Amazon's brand rating falls following Prime price hike

Amazon (NASDAQ: AMZN) announced last week that it would be raising the price of its Prime membership from $79 to $99, and not everyone is happy about the hike. A Brand Keys survey found that Amazon's brand engagement and customer loyalty ratings fell from 93 percent to 83 percent following the price hike.

Amazon has held the number one spot in the online category since Brand Keys began its survey 16 years ago. After the price hike, however, Amazon now ranks third, behind eBay and Overstock.com, according to CNBC.

"Based on immediate Prime member reactions, [Amazon] may have underestimated the negative effects of the increase," said Robert Passikoff, founder and president of Brand Keys. 

The Brand Keys survey showed that the Prime price increase resulted in significant negative effects in two emotional engagement categories: "Brand Reputation" and "Brand Value." The survey was conducted among 1,050 Prime members from March 14 to March 16.

Shoppers also took to Amazon's online forums to voice their frustrations about the price increase and departure from the Prime program.

"I will not be renewing my subscription and probably won't order from Amazon again. I know that means nothing to a giant company like them, but I had been a loyal shopper since Prime started," wrote user J. Humphrey.

"I'll stop using it. The prices in local stores are now comparable to Amazon, so with a higher Prime cost, it's not worth it. Netflix streams, I can live without Amazon's old tv shows. Don't need Prime to download to Kindle. It was fun while it lasted," wrote another Prime member, G. Detore.

Amazon's Prime service gives shoppers free two-day shipping, access to its digital streaming library of 40,000 movies and TV episodes as well as free e-book borrowing. Though Amazon has refused to divulge the exact number of people enrolled in Prime, in December the company said it was in the "tens of millions." 

Current Amazon Prime members will pay the increased fee when they renew, starting on April 17. Any new customer who signs up starting March 20 will also pay $99.

Shopper dissatisfaction and negative reaction to price hikes is par for the course in retail. In most cases, membership or sales pick up again after a brief dip and adjustment period. That was certainly the case when Costco raised annual membership fees, although Netflix wasn't as fortunate. When the rental service tried to separate DVD rental and steaming services in July 2011, effectively raising the price for those who subscribed to the bundled service, reaction was swift and incredibly negative.

Netflix lost hundreds of thousands of subscribers, retracted the changes and spent more than a year issuing apologies to woo back customers. It's taken two years for Netflix to again float the idea of a price increase. In a letter to shareholders in February, Netflix CEO Reed Hastings outlined plans to test tiered payments but insisted, "We are in no rush to implement new member plans and are still researching the best way to proceed."

Existing members would also get "generous grandfathering of their existing plans and prices." The best Amazon Prime members can hope for regarding grandfathered pricing for loyal, early adopters is this sneaky work-around requiring members to prepay for the following year.

Will Amazon be the next Neflix? Time will tell, but in the short term, its brand ranking has taken a hit from the Prime price hike.

For more:
-See this CNBC article

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