Interesting news emerges from the US, where Amazon has decided to release a lower priced Kindle. The base model wi-fi only Kindle was $139, but Amazon is now retailing a $114 version which comes “with Special Offers”. That effectively means GroupOn style one-off discounts and other advertising messages.
A couple of things occur to me:
- The people who haven’t yet bought a Kindle, and to whom this is undoubtedly aimed at, aren’t necessarily the most desired group by advertisers. These are people to whom price matters a great deal. The near-$100 price point drags them into the market
- Amazon is effectively telling consumers what their value is to advertisers. It’s the difference between the two price points plus some admin costs. Do you feel good or bad knowing you’re worth $25?
- Is the pricing point right?
I’ll go into that third point a little more. Most of us are now aware of the freemium model, where you perhaps download a programme or application for your mobile that offers a modest set of features and perhaps some advertising. If you pay for the premium application or programme, the advertising disappears and you get additional functionality. Spotify is a prime example of this.
But in those instances, you first tend to come across the free model, and then determine whether the increase in price is worthwhile to you.
Amazon is doing the reverse. The price of the Kindle has been established. Now you’re getting a discount in return for advertising. But I’m not sure that the discount is steep enough. Irrespective of whether consumers think that they’re being valued at $25 (point two above), I’m just not sure that the $114 price is attractive enough. Surely $99 would have made sense?
It must be said that by starting out at $114, Amazon leaves itself the ability to continue lowering the price of it’s ad-supported model, but I’m not sure how many consumers are ready to jump.
I’m not an expert in the psychology of pricing – an area that is very interesting – but it would seem to me that if I was fresh in the market for an eBook reader and had the choice fo the $114 and $139 model, I might well end up getting the more expensive model since the price differential was not great, and the value to me would be worth the removal of a potential irritance in advertising.
Of course there might be a handful of consumers who see it as an overall positive that they get both a cheaper Kindle and lots of great targeted offers. But I think it’s fair to imagine that they’re in the minority.
Anyway, in the UK this is all a moot point, since the deal has yet to be replicated over here. And in any case, I’m not remotely convinced that eBook readers are right for me.