Sr. Director, Marketing
At first glance, Amazon’s price increase seems like a repeat of Netflix’ disaster a few years ago – remember, Netflix raised their prices and faced a ton of backlash while seeing a significant drop in # of subscribers and in short term stock price.
In the Subscription Economy, it’s all about relationships. Netflix forgot about their relationships. Their backlash was due to them forgetting about their customers and splitting out their on-demand service from home DVD delivery, a move no one wanted. They made unilateral decisions without consulting customers. They raised prices on everyone, and at the same time, without giving them any choice.
Amazon is not repeating Netflix’ mistake.
Pricing evolution is an inherent part of doing business in the Subscription Economy. Amazon is right to raise prices, which have been flat for 9 years. Shipping and fuel costs have gone up. They have put more value into the Prime service, including their own video on demand. Everyone knows that Amazon Prime is still a GREAT deal. Even at $99, most subscribers will save a lot in shipping fees.
And Amazon was better about communicating the changes. First, they aren’t raising prices on you right now – just at the point of your next annual renewal. They started signaling to the market months ago. Everyone knew it was coming.
And customers have a choice – you don’t have to use it. Cancel it and pay for 2-day shipping. It’s your choice.
Amazon’s running a business, we all know that. But they also treat their customers with respect. And how about Netflix? Well, they learned their lesson well, they have been listening to their customers, and have recovered really well.
The lesson? In the Subscription Economy, respect your relationships with your customers.
This blog originally appeared on Wired’s Innovation Insights.