In the NYTimes article on Kindle, Mr. Russ Grandinetti, Amazon’s vice president for Kindle content make his case for Kindle thusly,
“If I’m going on a 10-mile run,” he says, “I want a really well-designed pair of running shoes instead of Converse high-tops.”
Another example is cameras.“As good as the technology in my phone camera is, when my son has his third birthday party, I’ll use my 35mm S.L.R.,”
Both are valid examples but do not apply to the case of Kindle. A specialized, really well designed pair of running shoes is a premium product, targeting a small segment and is offered at premium priced. Same goes for a premium SLR camera. The one thing that Kindle does really well is not marketed as a premium feature and is definitely not priced as such. Kindle isn’t the only single task device either – it is competing in a crowded field of eBook readers all using the same technology (and even the same manufacturer).
There are two types of specialized single task devices that appeal to different customer segments that are willing to trade-off price for benefits from these devices (you can find the segments and the trade-off function using Conjoint analysis):
- One that does the task extremely well and appeals only to a small segment that value the benefits more than they value the frills and hence are willing to pay a price premium for it. It stands relatively alone in its category and is not easily copyable. It adds little or no value to the rest of segments.
- One that does the task extremely well but nothing else but is so inexpensive that customers do not mind buying them (like a mobile phone that can only make calls – not even SMS, alarms , camera etc) and do not mind losing them. These are like the dedicated sudoku gaming devices you pick up at Walgreens checkout counter while you are waiting to fill prescription.
Amazon’s CEO, Mr. Bezos stated that Kindle is a dedicated device for avid readers, 10% of the total market. But with the release of $139 Kindle their focus has shifted to making it a mass market device – to make people not think twice to buy Kindle and even make them buy one for each family member. That is not the sign of a premium device, the way it is priced now Kindle resembles the second category.
My hypothesis is, despite selling out Kindle at current prices, we have not seen the last of price cuts before the Holidays.