Mark P. McDonaldThis week Amazon announced the availability of a version of its Kindle eBook software as a free download for the iPhone. What was Amazon thinking? After all its Kindle is the market leader for eBook readers and the company had just released a new version of the product a few weeks before.
Classic strategists and product managers must have rolled their eyes when they heard that Amazon was providing the same functionality for free on one of the most popular mobile phones as it was charging $325.00 for the Kindle reader. This move violates the rules of classic strategy as the company creates a substitute for its own product. Surely the free product will drive out the expensive one.
I doubt it; Amazon is a pretty smart company so there must be a good reason for this surprising move. I can think of a few. First, releasing a free reader immediately expands the number of potential Kindle readers by a few million. Everyone who has an iPhone 3G or an upgrade to the system is now a potential reader. If everyone bought just one book to try it out, then this is tens of millions in revenue to the company. It also associates Amazon with the Apple brand enhancing the value of both.
Personally I downloaded the software and bought Dan Simmons book “Drood” a two and a half pound novel of more than 770 pages about Charles Dickens. I figured that if I could enjoy this on the iPhone reader, then I could read just about anything. So far so good.
I am sure that others will not find reading a novel a Post-it note at a time as enjoyable, but they like the idea of not having to haul around physical book. This is the second audience for the iPhone reader. They are going after people who like the experience but not the form factor, in hopes that they will become Kindle buyers. The ability to view purchases on both systems insulates the buyer so there is no dead end.
Finally, I have to believe that people were working on cracking the DRM for the Kindle, or that Sony was making its own software available for the iPhone. In either case, this move pre-empts those attempts.
Amazon had already plumbed the traditional marketing strategy for the Kindle enlisting the endorsement of Oprah and her book club. With Jeff Bezos on the show, offering a discount all right before thanksgiving, Amazon was able to clear out its stock of Kindle v1 before Christmas and the release of the new product. So with that marketing effort done, they needed a different approach.
Amazon violated traditional strategy rules by releasing a ready substitute for its product at a price point that is hard to be. However, the value of the Kindle is not in the reader – that is an expensive razor. The real value for Amazon is in the books, magazines and newspapers – these are the razorblades.
The move not only gets Amazon free publicity and increases its addressable market; but also creates a low buy in for people to learn how to read eBooks. Is a small price to pay for giving customers that experience and educating the market on its offer. These are lessons for any company looking to introduce new technology and platforms into their offerings.
Another good move, one that illustrates the basis for competing based on a conversation and engaging the customer and market. It will be interesting to see how this plays out.
Do you have a Kindle? What is your experience
Have you tried the iPhone reader?
Interested in your thoughts?
Let me know if you are interested in my experience when I finish the book.
Category: Innovation Personal Observation Tags: Amazon, iPhone, Marketing, product innovation, Strategy
2 responses so far ↓
1 Tina Nunno March 16, 2009 at 4:36 pm
I did buy the Kindle. Since I do a lot of long haul travel, I thought it would be great to have for those flights on which multiple books are a pain to carry. I took the Kindle to South Africa last week and had a great experience with it.
Amazon had done a very good job of mimicking the experience of reading a book without all the extra weight. You can tell how far into a book you have read, place bookmarks, highlight and clip text. The electronic ink is easier on the eyes than if the screen were back-lit. The random graphics and pictures of authors that load while the device is in sleep mode are also oddly entertaining.
The audio function is experimental and not totally ready for prime time as you can’t adjust the speed and it definitely sounds robotic, but for reading the news in short bursts it may be useful.
The keyboard form factor is a bit off also – the QWERTY keyboard is too wide for thumbs, and too compact for fingers, but for the minimal functionality you’d use not too big an issue.
I agree with Mark that the free phone software for Kindle is primarily a marketing tactic, as reading on a phone could become tiresome after a while. That said, the Kindle device itself is set at a prohibitively high pricepoint. While in South Africa some CIO clients raised the inevitable comparison to the pricepoint of netbooks as their are priced similarly.
You have to ask yourself if you’d rather have $400 in books, or the device. if you buy enough ebooks, you get your ROI but it would take a little time. That said, the wireless download feature works extremely well – I downloaded two books in the airport while I was waiting for my flight. And I am planning to try the downloadable newspapers feature next.
It is important to note it does not work internationally in all countries yet. Although Amazon was advertizing the Kindle in South Africa while I was there, the wireless feature on mine wasn’t functional.
Overall though, I’m happy with my Kindle and being able to have a library with me when I travel and for times in between.
2 Katie Heupel March 19, 2009 at 2:01 pm
I think the Amazon move was genius!
They have redefined the Kindle from a hardware platform (ie, the Kindle as an eReader) to a content platform (ie, the Kindle network as a way to distribute reading materials).
Not only that, but:
• They are neutralizing their biggest threat (competing eReader apps on the iPhone).
• The cost to Amazon to make this extension is minimal – it’s just the cost to create the iPhone app. Apple doesn’t even get a cut – the app is free –Amazon is paid directly for the content.
• Like you said – they are greatly increasing their potential revenue streams via book sales, albeit at the cost of hardware sales
• They’re helping to offset any fears that Kindle owners have about their eBooks becoming orphaned, now that they work on multiple devices.
On top of all that, the iPhone extension is great for existing Kindle + iPhone owners – you can switch back and forth between devices and it remembers what page you left off on. That way, you can keep up with your book whether you’re in a traditional reading setting (ex, on a plane or at home with your Kindle) or simply stuck in line at the bank (when you’ll have your iPhone handy).
Looking forward to hearing whether you make it through the whole book and what you think of the experience!
Cheers,
Katie Heupel, Kellogg ’09 MBA
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