Bite-size Case Study

Amazon Prime: conversion rate optimisation

Published on January 31, 2021 Originally recorded 2020   4 min
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Let's look at a case-study of someone who has used conversion rate optimisation to their advantage. I don't think there is a better example than Amazon Prime.
This is the problem that Amazon Prime was invented for. Amazon had seen through their data that shipping rates were a major factor in the checkout process. They knew that when people got to that shipping rates page that was a point where people started to drop out of the process, and those shipping times, sometimes eight, nine or ten days created friction, compared to just going to your local store to buy that product. At the time consumers had to spend $25 in the US as a minimum, to get free eight to ten day shipping. Amazon wanted to get into the position where buying from them was the default option for users. They wanted to see how they could firstly fix that shipping problem that was stopping people from making purchases, but also see how they could use the shipping options to make Amazon the default option.
This was their solution. In 2005, Amazon launched Prime which was free two-day shipping for a $79 annual membership fee, and on the right-hand side that's the letter that appeared on the front of from Jeff Bezos (the founder of Amazon), introducing people to the Amazon Prime program. A year later, Amazon launched a program called Fulfillment by Amazon, usually shortened to FBA. That allowed merchants (nowadays over half of all sales through Amazon are through third-party merchants) to store their goods inside Amazon warehouses, and actually ship using the Prime program. This was incredibly successful and really led to the growth in third-party sales for Amazon. Five years later, Amazon launched Prime Video, and three years after that Prime Music was launched. Two streaming services which have become incredibly popular. A year after Prime Music launched the Prime Day sale launched. This has been very successful for Amazon and it allowed people who had signed up to the Prime program to get one-off deals, and of course have them delivered by Amazon Prime. This year in the US - and of course the US is a very large country, so shipping from one side of the country to another can take a considerable amount of time - Prime went from a standard promise of two-day shipping to one-day shipping, which was huge and really made Amazon the default place to buy online.