Opinion: Why Apple shouldn’t follow Amazon’s lead

Northwestern Now: Summaries

Amazon and Apple have both achieved what most companies aspire to, but only few manage to pull off: They have become a part of our everyday lives. Amazon’s third Prime Day "grew by more than 60% compared to the same 30 hours last year," according to the company, which begs the question: Should Apple launch a similar event to promote sales?At first glance, it might seem like a good idea for Apple to offer its own version of Prime Day. Indeed, why wait for Black Friday to offer discounts on Apple products? While intuitively appealing, this view reflects a fundamental misconception that Amazon’s Prime Day is just about selling more merchandise by offering discounts. It is much more than that. Prime Day is an excellent means for Amazon to create value for its customers, while at the same time enabling it to achieve several strategic goals:Promote Amazon Prime membershipPrime membership is important to Amazon for several reasons. First, it is a source of additional revenues and profits. Even if Amazon (amzn) merely breaks even on the sale of products, the $99 annual Prime membership fee makes a sizable contribution to the company’s bottom line. In addition to generating additional revenues, Prime membership has the psychological impact of increasing customer loyalty. Many customers who enroll in Prime are more likely to spend more on Amazon—in part because they’ve paid for it and in part because they now feel that they have made a commitment to shop on Amazon. This approach has also worked very well for Costco (cost), which derives much of its profits from membership fees.Promote the Amazon ecosystemHome automation relying on personal digital assistants is the new frontier in creating customer value. With many competitors jockeying for a dominant position in this space, Amazon is determined to become the dominant player and the go-to ...

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