prod­uct range, and excel­lent cus­tomer ser­vice avail­able to all.


One user even took to poet­ry to express his dis­taste with Prime Day:


As an out-and-out ini­tia­tive to boost sum­mer spend­ing, Ama­zon Prime Day seems a risky move, and not only because of the exclu­sion­ary ele­ment. As one com­men­ta­tor stat­ed: “it is a strate­gic mis­take. They are get­ting shop­pers accus­tomed to see­ing that lev­el of pro­mo­tion­al offers the whole year.”

It’s dif­fi­cult to com­pre­hend that Ama­zon would be so naive as to think that there would­n’t be a degree of fall­out for intro­duc­ing a day of mem­bers-only dis­counts.

So what, real­ly, was their strat­e­gy moti­va­tion behind the move?

And why, if the aim was to encour­age a boost in July spend­ing, did they not sim­ply intro­duce a sec­ond Black Fri­day, where dis­counts would be avail­able for every­one?

Battlelines Are Being Drawn

Ama­zon’s move has­n’t only alien­at­ed cer­tain con­sumers, it’s also incit­ed a reac­tion from com­pet­ing retail­ers.

Wal­mart is the most high-pro­file brand to launch a counter-offen­sive, declar­ing in a blog post that they will also be hold­ing a day of sales. In what seems to be a direct move against Ama­zon, Wal­mart has bold­ly stat­ed that their sales will be for every­one “who sees no rhyme or rea­son for pay­ing a pre­mi­um to save.”

Tar­get, Macy’s, and JCPen­ney are among the oth­er retail­ers with plans for a July dis­counts sales push, and Ama­zon’s move has led one HBR ana­lyst to say that the strat­e­gy rep­re­sents Ama­zon “clear­ly set­ting its sights on ful­ly invad­ing land-based retail ter­ri­to­ries.”

Ama­zon Prime Day must, in the cut­throat and inva­sive world of ecom­merce, be inter­pret­ed as noth­ing less that an aggres­sive step. Per­haps the most fit­ting ques­tion for ana­lysts is why they have picked this par­tic­u­lar moment to make their move.

Prime Is A Loss Leader?

Ama­zon has nev­er been over­ly con­cerned with prof­its. At the heart of the orga­ni­za­tion has been an endur­ing com­mit­ment to cus­tomer ser­vice and a unfal­ter­ing belief, embed­ded in the com­pa­ny cul­ture, that if they do right to the con­sumer, that future suc­cess­es will fol­low. In fact, in the 2014 fis­cal year, they are esti­mat­ed to have made a $241 mil­lion net loss.

In addi­tion, Ama­zon’s 40 mil­lion Prime mem­bers spend $1,500 per year on aver­age, com­pared to non-mem­bers, who spend $625 per year on aver­age, accord­ing to Con­sumer Intel­li­gence Research Part­ners report. Yet, Suchari­ta Mulpu­ru, an ana­lyst at For­rester research esti­mates that Ama­zon los­es $1 bil­lion to $2 bil­lion a year on U.S. Prime ship­ments – a loss that is even more excep­tion­al when you con­sid­er that it amounts to 11 times as much as Ama­zon’s oper­at­ing prof­it.

Some­thing does­n’t quite add up. Essen­tial­ly, Ama­zon’s move amounts to a risky, and some­what alien­at­ing move that pur­sues short-term prof­its in a way that is unchar­ac­ter­is­tic for the retail­er.

In fact, the one goal that Ama­zon Prime Day does seem to pri­or­i­tize, and per­haps the clue was in the name all along, is loy­al­ty sub­scrip­tions to it’s epony­mous, Prime.

Loyalty, Disruption…

While Wal­mart may have laid their stake in the ground, firm­ly on the “dis­counts-for-all” side of things, they were per­haps nev­er Ama­zon’s chief con­cern. Then who is?

jetdotcom is due to launch July 20, just five days after Ama­zon Prime Day. On clos­er exam­i­na­tion, it’s dif­fi­cult to con­sid­er the two events are but pure coin­ci­dence.

With­out even a web­site, filled many a busi­ness head­line at the begin­ning of this year as a hot prop­er­ty in the world of dig­i­tal ven­tures, and pos­ing a gen­uine threat of dis­rup­tion to a sec­tor which has more-or-less fought itself to a uneasy bal­ance of pow­er.

Jet’s busi­ness mod­el does some­thing that Ama­zon has nev­er pri­or­i­tized – lever­age the pow­er of loy­al sub­scribers, and for­go­ing almost all poten­tial prof­it mar­gins, to offer its mem­bers siz­able dis­counts.

The pow­er of this mod­el is sim­ple. Low­er prices. As re/code sums up: “We searched online for a Sonos Con­nect device and decid­ed that $349 was pret­ty much the best price out there. Then we checked Jet: $301. Wows­er.”

If Jet can pro­vide accept­able lev­els of cus­tomer ser­vice, it’s fair to say that con­sumers would­n’t argue with that kind of sav­ing. The obvi­ous con­jec­ture, is that Ama­zon per­ceives Jet, or indeed the Jet mod­el, to be a gen­uine threat to their val­ue propo­si­tion, and has decid­ed to pre­empt the launch of with a day cel­e­brat­ing their own mem­bers-only dis­counts.

…Churn? (Or Will Loyalty Work?)

Ama­zon Prime Day is begin­ning to look like part of a grand chess game. Bear­ing in mind the cus­tomer dis­sat­is­fac­tion as a result of the event, the fall­out from mem­bers-only exclu­sion, and the pre-emp­tive grab for mar­ket­share as retail­ers seek to intro­duce loy­al­ty-based dis­counts, the ques­tion still remains:

Is a hard push towards mem­ber­ship and loy­al­ty pro­grams a good move for Ama­zon?

Alder­son, who as well as found­ing, is also Head of Insight at Linkdex, said the fol­low­ing:

Loy­al­ty pro­grams have always been an effec­tive form of cor­po­rate bribery; vouch­er codes and dis­counts in exchange for mar­ket­ing per­mis­sions, tai­lored adver­tis­ing and behav­ioral data has always been a pow­er­ful trade-off for brands. The idea of ‘mem­ber­ship’ of a brand is some­thing a lit­tle dif­fer­ent: there are a few brands in a tra­di­tion­al­ly ‘retai­ly’ space, such as Achi­ca (and, Ama­zon Prime if we con­sid­er it to be a slight­ly dif­fer­ent enti­ty to Ama­zon), who are heav­i­ly push­ing the con­cept of mem­ber­ship (paid or oth­er­wise) as a con­cept beyond sim­ply hav­ing an account.”

The prod­ucts-as-a-ser­vice brands have a dif­fer­ent mod­el, one engi­neered from the ground up to lean on a vir­tu­ous cir­cle of mem­ber­ship, refer­ral and growth. How­ev­er, when it comes to whether exist­ing retail­ers such as Ama­zon can uti­lize such a mod­el, it may encounter unique chal­lenges, he said.

You can’t bolt their ‘mem­ber­ship and com­mu­ni­ty’ com­po­nent onto an exist­ing retail mod­el or web­site effec­tive­ly – espe­cial­ly one which is, for exam­ple, just access to a poor­ly indexed prod­uct ware­house.” Alder­son said, “I already get too many emails and too much junk mail, pay for too many sub­scrip­tion ser­vices, and have too many loy­al­ty cards in my wal­let. While a move toward gat­ing access to pref­er­en­tial treat­ment and prod­ucts might ‘lock me in’ to a sub­set of brands, it’ll just as soon spur a wave of enter­pre­neurs to set their sights on cre­at­ing busi­ness­es and mod­els which tar­get all the peo­ple who aren’t part of the club.”

It’s pos­si­ble that Ama­zon Prime Day, by prin­ci­ple, is too much of an impo­si­tion on con­sumers online shop­ping expe­ri­ences. Although con­sumers may be bliss­ful­ly unaware of the strate­gic moves and tac­tics being played out in the ecom­merce are­na in a bid to win con­sumer loy­al­ty, what they will notice is a stream of pushy mes­sages, or a con­stant impe­tus to sign up to this loy­al­ty pro­gram, or that mem­ber­ship mod­el, as a means of gain­ing this par­tic­u­lar dis­count.

The sys­tem will churn,” Alder­son said. “And I’ll still have too many loy­al­ty cards, and too many emails, etc. Over­all, I’m not sure we, as an indus­try, will achieve much by try­ing to inject a ‘mem­bers only’ fla­vor into the gen­er­al retail mod­el.”

Per­haps it will sim­ply be too much for con­sumers. It may be sup­po­si­tion, but part of the appeal that exudes from dig­i­tal cul­ture is its nat­ur­al sup­port for open­ness and inclu­siv­i­ty. In recent years, Ama­zon has prid­ed itself on being able to pro­vide the remotest regions with the same lev­el of ser­vice that they offer those from cos­mopoli­tan areas.

Demand­ing cus­tomers to com­mit to a paid loy­al­ty pro­gram may be one way to deliv­er low­er prices, but in the long-term per­haps Ama­zon could ben­e­fit from stick­ing to their lau­rels and con­tin­u­ing to pro­vide and improve expe­ri­ences for the huge, and large­ly loy­al con­sumer base that uses their site on a day-to-day basis, in bat­tles that they have already won.

Let us know your thoughts on Ama­zon Prime Day… Will it prove to be a good move for the retail­er?

Pat Hong

Written by Pat Hong

Editor at Linkdex/Inked, Linkdex

Pat covers the SEO industry, digital marketing trends, and anything and everything around Linkdex. He also authors Linkdex's data analysis and reports, analysing the state of search in various industries.

Inked is published by Linkdex, the SEO platform of choice for professional marketers.

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