The Story Continues: Can Amazon’s Fire Phone Replicate the Kindle’s Success?
Can the Fire Phone replicate the success of Kindle? Or can it help boost sales of Amazon’s goods and digital content as it’s designed to? The Cheung Kong Graduate School of Business posed these questions to Pradeep Chintagunta, who has followed Amazon closely since its launch and explored the subject in a previous post. In an exclusive interview, Pradeep explains that the company didn’t adopt a marketing strategy that he thinks is a logical starting point to promote the Fire Phone. Pradeep goes on to share his views on what Amazon is trying to become as the company diversifies its businesses across various sectors.
Q: The Kindle was phenomenally successful in transforming how a product is consumed. Do you think that the new Fire Phone can rise up to the challenge of the same success?
Pradeep: I think the Fire phone is entering a category at a very different time than when Kindle did. When the Kindle entered the market, the only e-reader that was available was the Sony PRS, which had been around for a long time before then. But Sony wasn’t really doing much in terms of pushing that platform forward, partly because it didn’t have that kind of ecosystem that Amazon had access to. The ecosystem that Amazon had access to was all these sellers of books and magazines that were trying to market on the Amazon even prior to the launch of the Kindle. So when they were able to come up with a Kindle, they were able to combine the benefits of the hardware with the ecosystem that they had access to, to then provide some value to the end customer.
In Sony’s case, the best that they could provide was a limited selection of books for which they could get copyright that consumers could then download onto their readers, which essentially gave them a limited amount of access to material and content, which is so important for people to want to continue using a device like that.
Now with the Fire Phone, I think Amazon is entering at a much later point in the lifecycle. Cell phones are well established and furthermore, the category of the smartphone itself seems to be maturing at this point. Entering at this point of the lifecycle I think is going to be a lot more challenging for Amazon, because they have to provide a value proposition which will tell the customers that they should now switch from the existing smartphones to the new Fire Phone. It’s not clear whether the value proposition that’s available is going to be adequate to overcome the current favorite smartphones that customers have. I think conditional on having a phone, is it is going to be useful. I absolutely think that is the case. Because what they can then do through the technology embedded in the phone is that they can bring the store to the customer. So the customer who wants to be engaged in routine shopping can do that if they want.
But that is only conditional on you having the phone. The key challenge for them is going to be how to get the phone in the hand of the customer.
My initial expectation was that they would discount the phone heavily for their current customers who were already on the Prime service (Note: Amazon Prime is a premium membership service available in select countries which offers free two-day shipping for a flat annual fee and discounted one-day shipping rates; it also offers exclusive benefits in streaming video and music). [That’s] because there are a lot of benefits that Prime customers get, which might make it worthwhile for them to use the phone for a lot of other things which they might end up doing. So my initial thought was maybe they will somehow combine the phone with the Prime service to then provide a bundle to their prime customers to make it more attractive for them to shop to a greater extent on Amazon. But that is not what they ended up doing. I think the jury is still out as to how successful this is going to be.
by Major Tian, CKGSB Knowledge