"Amazon spends more than $90 a year for each Prime customer, losing $11 annually for each subscriber"
Narrow thinking like this is why other retailers don't offer Prime. If you can turn a $400 customer into a $900 customer, you're probably more than covering that "loss" and it should be considered a marketing expense if anything. Put another way, what company wouldn't spend $11 to bring in $500 of customer purchases?
The right price point for Prime should be one where the customer benefits by saving on shipping and other costs ("this loss") but Amazon benefits by increasing their overall annual spend -- mostly by moving their spending over from other online and offline merchants. Seems like they're right in that sweet spot.
Narrow thinking like this is why other retailers don't offer Prime. If you can turn a $400 customer into a $900 customer, you're probably more than covering that "loss" and it should be considered a marketing expense if anything. Put another way, what company wouldn't spend $11 to bring in $500 of customer purchases?
The right price point for Prime should be one where the customer benefits by saving on shipping and other costs ("this loss") but Amazon benefits by increasing their overall annual spend -- mostly by moving their spending over from other online and offline merchants. Seems like they're right in that sweet spot.