If you were to administer truth serum and ask a retailer how it really felt about Amazon Prime, chances are the response would be that it’s pure genius — or pure evil genius, perhaps.
Why? Because Amazon Prime encourages shoppers to come back and back again to browse and buy, and it’s all based on an incentive that online consumers hold very dear: free shipping.
Amazon is notoriously tightlipped about its business, but over the years it has alluded to the high-profit Amazon Prime customer, Clarus Marketing CEO Tom Caporaso told CRM Buyer.
“The industry assumes now that an Amazon Prime customer spends about (US)$1,500 on Amazon, while the non-Prime customer spends about $500,” he said.
Which Comes First – Loyalty or Prime?
It is difficult to pinpoint the degree to which Prime benefits encourage customers to become more loyal. A certain amount of loyalty is obviously already present, or a customer wouldn’t be willing to pay Prime’s annual fee.
Either way, though the cycle appears to be self-perpetuating.
“Amazon Prime is scaring other retailers,” Caporaso said. “They definitely see value in it — but they don’t have the in-house ability to set up a subscription program like that.”
This is the niche Clarus Marketing has been targeting for the past year with Clarus Loyalty, a turnkey program for retailers to offer their own prepaid loyalty initiative to customers.
It is built on a platform Clarus has been offering for years — FreeShipping.com — that was further developed to become a prepaid shipping/loyalty program for retailers to white label.
“It combines our FreeShipping.com platform and loyalty program, with not just front-end marketing but also product configuration, benefit structuring, and the back-end customer service fulfillment piece,” Caporaso said.
This past holiday season Clarus Loyalty made a high-profile splash when MasterCard used it to offer customers free shipping.
There were two layers to MasterCard’s program. Users who registered their names could participate for free. If they used MasterCard at five retailers in the system — a group that included Macy’s, Best Buy and Walmart — their shipping fees would be credited back to their credit card. A paid version opened the system up to 25 additional retailers.
A Day in the Life of a Clarus Loyalty User
Each Clarus Loyalty implementation is different, depending on the retailer.
A company would discuss with Clarus the particular pain points that it wanted to address with the free shipping-loyalty program. It could be that the company would want all of its customers to have free shipping all the time. Or perhaps it would want to provide free shipping to customers who bought a certain amount of merchandise — or some variation in between.
Once the model is created and customer engagement patterns studied, the program might need to be tweaked to add or remove certain benefits. Clarus would then set about deploying the platform.
A website consisting of the necessary functionality and features would be built, and Clarus Marketing would step in to handle the front-end part of the initiative by testing the site and tweaking it further to optimize its message.
The back-end systems would be hooked up, according to the client’s model, perhaps integrating billing, customer service and fulfillment.
Analytics is also a big part of the mix, incorporated throughout the system from the engagement and conversion stage to assess how new customers affected the company’s business operations.
All of this would take place within a matter of months, Caporaso said, noting that MasterCard’s implementation began in September and was ready to go live by Thanksgiving.
The 25 or so customized solutions Clarus has implemented to date are showing signs of aping Amazon Prime’s ROI, he said.
“For one of our clients, purchase frequency increased by 40 percent among customers who joined the program,” Caporaso pointed out, “and the average order value of customers increased 11 percent. Total sales per customer increased 56 percent.”