This 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.
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