Who is Integrated Strategies?

November 19, 2007

Evaluating A Product Release

Amazon.com just came out with a new device called the "AmazonKindle." The device is supposed to be the iPod of books but I really have to wonder about the thought process that went into the design and price structure of the Kindle. The $399 price tag can be justifiable if the baseline content and overall technology is at a very high level. Technically speaking, everything is there: long battery life, free wireless connection, high capacity storage (several hundred books if you use an SD card) and no back light. Unfortunately the content doesn't seem to match the cost.

There is very little free content for the device. From my first look it appears like you can get wikipedia.org for free and a built-in dictionary. You can't even read blogs on the Kindle for free. It doesn't come with any partner content for free. The Wall Street Journal costs $9.99 per month. Sure that's less than actually buying a hard copy of the paper everyday, but you would think they could have partnered with CNN.com or any other other free online news papers for free content.

Even the books aren't cheap. The Nine: Inside the Secret World of the Supreme Court has a print cost of $27.97. Amazon sells it for $16.77 and advertises it for $9.99 on Kindle and say that it is a 60% savings! I'm not great at math, but it seems to me that it is less than 50%. Closer to about 40%. A public domain book costs $1.99. This is what is driving many of the reviews I've read today regarding this product. Amazon seems to be using two pricing structures at the same time which turns people off quickly.

This isn't a review of Kindle or whether it is a good/bad/indifferent product. This is about the importance of factoring in the on-going consumer costs versus the alternatives. You have to have a really special product to charge for something consumers can get free somewhere else in the same or better quality. If the initial cost was lower or the on-going costs were lower I believe there would be less initial negative reaction to the product on the review pages. Those review pages will affect whether many people buy the product or not. If you are launching an innovative product to the mass public and currently has no competition, you sure had better get some good reviews and not alienate many people right out of the gate.

Products like this typically come about from a completely internal development process with unconnected decision makers. They probably tested the product extensively with consumers but do you think they tested the price structure simultaneously? A product is only as good as its cost/value ratio to individual consumers. How do you test products before release? What differences are there between your successful releases and products that didn't do well? Do you anticipate negative reviews and have a strategy for dealing with them if they occur?

I doubt that Amazon predicted the reactions to the Kindle. They probably do not consider the iPod a direct competitor for this product. Consumers seem to be thinking that it is. They want more features and they want to put anything they want onto it, not just Amazon provided material. Why shouldn't the Kindle have a built-in web browser? Why should consumers be forced to pay for content that has never had a price before (public domain books and blogs). Dealing with unexpected reactions to a product is an important part of development. Make sure you anticipate all of the possibilities surrounding your release.

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