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Think back to trips to Disneyland or Disneyworld as a kid. Remember Disney Dollars? Not only were they fun and kid-friendly, creating a distance between real cu
by jonnathanson 14y ago
Think back to trips to Disneyland or Disneyworld as a kid. Remember Disney Dollars? Not only were they fun and kid-friendly, creating a distance between real currency and purchases within the park...but they were also redeemable only at Disney parks.
This is the concept behind all loyalty programs, in a nutshell. It's about giving ostensible rewards to loyal customers in an attempt to create what economists call "switching costs," i.e., the degree of hassle involved in moving from one service provider/vendor/business to another. If you've got enough points built up with one provider (e.g., American Airlines), you'll be reluctant to spend money on other providers (Delta, for instance).
Side benefits include increasing customer basket size, increasing purchase frequency, converting customers across categories, and increasing share of wallet per customer.
As loyalty programs go, Amazon Prime has been stellar. It's very costly for the company, and it had Wall Street in a frenzy when it first launched. But it works (and it's also very beneficial to consumers who use it).
I can't say I see the value in this program as much as I do with Amazon Prime, but the logic makes sense.
- shmerl 14y agoI.e. it's a lock in trick? One should avoid such things.
- jonnathanson 14y agoIt depends on how you define "trick." If you're going into it with eyes wide open, you're using it to derive the benefits, and you've got good self-control, then a loyalty program can be very valuable to you as a consumer. If you're going into it expecting benefits, and you find yourself getting carried away and overspending, then it's less valuable to you. I wouldn't call it a trick, so much as I'd call it a loyalty program -- with all the potential risks and rewards that such a term entails. There's nothing necessarily shady or evil about a loyalty program. Indeed, if it makes Amazon a much better consumer experience for you, it can be a win-win.
- _delirium 14y agoIf it was an option, like you can currently choose to buy Amazon gift cards or enroll in Prime, sure. Even an option with incentives. But if you move towards making proprietary currency the only way to pay in a given area, it seems shady to me. Not illegal-type shady, but has-bad-motives-type shady. These kinds of proprietary currencies are a typically deliberate attempt to reduce the transparency of prices, by adding an addition layer of indirection people have to mentally jump through in order to think accurately about and compare them (you can see that in part in how most such currencies pick weird exchange rates, not decimal ones that would be easier to think about).
- tspiteri 14y agoBut if you move towards making proprietary currency the only way to pay in a given area, it seems shady to me. Somehow, I doubt Amazon plan to remove the other payment options.
- beowulfey 14y agoOne such example could be the Microsoft Points - perfectly falls under your description. I can never remember the exchange rates, and they deliberately offset the prices so you always have residual points. For example, the minimum points you can buy are 400 ($5) but the cheapest item is 80, then 240, then 360... so you will never be able to spend ALL of them entirely (barring many, many transactions).
- jacques_chester 14y agoAn additional twist is to price things in prime numbers so that buying multiples leaves a residual balance.
- eterm 14y agoBut isn't every number the sum of two primes?
- 14y ago
- cschmidt 14y agoYou can benefit from the lock in. Amazon pays a fortune on my shipping for Amazon Prime. I ordered about 90 times last year, and got 2 day shipping on all of them. It replaces going to the store for many things, so more important to me is the time I saved shopping. The upside for them is I spent about $4000 on Amazon last year, which is way more than I would otherwise. I don't know if it is good for them, but it sure seems good for me.
- wtvanhest 14y agoI'm 100% with you there. I don't even bother price shopping anymore because I know with Amazon it will be close or better than average big city pricing and I get everything in a time period which seems instant.
- shmerl 14y agoI prefer to support Newegg when it comes to computer accessories for example because of patent trolls busting, and surely not Amazon who promote DRM. I'd buy on Amazon only as a last resort, if there are no other options.
- umsm 14y agoI don't know if it's just me, but I noticed that the BEST price is not always on amazon. Most of the time, the retail stores' price is equal to what amazon advertises. Some stores (Costco & Sams) offer items at far below what Amazon offers them for. Most of the time, I only save paying the tax...
- fr0sty 14y agoDoes Costco offer free 2-day shipping? (or free shipping, period?) If you are comparing an in-store price to the amazon Prime one you have to factor in the costs (implicit and explicit) of actually making a trip out for a particular item or waiting for your monthly Costco run to pick-up X rather than having it here by Saturday.
- 14y ago
- codex 14y agoAmazon can't really avoid doing stuff like this, because their business model (retail) sucks, and makes very little money due to razor thin margins. So they trot out every trick in the book.
- cma 14y ago> Walmart can't really avoid doing stuff like this, because their business model (retail) sucks, and makes very little money due to razor thin margins. So they trot out every trick in the book. Wait, no, Walmart avoids things like loyalty card discounts, etc. They also seem to have a decent business model. You're going to have to elaborate a little more.
- dave5104 14y agoI always thought it worked for Walmart because they have disgustingly high volume? (And therefore could have razor thin margins.)
- itistoday2 14y agoAnd Amazon doesn't have a "disgustingly high volume"...??
- shmerl 14y agoI've heard there was some other trick involved in Amazon's profits, that worked precisely because of high volume, and wouldn't work for middle / small size circulation. Something with reinvesting temporary resources during some time slot and etc. But I'm not sure how valid such claim is.
- philcag 14y agoWhat profits?
- shmerl 14y agoSomething like this. Let's say Amazon sells 1000 items from some manufacturer. Amazon pays manufacturer with delay (let's say 20 days after they get the merchandise). But Amazon manages to sell this 1000 in 10 days (because they have massive sales scale). In result Amazon has spare money for 10 days until they need to pay. So they have a potential to use them for 10 days. That's what I've heard, I'm not sure how valid this is.
- deleted 14y ago[deleted]
- flyinRyan 14y agoIt's a different kind of lock in. Phone lock in is real because the apps I bought on e.g. IOS don't transfer anywhere else. In the case of e.g. frequent flyer miles, that's something they just give me for "free" as part of using their service. That makes the next purchase potentially cheaper so I'll tend to shop with them again. But I could just walk away (and have, in the case of airlines) if I feel the need since this was essentially a gift to me in any case.
- pkulak 14y agohttps://vimeo.com/59014944 https://vimeo.com/59014944
- harpastum 14y agoParent's video is a Simpson's clip showing "Itchy and Scratchy money", similar to Disney Dollars.
- shubb 14y agoI think you might have got it - Lots of bad press about kids spending $1000 of mum's credit card dollars on Google Play Store. Better to give the kid an Amazon Coin account, like a charge card. Amazon do offer an alternate android ecosystem after all.