Rafael Sosa’s Weblog

It is clear that Amazon has pushed its Kindle product aggressively and with the newly granted patent, they stand to control the market leader position for the near future, but how is Amazon to 1.) Compete against the invasion of tablets that has begun with the iPad and is expected to grow with many other companies like HP and Toshiba, when the Kindle’s price point is so similar to tablets, and 2.) Retain customer loyalty for its Kindle platform and become the default source for ebooks?

Here’s how I believe this could be achieved. First, I will talk about Kindle Credits – a way that can both promote an increase in sales and a higher likelihood of a customer opting to purchase a Kindle. Second, I will talk about Kindle’s Books for eBooks, a program that can be promoted as a way to increase customer’s loyalty on the Kindle product.

Kindle Credits
As explained above, tablet PCs, starting with Apple’s iPad are quickly becoming the new form of portable electronic media consumption. Amazon quickly launched Kindle for iPad, before that they had also launched Kindle for iPhone, but their dominance over the market of ebooks is more threatened when Amazon has to compete within a system like Apple’s iPad and iPhone, which have their own competing eBook stores. Ideally, Amazon will have the most control over the market if customers buy the actual Kindle hardware.

So, how do we get people to pay for a Kindle? Kindles have continued to go down in price, but at $189 for the cheapest model, they are still fairly close to tablets which  can do many other things. Aside from price, Kindle can offer the eInk technology and a much lighter and thinner device. Getting to the right price can be achieved with a loyalty promotion that I call Kindle Credits.

Kindle Credits are credits that go towards the purchase of the Kindle hardware with purchases made on Amazon. For example, every time a customer purchases a regular book through Amazon or an ebook, the customer would receive an email informing them that they have obtained 2 credits towards their purchase of a Kindle. Like the miles program, once they reach a certain number of credits, they get the Kindle for “free”. This serves two purposes – one, it serves as an incentive to buy more from Amazon, and second, it reduces the price barrier of the Kindle in a direct proportion to a customer’s commitment with Amazon.

Even though the Kindle can finally be purchased for “free”, it really wasn’t. The customer will have purchased several Amazon products in order to get the Kindle, and thus, it will value the Kindle – unlike other products which are not valued because they are given away. In fact, the Kindle Credits could, upon fine tuning the most effective form, be restricted to only giving credit for purchases of ebooks, which would serve as an anticipation of the Kindle hardware. This way, customers can be incentivized to buy Amazon ebooks, rather than Apple or other company’s ebooks, despite reading them on devices like the iPad. Then, after reaching the amount of credits needed for a free Kindle, they would have a risk free option of switching to the Kindle hardware and dumping the tablet way of reading.

Kindle Books for eBooks
This program is aimed towards solidifying even more the loyalty to Kindle by offering Kindle owners a program where they can ship their old physical books to Amazon, and they can get the eBook version in return. I have lived in several states and have spent considerable amounts of time in different countries. Yet, it is impossible for me to carry all those books, which I might want to read or reference to at a given point. Instead, they are left abandoned because of the hassle of carrying them. Those loved books can be saved forever and reached anywhere, striking into the very hearts of passionate readers who would love the idea of having a full library – their library at their fingertips always, everywhere. Furthermore, it serves as a much stronger bond to have your full library under the Kindle brand, than to just have a few ebooks purchased sitting there. Those old books will serve as a magnet for coming back and purchasing the new ones, because they are all part of their library.

Amazon could then leverage the current press attention to “green companies” and announce a recycling program with the returned books, or they could just funnel the books to the used books for sale channels. Either way, they can get a second benefit from the byproduct of the old physical books. They could also strike a deal with the publishers who are willing to engage in the switch in some form – maybe by giving Amazon a higher sales margin for those types of transactions, or another form of creative deal that would serve to reduce the initial cost of making the switch between physical to digital.