Friday, December 13, 2013

Study Suggests Amazon Kindle Strategy Works

Amazon and Apple are mirror images in terms of how the roles content, transactions and devices play in their respective revenue models. Apple mostly cares about content because it helps Apple sell more devices.

Amazon mostly cares about devices because devices help Amazon sell more content and products.

A study by Consumer Intelligence Research Partners suggests Amazon’s sale of devices a bit above cost actually works.
CIRP conducted a survey of 300 customers over the three months leading up to Nov. 15, 2013,  and foundthat people who own Kindles spend more on Amazon than those who don’t own Kindles.

The size of the revenue difference is key. CIRP estimates that Kindle owners spend $1,233 per year on Amazon compared to $790 per year for Amazon shoppers who don’t own an Amazon e-reader or tablet.

Apparently, the pattern is that Kindle owners place many more small orders. If you assume that is because they are buying content, that makes sense.

It appears Jeff Bezos, Amazon CEO, was right. Kindles are sales platforms, and seeding the market by selling at only a bit above cost does stimulate sales at levels that justify the practice.

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