One of the greatest challenges in retail is providing what shoppers consider mutual value: selling a product or service that the customer thinks is worth the time, money and data exchange. Amazon is trying to crack that challenge, however, and it is doing so with one of the most well-exercised models out there — rewards.
Amazon’s new loyalty initiative, Amazon Moments, is designed for vendors, but its moment of truth depends on shopper reaction. After about 18 months of testing, the truth is coming out: The vendors that have used it seem to like it so far. But the concept’s real shelf life, the one with shoppers, depends on what they stand to gain in the long run.
Loyalty programs are growing massively as companies seek more ways to engage customers. According to LoyaltyOne’s Loyalty Big Picture Study, scheduled for release Spring 2019, the global loyalty industry is estimated to be worth $74 billion, of which $42 billion is loyalty programs, providers and platforms. The study also finds that companies invest upward of 2% of their sales in reward initiatives.
It’s not surprising, then, that rewards have to work harder to distract shoppers from their digital-enabled routines — 80% of consumers will buy whatever they need at the moment they see it, regardless of where they are, research firm WSL Strategic Retail reports.
If Amazon Moments wants to capture the consumer’s attention, it has to offer not only a different reward-earning model, but a literally different way of approaching shoppers all together. As in: Don’t expect them to do anything proactive, just thank them for merely showing up.
Rising Boats, Sevenfold Sales Gain
Amazon Moments attempts to remove the work for shoppers by first eliminating the work for its vendor brands. It provides the marketing platform, an online console for budgeting and managing each campaign, and reward fulfillment.
Essentially, these are the costlier operations of a reward program. Moments was developed so Amazon vendors could focus instead on the kinds of actions they want their shoppers to engage in, such as using an app or spending a certain amount of money. The vendor just has to determine which actions generate the desired results (revenue or word of mouth) and the rewards, physical or digital, it will give in return.
This is where cost control really kicks in. The vendors set their own reward expenses, pay Amazon only when reward actions are completed and let Amazon manage the delivery. It’s the rising-tides-lift-all-boats model — Amazon uses it size to do the back-end heavy lifting and its vendors affordably increase sales.
Here’s an example from Amazon’s Appstore blog: If a brand calculates that keeping an active customer engaged is worth $50, it can offer a $40 set of headphones for an action considered important to the brand and still enjoy a comfortable margin of error.
Among those brands that have tested Amazon Moments is Disney. It said net revenue increased nearly sevenfold after offering players of the game “Disney Heroes Battle Mode” $5 in Amazon credits for achieving level 15, according to the Amazon Moments developer site.
Moments Worth Repeating — 5 Ways It Will Change Shopping
But what do shoppers have to gain from this direct-to-consumer loyalty strategy in the long run? Here are five potential benefits that could change shopping expectations forever.
- More brands means more variety. Moments is a coalition program of sorts, meaning any brand that sells products or services through Amazon can participate. Shoppers, in turn, have massive opportunities — more than 5 million sellers operated across all Amazon marketplaces in 2017, the most recent year for statistics. And shoppers can apply many rewards, such as Amazon credits, toward something of value pretty quickly. They could potentially earn rewards from a handcrafted belt maker or from a music streaming service.
- It’s simple. Amazon users don’t have to do anything but shop. The participating vendors individually determines the actions and rewards. They simply send the shopper an invitation to participate in an action — reach a spending threshold or play a game in an app — to get a reward. If the customer completes the action, he or she will receive a special URL via text message or email, which leads to the physical or virtual reward that Amazon will deliver.
- Shoppers will get relevant rewards, without giving much away. Brands should deliver more relevant and desired reward options, per customer, since the data is more narrowly defined and controlled. For example, different user categories can receive rewards of varying values — $5 gift cards for occasional users; $100 for big spenders. That being said, vendors are not required to share any of their customers’ personal information, according to the Amazon Appstore blog.
- Shoppers can roll existing benefits into their rewards. As a bonus, Amazon users could apply other Amazon perks when they redeem their Moments rewards, according to Marketing Dive. These benefits would include the free two-day shipping that comes with Amazon Prime memberships, so customers could receive their Moments rewards faster.
- Shoppers don’t pay an added fee. This appears to be the model, assuming shoppers can avoid delivery fees. The Amazon Moments formula should enable brands to tightly manage how much they invest in each promotion so they can more accurately forecast profit. This method, complemented by Amazon’s marketing and fulfillment services, better positions brands to foot the fee and not pass it on.
In the end, the true value of Moments comes from vendors using the program right and consumers receiving enough value in their rewards to keep them looking at new offers or opportunities. It’s a virtuous cycle. Amazon just provides the tools to success; it’s up to the individual merchants to use them well.