When Amazon.com Inc. announced that it was boosting the price of its Prime membership, it indicated that an annual membership would cost $139.
However, slightly more than half of Prime members will pay about $180 each year, Bloomberg reported.
This is due to the fact that they pay a monthly cost, which is increasing to $14.99 from $12.99. In 2016, the company launched a monthly subscription to appeal to more middle- and low-income customers.
According to Consumer Intelligence Research Partners (CIRP), the tactic worked, and 52 percent of users now pay on a monthly basis.
Monthly customers are virtually as loyal as yearly subscribers, despite paying more, with approximately 97 percent of them likely to renew compared to 99 percent for their annual counterparts, according to the Chicago research firm, which conducts quarterly polls.
The raise, which was announced on Thursday, is the first since last year.
Despite a severe labor shortage and supply-chain bottlenecks, Amazon has committed billions of dollars to ensure that goods reach customers on time. Among other things, Prime members have access to movies, sports programming, and photo storage.
Despite reporting better-than-expected fourth-quarter earnings, Amazon cited several reasons for the price increase in its press release, including more big-budget shows on Prime Video, such as , Jack Reacher, The Wheel of Time and the forthcoming The Lord of the Rings: The Rings of Power, in addition to its decade-long exclusive license to NFL’s Thursday Night Football.
The corporation also boasted of extended same-day delivery to 90 metropolitan regions across the United States, free shipping on extra items, and more product offers.
Following past price hikes, Amazon attracted millions of new subscribers, and analysts predict that once the boost takes effect, the business will lose few users. After the company reported outstanding profits, powered in part by a strong performance from its cloud-services sector, investors hailed the boost and sent the shares flying.
The company has increased its content spending by billions for four years ago, said a senior research analyst at D.A. Davidson & Co, Tom Forte. There is a compelling rationale for price hikes and a strong case to be made that the retention rate will remain high, he said.
According to Morgan Stanley analysts lead by Brian Nowak, Amazon has drawn a substantial number of households with yearly incomes ranging from $55,000 to $70,000 in the last two years.
The analysts wrote, Amazon’s Prime subscriber base continues to expand and age, which is a crucial enabler of the company’s retail business.
New Prime subscribers will see a price increase on February 18; current Prime members who renew after March 25 will see a pricing increase.
Prime also assists Amazon in converting casual shoppers into long-term clients. On average, Prime members spend more on Amazon than non-members.
