How to Make Amazon Subscriptions Work for You

In recent years, amazon has started offering subscription pricing and s for many items. The main concepts here are loss aversion and scarcity. Time pressure from short term offers with limited quantities make people overcome their risk aversion to jump on an offer. If you're constantly having sales or making exceptions for people it will not have the same effect as true scarcity which makes us feel something is of great value. It's a virtuous cycle that allows both sides to win.

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I know these behavioral economics analysis episodes are very popular. The ones on Starbucks and Peloton have quickly risen through the ranks to become the third and fourth most downloaded episodes ever on the show (and as we are on the precipice of our 3 year anniversary that is a pretty big feat!). There are also analysis episodes on Apple Card, Costco, and Disney and as you know today we will be talking about Amazon.

I am so honored to announce that What Your Customer Wants and Can’t Tell You is now an award-winning book! The International Book Awards were just announced and my book was a finalist in two categories. According to their website and press release, books published from January 2019 to May 2021 were eligible and there were over 2000 entries amongst the various categories.

Show Notes:

[00:08] Today’s episode is a behavioral economics analysis of Amazon.
[01:50] I am so honored to announce that What Your Customer Wants and Can’t Tell You is now an award-winning book!
[03:27] In case this is your first behavioral economics analysis episode with The Brainy Business, what you can expect is a fairly rapid-fire list of things I see from Amazon where they are using tactics that tie back to concepts from behavioral economics.
[06:05] And this gets to the first and possibly most important piece of behavioral science built into the entire company of Amazon, which comes back to the biggest mistake I have said time and again most businesses make when trying to implement behavioral science into their work or just working on most projects: understanding the REAL problem you are trying to solve.
[06:43] Taking the time upfront to understand the behavior that needs to be changed and what might be motivating it (and on the flip side, how to make it easy for people to change) is so important to the success of Amazon.
[08:28] Truly understanding the problem before jumping into a solution is incredibly important for every business.
[09:01] This brings me to another cool way that Amazon thinks differently by reframing its approach to projects. Matthew Confer and I talked about this on his recent episode on The Brainy Business, and it is called the “press release method” or the “working backward” method.
[10:10] This simple mental shift, framing the project differently, can help people get out of their myopic approach to what is in front of them and ask some great questions.
[11:11] Reframing with the press release method can help you to ask the right questions early enough and avoid potential cataclysmic failures.
[11:29] Amazon really took herding and social proof to a new level.
[12:17] Star ratings, reviews, and recommendations for what other people “like us” have done before are hugely influential in getting someone to buy.
[14:02] With books, they also let you overcome that additional uncertainty by reading a few pages and taking a peek inside.
[14:45] The more people who use Amazon, the better it gets. There are more options to buy from, sellers are heavily influenced to keep honest and sell good stuff or they will get bad ratings.
[16:04] To help overcome the loss aversion and fear of regret, Amazon makes most returns incredibly easy.
[17:17] Another way Amazon makes it easy to buy is with their 1 click purchase set up.
[18:54] Simplicity and reduced friction while working with the brain makes a huge difference.
[19:23] It is so important to talk about the Prime membership at Amazon. Paid on an annual basis, there are lots of perks and benefits from being a Prime member, the biggest arguably being free 2-day shipping on a huge number of items.
[22:27] If you create a huge amount of value that drives loyalty and other purchases and engagement and revenue, the subscription is more of a mechanism to build the habit. And, as we are seeing from Amazon, can be far more valuable than the cost of the membership.
[23:26] Look for the value you can create to make it an amazing deal that people will love and want to talk about and you’re likely on the right track.
[24:44] If you are selling items, it may feel like you are being pushy to have the default be a subscription and let someone self-select to change to a single-time purchase, but that is all in your logical conscious brain. As long as you are creating value and helping someone get something they want and need, there is likely a great value to them in offering a subscription or membership or whatever the somewhat scary suggestion might be.
[26:28] The main concepts with Prime Day are loss aversion and scarcity. Time pressure from short-term offers with limited quantities makes people overcome their risk aversion and become very loss averse. Scarcity with herding makes us feel something is a great value and want to jump on offers.
[28:07] With how easily our brains get overwhelmed, it is amazing that the 200 million Prime subscribers are able to find what they need and buy it so quickly (across Amazon, half of purchases are made in 15 minutes or less).
[31:17] They make an unbelievable amount of information seem almost effortless, which is an amazing feat when you think about it.
[31:54] Melina’s Top 3 Tips for Incorporating These Lessons: 1) You need to spend more time thinking about the problem you are trying to solve.
[32:35] 2) Use social proof and herding whenever you can.
[33:11] 3) Make suggestions! People don’t always know what they want, so help them find their path.
[34:19] Melina shares her closing thoughts.
[34:24] Melina’s first book, What Your Customer Wants and Can’t Tell You is officially available on Amazon, Bookshop, Barnes & Noble, Book Depository, and Booktopia.

Thanks for listening. Don’t forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show.

I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation. Let’s connect:

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