Can Other Retailers Learn about Loyalty from Amazon
Amazon created Prime back in 2005. At first, it was a membership club that offered free two-day shipping on every purchase. Regular Amazon customers joined the club because the annual subscription was less than paying the shipping cost for each order.
Skip forward to today and Prime has over 100 million members. A recent article in the Guardian newspaper said that Prime offers such rapid customer satisfaction that it “acts like a drug,” making customers just want to keep returning to Amazon. Ninety-three percent of Prime customers renew their membership after the first year and 98% renew after the second year. Prime has been an enormous success.
This year Amazon reduced the standard shipping time for Prime members to one day and U.S. customers can also enjoy two-hour delivery times for groceries. By building out the services on offer — such as Prime Video — Amazon has driven loyalty and made it unlikely that any customer who tries Prime will ever want to leave.
So we are seeing that Amazon knows how to drive customer loyalty, but more importantly, they are also doing it by creating a sense of membership — everyone in Prime is part of a club.
I’ve often thought that other retailers, especially those with a chain of physical stores, could learn from the way that Amazon Prime has created this loyalty through membership.
First, you need to create a premium product that is not available to a regular customer. More products and more exclusivity can lead to more loyalty. But when physical stores are involved, it is important to connect the various channels together. The customer will expect the brand to know them just as well in-store as when shopping online, so it’s important to create a reason to login to the app even when at the store in person.
Target has their RedCard, which functions as a payment card, but offers members an immediate 5% discount on any purchase, free shipping, and access to special gifts and items that non-members cannot purchase.
That’s a great start and it helps customers to really feel like they are a valued member of the brand — team Target — but perhaps brands like Target need to consider how their physical stores change the membership dynamic. They cannot just copy the benefits of Amazon Prime and hope to see the same success because let's face it...Amazon has always been online-only...until very recently.
The success of a membership scheme like the RedCard will depend on how well Target can offer a true omnichannel environment. The customer needs to feel that Target knows them personally if they are shopping online or in a store. It’s great to get a discount, but every member gets the same discount. It will be the personalization of recommendations and social offers in addition to communication that really inspires loyalty.
This personalization requires that the app also has an in-store purpose. Nobody will use the app when at a store unless it adds real value. Walmart has found that allowing customers to select products and pay using their phone — avoiding all checkout lines — does create a reason to use it. This means that in-store customers can receive the same kind of personalized service they would receive online.
I think this is where membership programs need to go.
Making a customer feel like they are on the team is more complex than just offering an across-the-board discount. They need to feel special and only a personalized omnichannel approach can achieve this. How are you building that personalized relationship with your customers? Are your offers unique to the buyer and their loyalty to you?
What do you think? I would love to hear your thoughts.