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Will Amazon lose customers by raising Prime prices? Netflix and McDonald’s may hold the answer. | The Washington Post

Hard-wired into the DNA of companies of all kinds is a fear of losing customers with even the slightest uptick in prices.

Netflix watchers and McDonald’s eaters appeared undeterred by the rise in subscription and menu costs over the past seven months, with both companies reporting strong sales growth in the first quarter.

That might be good news for Amazon.com, which is hoping not to stall its own blockbuster growth with a recently announced price increase. The retail giant announced its profits more than doubled, to $1.6 billion, in the most recent quarter. It also revealed a long-held secret and subject of great speculation — that its Prime subscriptions had hit 100 million. (Amazon CEO Jeffrey P. Bezos owns The Washington Post.)

Yet the fanfare came with a rub: The price of a Prime membership will increase 20 percent, to $119 per year.

And so, with Netflix’s and McDonald’s fortunes soaring despite steeper prices, Amazon may be the next big test of whether consumers who are already stretching their pocketbooks will open them even wider.

“In general, people are sensitive to losses, and price increases count as losses psychologically,” said Ryan Hamilton, an associate professor of marketing at Emory University’s Goizueta Business School. “The broader perspective, though, is that people tend to be willing to pay for what they perceive as value.”

In October, Netflix raised the prices of its subscription streaming services, charging $1 more per month for its standard package (from $9.99 to $10.99) and $2 more per month (from $11.99 to $13.99) for premium access. In its first quarter, Netflix hit 125 million members.

McDonald’s has shaken up some of its menu prices. In January the chain debuted its $1 $2 $3 Dollar Menu. Some U.S. franchisees worried the revamped value option would drive down the price of checks overall, but the new Dollar Menu instead helped fuel the company’s 11th consecutive quarter of positive sales growth — along with edged-up prices for premium sandwiches.

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Will Amazon lose customers by raising Prime prices? Netflix and McDonald’s may hold the answer. – The Washington Post.