Archives: October 2017

A beneficial twist on customer loyalty programs – Amazon Prime

While reading the marketing and sales blog of Hubspot, I stumbled upon a very interest article regarding the top 5 tools a company can use to retain its customers for the long term, written by Sophia Bernazzani. Hubspot is a company that develops and markets software products for inbound marketing and sales. One idea I found interesting  in this blog post was that a brand should try and make sure that once a customer does a purchase with them, it should become much more difficult for the customer to choose a competitor for the next purchase. One way to do this, as stated in the blog post, was to develop a customer loyalty program, which is usually a system in which customers accumulate points or rewards for repeated purchases or leaving reviews for the company. However, Amazon has changed the way customer loyalty programs work through the development of Amazon Prime.

 

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Amazon prime is a customer loyalty program developed by Amazon, so that customers can receive their orders within two days. Customers pay an annual fee of $99 to upgrade their Amazon account to a prime account. This is one of the first customer loyalty programs in which customers pay in order to receive extra rewards. Usually customers do not have to pay anything for loyalty programs, however Amazon charges people for this service. This is a great example of a customer loyalty program because frequent shoppers feel like Amazon prime is really benefiting and rewarding them.

Sucharita Mulpuru, an analyst at Forrester Research, has estimated that due to Amazon prime, the company is losing around 1-2 million dollars every year. However the company is still continuing with the loyalty program, as customers are making more frequent purchases. An investigation done by the CIRP shows that Amazon.com customers spend around $625/year, while prime members spend around $1500/year.

Amazon Prime is making it hard for customers to do their next purchase with a competitor. Customers are getting quick service from Amazon and they are also paying for the service, so they want to make sure that they take full advantage of what they are paying for. With these two factors together, prime customers keep on making repeated purchases. This is a possible reason to why Amazon isn’t removing its prime service even though they are losing money.

https://blog.hubspot.com

Amazon prime is an excellent example of the idea mentioned in the Hubspot blog. Customers are forced to continue to make repeated purchases. The ideas in this blog will be valuable for companies as Hubspot is a marketing and sales software, and thus is has a lot of knowledge and date regarding brand and customer management.

 

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Was it worth it? – Starbucks shuts down its online store

 

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In this age and time, when most consumers are increasingly shifting their retail shopping towards online shopping and e-commerce, one company has made a decision to shut down its online e-commerce store. I am talking about Starbucks, one of the worlds biggest coffeehouse chains. In late August, the company put a notice on its online store informing people about the closure, and just last week, they finally shut down their online store.

Maggie Jantzen, a company spokeswoman said that this decision was made to simplify the companies sale channels. Shutting down the online stores does decrease the amount of distribution channels Starbucks has, but according to me, it eliminates one of the easiest distribution channels Starbucks has. It is a zero intermediary distribution channel, in which the producer (Starbucks) sells directly to the consumer. The company would directly earn revenue from the consumers.

The major disadvantage of this decision would be that consumers would lose access to two important things. First of all, they will not be able to get Starbucks merchandise and syrups delivered right to their doorsteps from Starbucks. Second of all, Starbucks will be permanently discontinuing its syrups, such as the Pumpkin Spice Latte because these are only sold on the online store. Some customers are very sad about this decision and have been constantly posting on Twitter to show how they are against this decision. This decision could potentially lead to a negative consequence for Starbucks, which is that they may lose some customers who only shopped on the online stores, and the company may face some loss of revenue but it would not be anything major as a lot of people still buy products from the stores or groceries.

A Starbucks Syrup
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Starbucks has also said that this decision was taken so that retail stores would increase their performance and provide customers with a very good experience. Starbucks recently shut down around 400 branches that were underperforming, and wants to make sure that more stores do not continue to underperform. Customers would now go to the retail stores to buy the merchandise, as well as bulk buy their coffee supply. While they are purchasing this they might decide to buy a snack and a coffee to eat over there. These are ways performance is being increased.

I personally believe that if Starbucks wants to increase the performance of their retail stores, then they should start selling the syrups they sold online in these retail stores. No one is gaining anything from discontinuing the syrups, as consumers are losing some of their favourite products and Starbucks is losing the revenue made on these syrups. This would be my recommendation to Starbucks

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