Amazon was in the spotlight during the second quarter of 2018.
We saw Prime membership reach unbelievable levels even while the membership price increased, and the Amazon logo was dropped from the program.
Prime benefits at Whole Foods continued to expand while Amazon officially entered the prescription drug market.
Meanwhile, online and mobile wholesale retailer Boxed joined the premium loyalty market with Boxed Up as Plenti announced its demise.
Here’s what we learned from all of it.
Prime Passes 100 Million Global Members
Viewed as the gold standard among all premium loyalty programs, Amazon Prime eclipsed 100 million global members in mid-April.
Prime’s appeal continues to grow exponentially as Amazon regularly adds attractive benefits to its members. Amazon keeps the Prime program fresh and increasingly relevant by truly listening to its customers, identifying their pain points, and addressing those concerns via desired benefits.
Some of those benefits include unlimited video streaming, limited music streaming, unlimited photo storage, one free e-book per month, free audio books, and free games. Prime members are attracted to the program for its convenience (free two-day shipping), simplicity, and slew of benefits.
To illustrate the massive appeal of Prime, in 2014 the program had about 28 million members and gained more than 72 million members during the past four years. By continuing to listen to its customers, Prime membership reached all new levels amid a membership price increase.
Cost of Prime Membership Rises
Prime members spend nearly five times as much as non-Prime members.
Riding the high of Prime’s immense popularity, Amazon officials announced that annual membership would increase from $99 to $119 (which became effective on May 11, 2018 for new members and on June 16, 2018 for existing members’ renewals.)
When most people hear about a price increase for a product or service they use, often the thought is: “Wow, I can’t afford to pay that much more for that service,” or “Do I really need that anymore?”
The magic behind the Prime program, though, is those responses, for the most part, don’t apply to its membership because of the inherent value.
Because Prime has become so ingrained in so many people’s lives, Amazon knows it won’t lose users due to this value and what the program offers.
Amazon Acquires PillPack
In a move that could have a major impact on the pharmacy industry, Amazon recently bought online pharmacy PillPack for $1 billion.
The next step for Amazon is likely delivering prescriptions to your door, and maybe even including these types of deliveries in its long list of Prime benefits.
This makes a lot of sense for Amazon, considering its entry and expansion into the grocery category.
Amazon Offers Whole Foods Prime Benefits to 10 More States
Keeping with the Amazon theme, Amazon added its new Prime Whole Foods discounts to 10 additional states. These discounts, which are operated through the Whole Foods Market app, will include 10 percent on sale items and other special deals for Prime members.
Amazon acquired Whole Foods for $13.7 billion last year.
The new discounts are available at Whole Foods stores in Alabama, Arizona, California, Georgia, Hawaii, Mississippi, Oregon, South Carolina, Tennessee, and Washington, along with Arkansas, Colorado, Florida, Idaho, Kansas, Missouri, Louisiana, New Mexico, Nevada, northern California, Oklahoma, Texas, and Utah.
If Amazon is successful with its integration of Prime-only shopping benefits into Whole Foods, then grocery chains everywhere might start feeling the same pressure that traditional retailers have felt from Amazon over the past decade.
Boxed Launches Premium Loyalty Program
Boxed, which offers direct delivery of bulk-sized packages via the Boxed app or website, launched its premium loyalty program to afford consumers the luxury of shopping at a wholesale club without the need to leave home.
Helen Pan, Director of Loyalty and Customer Experience at Boxed, told Clarus Commerce that the five-year-old company “definitely looked at Amazon Prime given its success over recent years” and other “popular loyalty programs across retail and outside of retail” when developing the Boxed Up premium loyalty program.
The Boxed Up program, which launched in April, charges customers an annual $49 fee. It includes lots of benefits such as free priority shipping on orders over $20, cash back, and more.
Pan explained that through listening to Boxed customers, company officials identified pain points and addressed them in the Boxed Up program. She believes that a premium loyalty program allows for continual testing, optimization, and personalization.
The End of Plenti Annoucement
Although the Plenti coalition loyalty program officially ends on July 10, the announcement of its expiration came in mid-April.
Plenti launched in mid-2015 as an attractive loyalty program that allowed customers to collect points at various retailers. They could then use those points at any other retailer under the Plenti umbrella.
By the end of 2016, it grew to 13 partners with 16 brands. This placed it in 71 percent of all U.S. households within a five-mile radius of at least two of the 30,000 retail locations participating in the program.
Things appeared encouraging for the program, but 2017 was not kind to Plenti as some participating brands departed the program.
When Macy’s launched its new Star Rewards loyalty program nine months ago, while still a member of Plenti, the writing was on the wall for other brand participants. Many questioned the viability of the coalition loyalty program model.
AT&T exited the program in October. Two months later, American Express announced that its Plenti co-branded credit card would be discontinued. All accounts were canceled in February.
On Jan. 1, 2018, Direct Energy, Hulu, Nationwide, Enterprise, and Expedia also left the Plenti program. At that point, nothing was left except for the epilogue.
Historically, many coalition loyalty programs have under-performed.
Our CEO Tom Caporaso says that coalition programs like Plenti struggle to create true brand loyalty.
“Coalition loyalty programs are appealing in theory,” Tom says. “They seem like they will elevate a brand’s transaction levels. However, they aren’t efficient at creating actual loyalty. A loyalty program has to be brand aligned and customer targeted. Macy’s realized that loyalty should be a brand’s differentiator. A coalition model like Plenti lacks consistent delivery on that brand promise because it’s a one-size-fits-all solution.”
Takeaways from Q2 2018
For companies like Amazon and Boxed, the simple loyalty formula comes down to this. Listen to your customers, identify their pain points, and address them in enticing fashion.
As loyalty continues to change, one thing has not: Customer expectations.
The brands that listen most effectively to their customers to meet and exceed those expectations will gain deeper insights that lead to elevated engagement and loyalty
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