Tuesday, 30 August 2011

Paying a premium

First there was Amazon Prime, then came Asos Premier, now M and M Direct has launched its Premier service, offering customers free express delivery, free returns, priority mailings and exclusive offers.
Amazon Prime, Asos Premier and M and M Direct Premier are membership programmes that charge customers an annual fee for added-value services. Amazon’s service costs £49 a year; Asos currently charges £14.95 and M and M Direct charges £14.99 as an introductory price. But do they represent good deals for the merchant and the consumer?

I looked at joining Amazon Prime, but could not see any immediate benefits as a consumer. Sure, I could get “free one-day delivery on millions of eligible items sold by Amazon.co.uk”, but what about the items sold by third-parties on the site; not all of those are eligible. Not to mention that most items are eligible for Amazon’s free super-saver delivery anyway. I may have to wait up to five days to receive my purchase, but if I wanted it sooner I’d pay the one-off delivery charge. For most items I am happy to wait a few days. Although my family buys a lot on Amazon, I don’t think our shipping costs rack up to £49 a year. Thanks, but no thanks. This offer clearly works out better for Amazon and if people are willing to pay £49 when they could get a very similar service for free, Amazon is definitely the smartest marketer out there.

The Premier offer from apparel etailer Asos is instantly more enticing for consumers. It offers free next-day delivery as well as a returns collection service. I can see the immediate attraction of not having to trudge to the post office to return a parcel. Another benefit, at least for a catalogue nut like me, is that Asos will mail its customer magazine to Premier customers each month. I have bought from Asos a couple of times over the past year or so, but they’ve not sent me a magazine for several months. I was told by a customer services rep that “we send out the magazine every month to a random selection of people who have ordered from us in the last six months. This means that if you keep ordering from us you will receive the Asos magazine,” she directed me to the online version, but it’s just not the same. For £19.95, or even the full price of £24.95, the Asos Premier deal is much better than Amazon’s. As Asos already offers free delivery with no minimum order value, albeit not next-day, I guess the Premier service is a way to reclaim revenue from deliveries. It’s also a great way for Asos to communicate directly with its very best customers. Plenty of online retailers can segment their databases to find out who among their customers buys the most often. But using a service like Premier, Asos knows exactly who its most engaged customers are. To use a much-bandied term, the people who subscribe to a service like Premier are likely “brand advocates”, willing to pay extra for a service from their favourite retailer. Impress these people and they will tell their friends, who may then also join the service, who will tell their friends, and so on.
M and M Direct Premier
M and M Direct’s offer is very similar to Asos. It includes free express shipping, free returns, “priority mailings” and exclusive offers. Already, M and M says 50,000 people have signed up to the programme since March. Again, like Asos, M and M calls out receiving regular catalogues as a key benefit. Its non-offer price is £19.99, cheaper than Asos’s full price. The real added benefit here is that M and M Direct normally charges £6.99 for express delivery and £3.99 for standard delivery compared with Asos and Amazon where customers can opt for free delivery on most items. That means that the service essentially pays for itself after just two orders. For regular shoppers, that’s a very tempting deal.

If I genuinely shopped that often with a retailer, paying for a premium service would definitely appeal. It’s a concept that would work for anything purchased regularly--pet supplies, vitamins and supplements, home-office supplies, childrenswear and baby products, and so much more. If margins permit, we may see many more of this premium services crop up. After all, there’s nothing customers love more than being treated like VIPs.--MT

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