Amazon’s Loyalty Program is About to Pay Off

In Strategy by Lyndsey Jones

When Amazon bought Whole Foods in June, most didn’t expect to see so many dramatic changes implemented so quickly. Yet, Amazon has still managed to pump out a new business model that incorporates the Amazon Prime membership into Whole Foods as a customer loyalty rewards program.

Amazon Prime members will have access to special savings and exclusive benefits that a “regular customer” without an Amazon Prime membership will not have access to. These special discounts are already on top of the price cuts that Amazon has made to certain items within the Whole Foods chain.

In addition, Amazon Prime members will have access to Whole Foods private-label items through Amazon Prime Now. That means everything from dog food to body lotion with guaranteed same-day delivery.

Finally, Amazon Lockers will be available at select Whole Foods stores, allowing eligible Amazon Prime members to order food online and simply pick it up in the store.

But if Amazon really wants to nail consumer loyalty with the Whole Foods acquisition, they still need to make sure that they’re hitting some important marks.

Reach The Target Market

To entice students across the country to use Hulu, Spotify recently announced a partnership that got Millennials all fired up. Students now automatically receive a free Hulu subscription by subscribing to Spotify Student for $5/month.

Spotify did a great job of identifying the wants of their target audience, and sweetened the pot by combining subscription prices. Maybe soon “Netflix and chill” will become a thing of the past as more students recognize the cheap Hulu bundle.

Amazon’s acquisition of Whole Foods is great, but only for people who shop at Whole Foods. Amazon must try harder to attract the business of customers who shop elsewhere, but their initial efforts have been less than enticing.

Greater Price Cuts

In its first week of owning Whole Foods, Amazon cut the prices of some random items by up to 43%. Sounds awesome, right? Well, consumers will find that Whole Foods is still 50% pricier than the average Wal-Mart. Whole Foods customers are already starting to leave the chain for mainstream supermarkets with cheaper prices.

Brian Vu, a grocery store expert with Bain and Co., suggested that Amazon CEO Jeff Bezos could cut prices as much as 15% across the board if he is willing to break even for a while.

Two-Way Promotions

Amazon encouraging users to shop at Whole Foods is a fantastic idea, and the acquisition is changing the retail scene completely. But instead of only incentivizing the Amazon Prime program, Amazon could also consider promotions that go in the opposite direction. Perhaps one day Whole Foods shoppers will earn Amazon gift cards for their continued loyalty. This approach would create a true Amazon/Whole Foods ecosystem, where customers of one are enticed to become customers of the other.

Create Loyalty Progression

Amazon Prime is not a part of a progression system, where customers gradually increase and change their buying habits to fit a specific promotion. You’re either a Prime subscriber or you’re not.

Amazon Prime targets customers who make purchases regularly. The Whole Foods acquisition follows this framework in the physical retail space: people have to buy groceries, right?

Instead, Amazon should explore the possibility of creating a tiered loyalty program, ene where customers receive different benefits for different rates of pay. This way, Amazon can create a funnel that ultimately leads customers into the Amazon Prime/Whole Foods space.