Answer to Pricing Puzzle: Pricing iPad and Kindle 3G vs. Wifi

This is a short argument probably does not need a post of its own.

Let us set side 3G vs. 4G. The radio parts used for over the air data connection are exactly the same for both iPad 3G and Kindle 3G. Both Amazon and Apple have purchasing power to get the same low price from the suppliers. So why then there is price difference?

Start with the customer. Those who buy iPad and those buy regular Kindle (not Fire) are doing so for different reasons. Once they decided to buy one or the other, the choice of 3G or not is the next level decision.

For those who chose iPad, the value of 3G is everywhere connectivity with access to all the streaming, tweeting, pinning etc. Besides they are already primed by the high anchoring set by iPad price. Apple priced to align with value delivered to customers.

For those who chose Kindle, the value of 3G is limited, just buy books on the go. In fact it helps Amazon as much as it helps the reader. So Amazon priced it to align price with value delivered to its customers.

When Kindle Fire 3G arrives, it will  be priced more than $50 difference we see for Kindle 3G but less than $129 Apple charges because of the low reference price set by Amazon both with its Kindle Fire price and the Kindle 3G price.

The question you should be asking is, “why are so many of us willingly pay $129 for radio parts that cost so little?”

2 thoughts on “Answer to Pricing Puzzle: Pricing iPad and Kindle 3G vs. Wifi

  1. Rags,

    The iPad also requires a monthly data plan, which would indicate that these buyers are much less sensitive to the price. The Kindle 3G is a one time fee.

    I completely agree that this fee is not a cost plus markup.

    Anthony

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