How do you decide the price of Amazon prime?
Amazon prime includes Amazon delivery, music, videos
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Amazon prime includes Amazon delivery, music, videos
in Strategy by (19 points) | 197 views

1 Answer

+1 vote

Here is how I would approach this problem:

1. Ask clarifying questions: What geography are we talking about here? 

Here, I am assuming that we are talking about India.

2. What is the product? The product, here, is Amazon Prime. It is a service that gives its users access to online content along with some extra facilities on the Amazon e-commerce platform. Some of the content is created by Amazon itself while most of it is being taken from other production houses.

3. What are the different pricing models? Pricing can be mainly done in three ways: Cost-based, Value-based and competitor-based.

  • Cost-based pricing model: For running this type of service, Amazon will require some content creators, developers, charges levied by other production houses, etc. Based on these costs, one can estimate the total cost incurred by Amazon in running this platform.
  • Value-based pricing model: The customer segment for the Amazon Prime would be middle-aged Indians belonging to middle-income or high-income classes. Some primary or secondary research can be conducted to gauge the willingness to pay for these customers.
  • Competitor-based pricing model: The main competitors for Amazon Prime would be Netflix and hotstar. Although Prime has an edge over them since it also provides e-commerce services along with OTT services. The prices charged by these competitors can be looked into to calculate our charges.
4. Give your recommendations: I would suggest that Amazon Prime should go through the pricing models of its competitors and then add some premium over it because of the extra e-commerce services.
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