Why would Amazon.com Inc. (NASDAQ: AMZN) have the equivalent of a flash sale for its Kindle e-reader, offering potential customers a price cut from $79.99 to $59.99? Business school professors would have several theories.
Amazon’s new offer: a “last chance” to get the Kindle E-reader, six-inch glare-free touchscreen display Wi-Fi product at a 25% discount. And the deal includes free shipping. Analysts have questioned whether Amazon makes money on the Kindle or it is instead a traditional loss leader.
A number of upsells for the cheap Kindle are in the promotion package. Some of them hint at extra revenue Amazon can bring in from its marketing:
- Easy on your eyes–touchscreen display that reads like real paper
- No screen glare, even in bright sunlight
- Single battery charge lasts weeks
- Lighter than a paperback, holds thousands of books
- Try Kindle Unlimited free for 30 days–choose from over 1 million titles
- Kindle doesn’t distract you with social media, emails, and text messages
- Massive selection, lowest prices – over a million titles at $2.99 or less
Amazon’s sale of e-books is a major source of revenue. The promotion offers two gateways to the sales of these products — free books and cheap books.
The presumption is that Amazon can sell Kindle accessories like covers, plug adapters and outside batteries. These likely have markups above what Amazon pays for them. The cheap Kindle is also a means to sell Kindle Unlimited, which offers permanent access to Amazon’s huge e-book library and audio books. This service carries a price of $9.99 a month, after a free month to try it. A traditional upsell: first offer something that costs little for the company to provide, then follow with an aggressive effort to turn these trials into memberships.
Amazon has at least one other reason for the discounted Kindle. The process of buying it takes customers to the Amazon.com site, and the millions of products and services are sold there. Some of the customers who buy the cheap Kindle will shop at Amazon. The loss leader programs works in these cases.
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