Last week, Amazon announced a price hike for its Prime program, which gives members free two-day shipping and access to a burgeoning library of streaming content. The cost for the service is set to increase by 25 percent, to $99 per year.
According to a survey conducted by Brand Keys, word of the price hike had an immediate negative effect on the brand.
"Based on immediate Prime member reactions, they may have underestimated the negative effects of the increase," said Dr. Robert Passikoff, founder and president of Brand Keys. "Consumer expectations are always on the increase, and when it comes to online retail, they operate in a 'what-have-you-done-for-me-recently?' paradigm. Price increases weren't what Prime Members were expecting."
In a survey conducted by Brand Keys March 14–16, among 1,050 Amazon Prime members, metrics — independently validated as predictive of consumer behavior toward brands — showed that the Amazon brand took a blow to its normally high overall brand engagement and loyalty evaluations. Assessments among Prime members (vs. the category ideal at 100 percent) were down 10 percent, from 93 percent to 83 percent.
Brand diagnostics showed that the price increase resulted in significantly negative effects to two important emotional engagement drivers for the online retail category: brand reputation and brand value.
"When a brand misses the mark when it comes to consumers' expectations, 'expectation' quickly becomes 'disenchantment,' and based on these assessments. Prime members seem really disenchanted with the Amazon brand right now," Passikoff said.
There appear to be business justifications for Amazon's decision, but as consumer decision-making is more emotional than rational, an explanation about increased shipping costs doesn't seem to placate consumers, Passikoff said. Another online rival, ShoppRunner.com, a site that guarantees two-day delivery from many of the retailers on its site, has offered to waive its $79 annual fee to anyone "disgruntled" by the Amazon price hike.
"Amazon should have expected that," said Passikoff.