Dash Buttons are cute little stick-on gadgets that let you reorder a product at the simple push of a button. For example, Amazon envisions a Tide button right on your washer, extending the Internet Of Things (IOT) to things that aren’t yet Internet-enabled.
Amazon Dash Button is all about the data, not just the repeat purchase.
The Dash Button makes the registered Amazon Prime user known and contactable to the CPG and Amazon. This allows them to deploy a Customer Relationship Management (CRM) based marketing and promotion model through the Amazon app which is paired with the Dash Button. What the Apple Watch is to the iPhone, Dash Buttons are to the Amazon mobile app.
They know who you are and that you have a Dash Button for this brand installed on an identifiable IP address for your home WiFi. Think NEST and Google.
This is huge for consumer packaged goods (CPGs) and Amazon and is another very disruptive move for displacing in-store sales for the higher value repeat purchases. We refer to this phenomenon as nibbling. Grocers are already up in arms over Amazon’s nibbles at the most valuable, higher margin repeat purchase items, reducing the average basket size of the physical in-store purchase.
Dash Buttons are like paper coupons that are always present at the moment of need, never need to be clipped or carried to the store, promoting one particular brand.
Amazon has roughly 220 million customers with registered payment credentials. About 10% of these customers are also Amazon Prime subscribers that could activate Amazon Dash Buy Buttons. Through the magic of WiFi, the button signals a replenishment order through the Amazon app on your smartphone.
This is paid for and promoted by the CPGs, manufacturers and brands. CPGs lack a direct connection with customers, typically insulated from their customers by the retail distribution structure. They’re hoping that with this instant reorder button, you will never consider a competing brand again. But Amazon Dash Buttons also give the sponsoring CPGs (and Amazon for their private label brands) very personal stats on your usage volume and frequency, and a forward view to your brand loyalty and intent to buy.
Amazon is using a very interesting launch strategy by charging for Dash buttons and having the CPGs reimburse the customer for the cost of the device with first purchase. You get the credit after you have activated, installed and pushed the button to make a purchase. This disjointed delayed gratification incentive structure, along with their single brand item focus, is slowing the uptake of the Dash Buttons.
We etimate Amazon has distributed fewer than 100,000 Dash units since launch, with less than about a third of them actually being activated. No activation, no button depression, no refund for the button.
Dash buttons are placeholder interim technology. The ultimate service will be driven by shopping list applications integrated with cloud-based neural networks and predictive analytics like the Amazon Mom membership program. Attracting new mothers with 20% off diapers, Amazon Mom anticipates and ships discounted baby supplies at regular intervals matched to the baby’s growth and development. Services like Amazon Mom are the driver behind the biggest impact of nibbling and have reduced in-store purchases and average basket size by as much as 5% to 10% for some retail grocers.
In addition to Amazon Mom, other mobile shopping list apps like Out-of-Milk, etc. will provide the prompts to your smartphone to make the purchases in advance of depletion. The Amazon Dash button will provide the vital data needed to customize your replenishment cycles for frequently purchased household goods, but again the button is just a stepping stone. The shopping list app or subscription service such as Amazon Mom will power this market.
For this reason, Dash buttons are projected to appeal to a very small segment of the Prime membership, but play a vital role in developing the predictive analytics-based shopping list apps that will power mobile buying in the future. Amazon Dash buttons will not have a material impact on incremental sales any time soon, but could greatly improve the effectiveness of Amazon’s predictive analytics for its growing number of subscription programs such as Amazon Mom, Amazon Student, Amazon @Your University, and more to come.
As Amazon starts building the entire shopping list for automatic replenishment, it will start to move the needle for increasing sales, potentially subsuming the act of payment in pantry-restocking as Uber does today in ride sharing. Controlling the shopping list app has the potential of increasing the average spend by 20% as it can drive “one more visit” vs. a Dash buy button that drives only “one more item.”
Amazon (and others) could even distribute this capability through buy buttons at the brand and CPG level embedded inside mobile wallets. It will be a whole new form of loyalty-based pre-purchase promotions. CPGs rely on post-purchase coupons today to promote their products. In a mobile wallet, consumers will be provided a CPG-based product-level buy button, given the options to have it shipped, or credited to their checkout at the physical store.
This will enable a whole new category of private label prepaid at the CPG or brand level, not just at the retailer level. In this scenario, the mobile wallet issuer will be compensated in the same way a store today is compensated for selling the product in the first place. Very disruptive technology to the existing retail stakeholders, as the mobile wallet puts the CPGs in direct CRM contact with their end user consumers, making them known and contactable. This option will drive new promotional models for CPGs and net new revenue streams for the purveyors of mobile wallets. We estimate that this will be worth at least $300 per year per active mobile wallet user.
In five years the Dash buttons won’t even exist, but like pet rocks and pictures on your refrigerator, they will live on as a reminder of the past.
Richard Crone and Heidi Liebenguth lead Crone Consulting, LLC, an independent advisory firm specializing in mobile strategy and payments.
