Amazon Prime is something we have strongly considered purchasing for quite some time.  We originally got a free one-year subscription by joining the Amazon Mom program, but when that ran out, we reverted back to the Free Super Shipping option.  Giving away the one year for free is a great gimmick, because you really don’t know how much you appreciate it until you don’t have it anymore.

It’ just nice to be able to log in, order something, not really worry about whether your order totals $25, and have the item in two days (of course, you still have to be careful that the items are shipped by Amazon, as many third party resellers are not included in Prime).

mb-201201primeAs we’ve considered Prime, I’ve done some checking, and there seems to be more than a few people that believe that Amazon Prime membership is a joke, and that they simply charge Prime members a higher price by directing them to a higher cost version of their product.

I don’t have any specific examples to cite (simply because I don’t have the benefit of a Prime membership to search with), but I’ve seen similar numbers used as an example:

Person A without Prime searches on an item and the main result comes back at $19.99 from a third party seller.

Person B with Prime searches on an item and the main result comes back at $21.99, sold directly by Amazon.

At first glance, this appears that Amazon is charging Prime members more.

Oh, the outrage, right?

Wrong.

See, Amazon returns the results based on the lowest total cost to you.  And, what’s the difference between your two customers?

Shipping costs.

Amazon assumes that Person A, who doesn’t have Prime, will buy the item alone.  Since they don’t have Prime and wouldn’t qualify for any shipping cost exclusions, Amazon assumes that they will pay shipping regardless.  Assume, for the sake of argument, that the shipping cost by both Amazon direct and the third-party seller is $4.99.  The $21.99 version is sold by Amazon, but since Amazon believes that this customer will buy the item alone, they factor in the expected shipping cost.  Thus, the lowest cost item to the customer is the $19.99 third-party version, which added with the $4.99 shipping cost, totals $24.98, lower than the Amazon directly sold version, which would total $26.98.

But, why does the Prime member get the $21.99 version?  Simple.  Because for them, the version sold directly by Amazon will include free shipping, whereas the third party version for $19.99 would include shipping charges anyway.  Thus their ‘total cost’ on the Amazon directly sold version is $21.99, whereas it’s still going to be $24.98 for the third party sold version.

In other words: Amazon has provided both customers with the version that is cheapest to them based on the item pricing, expected shipping costs, and their membership status.

I know these examples don’t include ‘real’ numbers, but I’m 99% certain that this is the model that Amazon follows.  And, if so, there is no reason to think that Amazon is trying to charge a higher price for a Prime vs. non-Prime customer (or vice versa).  On the contrary, it seems that they’re doing their best to ensure that you get the lowest price possible given the circumstance.

Do you use Amazon Prime?  If so, do you think it saves you money in the long run?  Have you ever run into the different pricing structure as noted above?