Saturday, December 20, 2008

Increasing customer lifetime value

Every marketer wants to increase the lifetime value of their customers. One of the best ways is to make sure that the consumer only thinks about your brand/product/service/store/e-commerce store before making a purchase.

Amazon prime is a perfect example of a service which can be used to increase the lifetime value of consumers. This service is a one-time annual fee and provides free 2-day shipping and next day shipping for only $3.99 on most of the products sold on

By providing such a service for a minimal fee, Amazon has secured all the consumers who have signed-up for this service. Amazon is one of the largest collections of products across all categories – household products, baby products, electronics, books, tools, clothes, grocery, and apparel. Therefore, the chances that you will not find a product on Amazon are very few.

They have also made sure that a consumer, when is ready to buy a product, uses only to find the product and checkout.

A consumer previously would have done a lot of research on various comparison shopping engines like or and put in a lot of time to find the best deal. Now, the same consumer who has signed up for Amazon prime would just go to Amazon, find the product and check out. This would save a ton of consumer's time and the consumer would also get the product delivered to their doorstep in 2 days or even next day if they pay $3.99.

I have been using this service over the last few months and have ended up make more and more purchases from Amazon. It all started with monthly diapers, then I ordered a multi-function printer, then I got a car seat for my son, then comforters, duvet cover and the list goes on. Living in the city of Chicago, I save on 10.5% sales tax and get the product gets delivered to my doorstep in a day. I used to order only a few products annually from Amazon but now, I order a product almost at a weekly level. Guess what! I also have the Amazon rewards credit card now, which has hooked me to Amazon. I have even ordered products from Amazon using my phone, as I was at a physical store which didn't have the actual product I was looking for.

From a marketing analytics ROI point of view, if I was running the Amazon prime program, I would love to do the analysis of shipping cost vs. the increase in the consumer lifetime value. As the service has been available for a few years, I am assuming they have a positive return and is helping increase profits.

This indeed is a classic case of increasing consumer lifetime value.

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