Case ROI Calculation
Project Background
Amazon Prime
In 2005, Amazon announced the creation of Amazon Prime, a membership offering free two-day shipping within the contiguous United States on all eligible purchases for a flat annual fee of $79 (equivalent to $96 in 2015), as well as discounted one-day shipping rates. Amazon launched the program in Germany, Japan, and the United Kingdom in 2007; in France (as “Amazon Premium”) in 2008, in Italy in 2011, and in Canada in 2013.
Amazon Prime membership in Germany, the United Kingdom, and the United States also provides Amazon Video, the instant streaming of selected movies and TV shows at no additional cost. In November 2011, it was announced that Prime members have access to the Kindle Owners’ Lending Library, which allows users to borrow certain popular Kindle e-books for free reading on Kindle hardware, up to one book a month, with no due date.
In March 2014, Amazon announced an increase in the annual membership fee for Amazon Prime, from $79 to $99. Shortly after this change, Amazon announced Prime Music, a service whose members can get unlimited, ad-free streaming of over a million songs and access to curated playlists. In November 2014, Amazon added Prime Photos, which allows unlimited photo storage in the users’ Amazon cloud drive. In March 2015, Amazon was expanding that service as a paid offering to cover other kinds of content, and to users outside of its loyalty program. Unlimited Cloud Storage will let users get either unlimited photo storage or “unlimited everything” – covering all kinds of media from videos and music through to PDF documents – respectively for $11.99 or $59.99 per year. Amazon also began offering free same-day delivery to Prime members in 14 U.S. metropolitan areas in May 2015. In April 2015, Amazon started a trial partnership with Audi and DHL in order to get deliveries directly into the trunks of Audi cars. This project is only available on the Munich (Germany) area to some Audi connected car users.
On July 15, 2015, to commemorate its 20th birthday, Amazon celebrated “Amazon Prime Day”, which Amazon announced would feature deals for prime members that rivaled those on Black Friday. Also that month Amazon Prime announced that it would be signing Jeremy Clarkson, Richard Hammond, and James May, formerly of BBC’s Top Gear, to begin working on The Grand Tour, due to be released in 2016.
In December 2015, Amazon stated that “tens of millions” of people are Amazon Prime members. Amazon Prime added 3 million members during the third week of December 2015. It was also during December that Amazon announced the creation of the Streaming Partners Program, an over-the-top subscription service that enables Amazon Prime subscribers to add additional streaming video services to their accounts. Among the programming providers involved in the program are Showtime, Starz (with additional content from sister network Encore), Lifetime Movie Club (containing recent original movie titles from Lifetime Television and Lifetime Movie Network), Smithsonian Earth, and Qello Concerts.
In January 2016, Amazon Prime reached 54 million members according to a report from Consumer Intelligence Research Partners. In April 2016, Amazon announced same-day delivery would be expanded to include the areas of Charlotte, Cincinnati, Fresno, Louisville, Milwaukee, Nashville, Central New Jersey, Raleigh, Richmond, Sacramento, Stockton, and Tucson, bringing total coverage to 27 metro areas..
Source: Wikipedia
Team assignment
You’ve been given a team project targeting current AP customers for a pre- holiday promotion encouraging shoppers to visit AmazonPrime for their holiday gift buying needs.
Your marketing manager requested your team analyze purchase data from the previous holiday season with data provided by American Express Cardholder Services. The data contains demographic , product, and spend amount data for your team to analyze and determine how best to solicit shoppers. Your team’s analysis will then be used to select 100,000 names from the AmazonPrime database as the marketing budget is not large enough to solicit everyone.
The data file provided contains:
- High-level demographic data (name, location, age, income, etc) for nearly 400 randomly selected customers.
2. Each record contains the product purchased and the amount spent to purchase that product
Requirements
As a team, analyze the dataset and segment these customers into distinct groups. Your segmentation scheme may combine any of the variables provided in the excel document.
Once complete, your team is required to present findings to the Chief Marketing Officer (me) for go/no-go approval. Your presentation must consist of the following:
1. A title page with team members listed
2. 1-3 slides profiling holiday shopping customer. Your research can come from any credible source such as Forrester, Adage, Adweek, eMarketer, NY Times, etc.
3. 1-3 slides on how you conducted your analysis; any techniques used such as cross-tabulations, logic counter variables, etc., to summarize the data
4. 1-3 slides on your segmentation scheme including high, medium, and low value cardholders
5. 1-3 slides on your marketing plan on how you will solicit the target audience via direct mail and email channels
6. 1-3 slides on the call-to-action(s); what actions are you asking the target audience to do; how will you get them to consider purchasing products at AmazonPrime.
- 1-3 slides on how you will monitor and measure the performance of the marketing plan.
- 1-3 slides on how you would calculate ROI for this promotion, based on assumptions in the below chart. Please also project your findings on a house file of 100,000 names. You may use the average spend by member for each of your segments to determine ROI.
