Amazon Prime Day Is a Brilliant Piece of Marketing

It may not help AMZN stock right away, but critics may want to think bigger-picture

Whether or not you’re a regular customer of Amazon.com (AMZN), you may want to mark July 15th on your calendar. That’s when the world’s most prolific (and feebly profitable) e-commerce company will be hosting what’s uncreatively been dubbed Amazon Prime Day.

Amazon Prime Day is a Brilliant Piece of MarketingWhile only time will tell if the event in any way benefits the value of AMZN stock, there’s no denying the Amazon Prime Day event has already put a lot of renewed attention on the company and its services. Kudos to CEO Jeff Bezos for that.

That being said, the event prompts two key questions: Why is Amazon bothering? And, will the ploy actually do the company any good?

What’s Amazon Prime Day?

On the off-chance you’ve not heard, Amazon Prime Day is a 24-hour span during which members of Amazon’s “Prime” service will be given special discounts on select merchandise, and unlimited free shipping on their online purchases.

Though no specific deals have been leaked, Amazon.com has explained Prime members will find more deals online on July 15th than they would on Black Friday… the day right after Thanksgiving, which is not only the second-busiest brick-and-mortar shopping day of the year, but a day on which retailers have decided to wage outright price wars against one another in an effort to win over Christmas-shopping dollars.

Only existing Prime members will have access to these bargains.

What’s Amazon Thinking?

It was only a matter of minutes after Amazon Prime Day was announced before bargain hunters recognized they could access the deals and pay nothing for the privilege. How? By signing up for a free 30-day trial of Amazon Prime, then canceling the service before any membership fees were assessed.

That’s not what Amazon is betting on happening, however.

Though Amazon hasn’t plainly stated it, it’s unlikely the company would deny this is an effort to get new Prime members in the door.

And well they should. Statistics show that Prime members spend, on average, $1500 per year at the online shopping site, versus only $625 per year for shoppers who aren’t Prime members. The extra cost of free shipping and digital video that Prime members enjoy is jointly offset by the $99 annual membership fee and greater sales volume.

The Best Publicity Yet

Calling a spade a spade, Amazon.com hasn’t exactly been hitting homeruns on the marketing and promotion front.

Case in point: In October of last year, it was widely reported Amazon would be opening a store in downtown New York, just in time for the Christmas spending season. Though intended to be a drop-off and pickup station, it was also pegged as a place to store (and buy) commonly-purchased staples, and even as a place to promote Amazon-branded electronics to all the patrons who would be flowing in and out of the locale.

No store has been opened there yet, though the news at the time certainly put Amazon.com back in the limelight… just in time for the holiday shopping season.

In retrospect, it was clear the media proverbially took the ball and ran with it, making the Amazon lease of the space in question far more than it was ever going to be. But, also in retrospect, Amazon did absolutely nothing to correct what it clearly knew were misconceptions.

While few investors saw through the publicity ploy of the downtown New York storefront, most investors did immediately recognize the silliness of Jeff Bezos’ prediction offered on a 60 Minutes story that aired on December 1st of last year… a prediction that it was only a matter of time before Amazon would be delivering packages with drones.

Again, the timing of the story — right in the thick of the holiday shopping season — was suspect.

Amazon Prime Day, however, is a tactic that makes sense. Bring people in, let them try it out, and develop trust with them. Some will bail out anyway, but many will stay. Yes, it’s a loss-leader, but Jeff Bezos is no stranger to spending a lot of money now in the name of growth that could yield even bigger returns later. It’s refreshing to see the company getting back to preaching the value and ease of its service, rather than relying on PR gimmicks and stunts.

Bottom Line for AMZN Stock

It remains to be seen if giving away something now will bear profitable fruit later; Amazon.com has rarely been concerned about profits, anyway. But, in that the hardest part about a service business is getting someone into the fold in the first place, a swath of new Amazon Prime members can’t hurt, even if Amazon Prime Day is going to be an expensive day for Amazon.com. The question then becomes one of how well the company can incrementally monetize those new members.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/amzn-stock-amazon-prime-day-brilliant-marketing/.

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