Kindle Fire Marketing Strategy: Amazon’s Big Bet
- On Tuesday, the Kindle Fire will hit store shelves and became available for purchase online. Already, many are saying the tablet will give the iPad 2 a run for its money and perhaps break tablet sales records. (when the Fire became available for pre-order back in October, MSNBC reported that Amazon was selling 50,000 of the tablets per day, more than the iPad and iPad 2 over the same sales period)
- Dissimilar from previous tablet market entrants (HP, Motorola, Samsung, Research in Motion, Acer, Dell), Amazon’s Kindle Fire marketing strategy focuses on price as opposed to performance and/or functionality. In fact, the Kindle Fire is actually designed to be a multimedia consumption device as opposed to a multimedia creation and consumption device like its predecessors. The Kindle Fire does not have a webcam, large storage options, or mobile network connection capacity, but it is considerably less expensive than its peer products at $199 per a unit and is positioned as a handheld multimedia consumption device for the masses. Despite having limited computing and memory resources built into the device relative to its peer products, the Kindle Fire leverages processing resources and cache storage capacity in the Amazon EC2 Cloud to power part of its new Silk browser functionality and enable the system to reach higher performance levels when streaming content.
What is so intriguing about the Kindle Fire marketing strategy?
What’s intriguing is that Amazon is not actually aiming to profit from tablet device sales (at least early-on); rather, it is using the Kindle Fire as a means to develop a new sales channel for its e-commerce business and platform to facilitate the growth and dominance of its content and cloud computing services. Amazon is selling the Kindle Fire at an estimated $10 to $20 loss per a unit to encourage tablet adoption by the less affluent segments of the population, as they believe this will increase their content consumption and encourage more online purchasing and drive demand for their Prime services and e-commerce business. Amazon is betting that pre-loading their content service apps on the device and optimizing the device for Amazon’s e-commerce business and multimedia services will increase its market share among users in these categories and offset the cost of subsidizing the Kindle Fire sales.
Rather than restrict the Kindle Fire to only Amazon services, Amazon decided to open its own app store that will offer competitor content services like Pandora and Netflix with the hope that it will encourage more wide-spread adoption of its device. However, Amazon is taking the Apple approach to its app store and requiring all applications to go through a rigorous review process before they are approved for distribution on the Amazon App Market.
If Jeff Bezos and Amazon’s senior management team are correct (which early anecdotal evidence would suggest), the Kindle Fire marketing strategy could be a huge success. However, if they are, in the long run, wrong in this bet, then Amazon’s margins could suffer from this bet for several years to come.
If you are interested in reading more about the Kindle Fire, I recommend reading IDC’s article on how the Kindle Fire could shake up the tablet market. Similarly, if you are interested in reading more about other tech company marketing strategies, I also recommend reading my colleague Tien Anh Nguyen’s blog post on Apple’s Marketing Strategy.