(Spencer Platt/Getty Images)
Amazon CEO Jeff Bezos.
Amazon Prime, the Amazon membership program that costs $99 a year, comes with a lot of perks.
Prime members get free two-day shipping and access to thousands of videos, songs, and books, as well as unlimited cloud storage for photos.
Why would Amazon want to give all these benefits for a mere $99 annual membership fee?
According to RBC Capital, the reason is quite simple: increased customer loyalty.
In a note published on Monday, RBC shared survey results from last month showing the growing number of Prime members and how those members were continuing to increase their spending on Amazon.
“The two ‘killer’ data points, in our view, are that Amazon is building up significant loyalty amongst Prime members and that the longer Amazon Prime members stay around, the more they engage/spend with Amazon,” the report said.
Some of the key takeaways from the survey include:
- Prime adoption is growing: 40% of Amazon customers in the US are Prime members versus 25% in 2013. Globally, Prime members are estimated to number 60 million to 80 million.
- Prime members are coming back more frequently: Seventy-four percent of Prime members said they used Amazon more today than when they first joined Prime. Also, 73% of Prime customers said they shopped at Amazon at least two to three times a month, while only 22% of non-Prime customers said they did.
- Prime members spend more: Forty-nine percent of Prime members spend over $800 annually, while only 16% of non-Prime users do so.
- The longer they’ve been a Prime member, the more they spend: Forty-one percent of those in the first year of a Prime membership spend over $800 a year, versus 68% of Prime members of more than four years who do.
“More than 10 years after its launch, Amazon’s Prime ‘free shipping’ program is becoming a material driver of AMZN retail revenue growth,” the report added.
Amazon doesn’t disclose the number of its Prime subscribers, but it has made it clear that the service is where it anticipates growth to come from. During the company’s most recent earnings call, Amazon CFO Brian Olsavsky said: “We are getting very good top-line growth. A lot of that is fueled by Prime adoption, and we are dropping a lot of it to the bottom line with many of the efficiency projects.”
Amazon reports its next quarterly earnings this Thursday. Wall Street expects a loss of $0.13 per share and $24.9 billion in revenue.
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