“Holy shit! That’s a lot of money!” said Lynn Blake, the Amazon executive in charge of books during the summer of 2000.
Blake was referring to the money Amazon lost on a Harry Potter promotion.
That summer, author J.K. Rowling released the 4th book in the Harry Potter series – Harry Potter and the Goblet of Fire. Amazon promised 40% discount on the book and express shipping to customers who placed an order the day the book was released. The promotion was very popular.
Amazon lost a few dollars on each of the 250,000 orders that were received that day.
This was exactly the kind of money losing tactic that Wall Street hated. And these were times when dot coms and Amazon in particular was hugely unpopular.
Amazon’s stock price had fallen from $107 to $32 that year.
Many were predicting Amazon’s end. Even Jeff Bezos’s executives were doubting him.
Amidst all this opposition, Bezos went ahead with the Harry Potter discount because he firmly believed it would create customer loyalty.
The promotion resulted in 700 positive stories for Amazon in the press. Delivery drivers were reporting stories of elated customers.
You don’t have to lose money to build customer loyalty.
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