The Flywheel Effect in Action: Why Amazon Prime Day Participation is Escalating

Amazon.com's Prime Day is proving to be a highly effective “flywheel” strategy that boosts Prime subscriber numbers and, in doing so, creates a captive membership community that’s willing and eager not only to participate in future Prime Day events, but also in year-round shopping. Prior to this year's Prime Day, Periscope By McKinsey conducted research that demonstrated how the midsummer shopping event is generating real momentum for Amazon in all of the markets surveyed. Illustrating this point, there was a clear jump in U.S. consumer participation in Prime Day, from 31 percent in 2017 to 46 percent in 2018, and our pre-event research revealing that 77 percent of U.S. consumers were intending to participate ahead of this year’s 2019 event. With Amazon now reporting its largest consumer participation ever in 2019, it’s clear that this strategy is working.

Prime Day has proven to be a highly effective promotion engine that not only fuels more Prime sign-ups, but also incentivizes customers to subscribe to additional Amazon own-brand products and services. Amazon announced that this year the company welcomed more new Prime members on July 15 than any previous day, and almost as many on July 16. It also reported that it sold more than 175 million items during this year’s Prime Day shopping event, which is more than its sales for the past Black Friday and Cyber Monday combined.

Amazon’s Prime Day is a retail master class that clearly demonstrates the value-add power of maintaining a strong customer-centric focus, deepening links into its ecosystem with own-brand products/hardware (Alexa voice search/purchase) and services, and rewarding customers with the offers they want. It's a self-reinforcing flywheel. However, Periscope By McKinsey’s 2019 findings showed that 63 percent of U.S. respondents were also eager to try out different deal events, representing a golden opportunity to generate additional online revenue for other retailers. With consumer enthusiasm clearly riding high for online shopping holidays, there are significant opportunities for other retailers and brands to get in on the act.

So how can other retailers and brands effectively compete during events like Prime Day and capitalize on the flywheel effect? Amazon’s relentless focus on eliminating friction and making it simple to shop is proving a winning combination for consumers. Merchants wishing to increase their pre-event marketing performance, optimize the customer journey, and maximize the results of promotional events should consider the following steps:

• Develop a comprehensive channel strategy. Today’s consumers increasingly expect a fast and seamless experience across channels. With the prevalence of mobile and voice-assisted shopping slowly becoming more dominant, retailers will need to rethink their consumer journeys as well as their channel strategy in terms of their overall ecosystem rather than individual channels. What deepens the links for consumers into your ecosystem beyond the transaction on that day?
• Make customer centricity the core of your business. Focus on gathering insights into your customers’ needs and pain points using quantitative and qualitative research, behavioral data, and social media. Use these learnings to inform the design of customer journeys and your offer selection for the event.
• Invest in advanced tools and analytics. Make use of the vast amount of data available to you; collect and analyze customer feedback; benchmark your customer experience against competitors; and set key performance indicators to constantly improve customer journeys. Look at promotional return on investment by item by event by week, both standalone and the halo impact on full-priced items added to the basket. For subscription businesses, include the view to lifetime value for new subscribers and longer life of existing subscribers. In addition, leverage data and analytics solutions to manage the delicate balancing act of markdowns and margin goals.
• Plan your pre-event marketing wisely. Consumers research their shopping targets well ahead of an event. Prepare your event marketing pipeline strategically to build awareness and prepare and curate promotions for each customer that incentivize them to participate on the day.

For a copy of Periscope By McKinsey’s research report on 2019’s Amazon Prime Day, visit The Amazon Prime Day Effect: Consumer Anticipation and Excitement Grows in 2019.

Brian Elliot is partner, founder and head of innovation at Periscope® By McKinsey, a platform that combines world-class intellectual property, prescriptive analytics and cloud-based tools with expert support and training to drive revenue growth now and into the future.