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Pricing the Kindle Fire
The Kindle Fire, priced at $199, is just 39% of the price of it's most well-entrenched and popular competitor the Apple iPad2, which sells for $499. Amazon has pursued a market penetration strategy with this product, looking to create a content consumption platform for the future. Apple argues that the iPad2 is a content creation and consumption platform. The price differential of $300 is steep to pay for content creation capability, which is one of the factors in Amazon being so successful with its pricing strategy. Apple could further refine this pricing strategy however and further expand the market.
Defining Kindle Fire Pricing Strategy
The initial pricing elasticity of products that have a high degree of innovation associated with them tend to be more unitary or highly elastic, as demand often outstrips supply of these types of devices (Antonelli, 1989). This factor in pricing...
Amazon enters into the middle of the tablet market Apple initially created with their Kindle Fire, pricing at a level that completely re-defines the demand curve, 39% of the price of the lowest-price Apple iPad2. Amazon is testing the market with this strategy and they need to be even more aggressive with the strategy they are pursuing to disrupt the demand curve for tablet devices.
Amazon needs to take the Kindle Fire down to $125, a 25% price point of the lowest-end Apple iPad2. Pricing 75% below the…
References
Antonelli, C. (1989). The diffusion of information technology and the demand for telecommunication services. Telecommunications Policy, 13(3), 255-255.
Dong-Qing, Y., & Liu, J.J. (2005). Competitive pricing of mixed retail and e-tail distribution channels. Omega, 33(3), 235-247.
Dudick, T.S. (1989). Pricing strategies for manufacturers. Strategic Finance, 71(5), 30-30.
Neelamegham, R., & Chintagunta, P.K. (2004). Modeling and forecasting the sales of technology products. Quantitative Marketing and Economics, 2(3), 195-195.
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