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The real reason Amazon is bringing back Amazon Prime Day

Reuters/Rick Wilking
Jeff Bezos knows why.
By Alison Griswold
Published Last updated This article is more than 2 years old.

For its second-ever membership bonanza (happening today!), Amazon is promising more than 100,000 deals for Amazon Prime subscribers worldwide, with new bargains appearing ”as often as every five minutes.” Discounts include $10 off for customers making their first order through Amazon Echo, an internet-connected speaker, as well as $10 off for shoppers placing their first order on Prime Now, Amazon’s one- and two-hour delivery service. There are “lots of TVs,” “toys all day,” and expected savings of 20% on the Segway miniPro.

Amazon introduced Prime Day last summer to celebrate its 20th birthday. The company wasn’t initially set on bringing Prime Day back, but declared it a “huge success” after sales exceeded those of Black Friday 2014. US customers purchased 47,000 TVs, 41,000 pairs of Bose headphones, and 12,000 copies of Fifty Shades of Grey Unrated on Blu-ray. (Good job, America.) ”We’ll definitely be doing this again,” Greg Greeley, Amazon’s vice president for Prime said at the time.

But another number was much more important than any of those sales statistics: How many people enrolled to try Amazon Prime. While the company never released a specific number, it heralded the inaugural Prime Day as its best-ever for new Prime signups. Over the last year, Amazon added an estimated 19 million US subscribers to its signature membership program, which costs $99 year, according to Consumer Intelligence Research Partners. At the close of the second quarter, more than half of all Amazon shoppers in the US were also thought to be Prime members.

Why does Amazon care so much about enlisting new subscribers? Because Amazon Prime subscribers spend more and stick around longer, making them incredibly valuable customers. In the latest quarter, CIRP estimated that Prime subscribers spent $1,200 per year, compared to $500 for non-Prime participants. Meanwhile, CIRP has also found that Amazon Prime has a ridiculously high renewal rate. Ninety-six percent of people who have bought Prime for two years renew for a third; 91% of those in their first year sign up for a second. Even 76% of users on free 30-day trials become full subscribers.

In other words, you might say that the most important thing Amazon can do to grow its Prime member base is to get people in the door to sign up. That, more than anything, is what Prime Day is for.

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