Thought Leadership presented by Foresight CFO Consulting, Inc
Asking customers to pay to join a special group of your best patrons can increase your revenue, encourage customers to buy new products and services from you and provide a healthy boost to your cash flow.
Just ask Jeff Bezos, the founder of Amazon.com and the chief architect behind Amazon Prime. In exchange for $79 a year, Amazon Prime customers get:
● Free two-day shipping on millions of items
● Unlimited streaming videos and TV shows
● 350,000 books to borrow for free.
It’s a compelling offer, which is why, according to TIME magazine, more than 10 million people have signed up. If you do the math, that makes Prime close to a billion-dollar business for Amazon. And like most programs, members pay upfront, giving Amazon a big injection of positive cash flow.
Changing buying behavior
What is even more interesting is what being a member of Prime does to the buying behavior of the average Amazon customer. Prime customers pay their $79 upfront, making them eager to “get their money back” by purchasing a bigger and broader array of products from Amazon. With free shipping and a $79 nut to recover, Prime customers go well beyond buying books from Amazon, and now get everything from tires to turtlenecks from the e-tailer. According to TIME, the average Prime customer now spends $1,224 per year with Amazon vs. the average non-Prime customer who spends just $505. In other words, Prime customers spend almost three times more per year than non-members. Other examples include AMC movie theaters, credit cards and private golf clubs. Customers who pay upfront for a premium membership buy differently.
Build it right
Getting your customers to pay to join your elite customer club requires that you design a compelling offer as Amazon Prime did. Ensure that your sales and marketing teams work with your strategic financial management experts to figure out the economics. When you build it right, not only will the club itself turn a profit, but it will also provide a quick boost to your cash flow and create a legion of sticky customers who buy more because they paid to become a member.