Methodology
In the process of analyzing and solving this Kindle's case, both quantitative and qualitative data are used. On the quantitative side, data about publishing industry and e-reader market share and sales figures were collected from the internet and from the provided academic documentation.
The qualitative side was based on the internet, provided academic documentation, and the arguments from analysts.
Findings
Defects of Reading Device
Even though Kindle has been one of the best devices for readers, some defects have negative impacts for Kindle to maintain its market share.
Since Kindle was launched, one of its selling points is e-ink screen, which mimic the real book and can read on the sunshine without uncomfortable glare. However, this kind of white-black screen probably cannot display color pages and pictures which make some magazine lovers back to the traditional magazines, and business people to tablets, such as iPad when they need colorful graph to show their business models.
Moreover, some out-of-dated functions make Kindle inflexible to operate. The latest Kindles still do not have touch ability. Users can not turn over the page and take note on the Kindle just like they do when reading paper books. Without backlight in the Kindle, reading e-books in the Kindle in dark is impossible. By contrast, Sony e-readers and Apple’s iPad have touch screen and also allowing users reading books at night. Apart from that, to fashion its products, voice is added into Kindle. Unfortunately, those voices are electronic sound, having odd peculiar inflections and pronunciations and incapable of expressing emotion. Furthermore, tablets such as iPad and some cell phones have multi-function which not only can be used as an e-reader, but also allow users browse websites, watch Videos, send emails so on so forth, whereas the functions of Kindle is limited, which probably only can be used to read black words.
The Functions of Each Device
Source: Wikipedia
In addition, Companies are swarming forward to invest new technology, requiring Amazon Kindle to quick its development pace. Plastic Logic, first developed a plastic display which almost as thin and light as a paper and break resistance. In 2010, it launched its QUE proReader, which weighs less than a pound, as comfortable to hold as a pad of paper, yet features much larger shatterproof touch screen than many e-readers. LG from South Korean is devoting in solar-powered e-reader, A Dutch company Aquavista is trying to create a new kind of e-reader screen---color e-ink display. Facing the development and innovation of technology, the position of Amazon’s Kindle would be threatened if there are no measures to maintain its competitive advantages.
Consumer Awareness and Purchase Intent
Although Kindle takes the biggest market share in e-reader market, people have a plenty of other choices to read books.
There is a survey made by Forrester Research about online consumers’ awareness, purchase intent, and ownership of Apple iPad, Amazon Kindle, Barnes & Noble Nook and Sony Readers in the US e-reader market (Gelles, 2010).
It can be seen from the graph that 25 per cent of respondents never heard of Kindle. Among people who had heard about Kindle, the percentage of people who had intent to buy it is less than 15. The purchase intent of buying a Kindle is lower than to buy e-readers (regardless of brand) and iPad.
Amazon.com CEO Jeff Bezos said on annual shareholders meeting in 2009 that advertising is the price you pay for having an unremarkable product or service (James, 2009). This reveals the attitude of the managers towards the promotion. However, 25 per cent of consumer unawareness shows there may be some problems.
Problems with Pricing E-books
There are more than 670,000 books, newspapers, magazines and blogs, most of which are sold in a lesser price than printed versions by Amazon and their counterparts’ e-books. One of their price policies is all the best sellers are sold in a uniform $9.99, especially when that price is at a discount to the physical alternative. This Amazon’s strategy aims to attract the customers more to the site, buy more books and buy more Kindle.
However, Apple with iPad and iBook store have become obstacles for Amazon. In June 2010, Apple was coming to the market with a new model of pricing by allowing publishers to have more control over their prices. This opposing model, which is more preferable by the publisher since they want to keep the list price of e-books higher in order to protect the sale of physical books, is the “agency model” that treats Amazon not as a wholesaler but merely a sales force (Magee, 2010) .The publisher sets the prices, and Amazon takes a 30% commission of whatever that price is. In January Macmillan was demanding that Amazon sell its eBooks for $14.99, and News Corp's Rupert Murdoch was making similar grumblings about HarperCollins. As a result, Amazon and MacMillan could not reach an agreement and since then there were no more MacMillan’s books on Amazon’s site. So simply by allowing a $14.99 price for those books for the iPad and iBook store, Steve Jobs wanted to destroy Amazon's $9.99 price advantage (Schonfield, 2010). With Amazon, its ability is to lower prices and to compete on Price, Selection & Convenience. If Amazon is forced to do away with $9.99 pricing on all best-sellers, it will be less able to compete effectively with other eBook retailers.
Recommendations
Cooperating with Technology Companies
The functions of Amazon’s Kindle has some defects and they need to be improved There have been many e-readers which can provide better reading experiences for kindle content. It is better for Kindle to cooperate with other companies to develop e-readers, rather than research itself.
According annual report 2009 of Amazon, the management have never designed or built hardware devices before design and launch Kindle. However, the requirement of their long-term vision did not allow for hard line of demarcation between Kindle the device and Kindle service—the two had to blend together seamlessly, so they hire a number of hardware engineers to go start learning a new institutional skill to better serve readers. These years, their business is rapidly evolving and intensely competitive. Their competitors, such as Apple, Sony, may devote more resources to technology. As an e-commercial company, Amazon may have limited experience in technology segments. Their customers may consistently find the defects of their products when competitors launch new one.
Moreover, a significant portion of their expenses and investment is fixed, and they may not be able to adjust their spending quickly. They have invested a large percentage into their technology and content fields which is 1,033 million in 2008 of a total 3,428 million. Further invest into technology innovation would be a burden for their future development, considering that new and enhanced technologies, including search, web services and digital, may increase their competition.
In addition, the internet facilitates competitive entry and comparison shopping and renders e-commerce inherently more competitive than other retail. They need to invest in more important areas of technology and content including seller platforms, web services, digital initiatives, and expansion of new and existing product categories, as well as technology infrastructure so that they can enhance the customer experience, improve their process efficiency and support their infrastructure web services.
Rising Awareness and Purchasing Intent
From the findings we can see the purchase intent of Kindle should be improved. The purchase intent can be influenced by several factors.
One of the factors is awareness. People have to know of this product first, and then there are possibilities for them to buy it. Amazon can increase consumer awareness of Kindle by advertising campaign and PR events. For example, people who travel a lot are more likely to buy an e-reader because it is easy to carry. So there can be some attracting advertisements on the vehicles, like buses, trains, which are precisely aim at this group of people. They can also invite famous writers to use their products and make positive comments on the products. By doing these it might improve the awareness of people potential customers.
Another factor is price. Although Kindle gets plenty of attention, the e-book reader is still a niche device. This situation will change if the devices become cheaper. According to a survey on “Which three of the following features would most likely cause you to consider purchasing an e-book reader”, the main three reasons are cheaper devices, cheaper content and hands-on experiences (Forrester, 2009). So the price is the most important thing to potential customers. Furthermore, according to another report surveyed 4,706 US consumers in an online survey to find out what value they place on e-reader devices (Epps, 2009). What they found was that the price points for how most consumers value e-readers is low--for most segments, between $50 and $99. Currently, the lowest price of Kindle 3 is $139, which is already lower than $399 of Kindle 1. If Kindle wants to attract more people, the price has to be much lower.
Pursuing $9.99 Pricing Policy
After the withholding of MacMillan, luckily there is not any withhold from others publisher. The main point is that customers always looking for product with the reasonable price. When choosing book with different range of price but the same content, obviously, customers will chose the cheaper one. The fact is that e-books sales in Amazon were not affected by MacMillan issue. “Now the company has hit a more significant milestone, selling 143 e-books for every 100 hardcover books sold over the course of the second quarter. The rate is accelerating: For the past month, Amazon sold 180 e-books for every 100 hard covers, and it sold three times as many e-books in the first six months of this year as it did in the first half of 2009” (Twedney, 2010). It is highly recommend that Amazon remain this pricing policy so that it can keep and even attract more customers to its site. Amazon should also keep good relationship with publishing houses by offer better publisher/retailer split than its counterparts or make an effort in promoting not only e-books but also the hard covers. Lastly, Amazon should try to avoid the sudden decision to stop selling books from any other Publisher like what they had done with MacMillan. It had the bad effect on customers’ satisfaction on Amazon’s service. It may be better to be keen on negotiating and having a final deal that is good for both the company and the publisher.
References
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