Amazon Enters the Tablet War for Real, and at $199

As expected, Amazon this week launched a new media tablet, the Kindle Fire, at a $199 price point. This immediately started the debate about whether the Kindle Fire was an iPad killer. Indeed, this debate overshadowed the overhaul of the entire Kindle line up, which now starts at just $79. These devices are less portable computer and more media tablet, integrated tightly with Amazon’s book, movie, and music content.

From a pricing perspective, Amazon has done a nice job of filling various nitches, from the $79 basic Kindle (with ads–oh, sorry “Special Offers”, $109 without), to the $99 Kindle Touch (with ads, $139 without), to the $149/$189 Kindle Touch 3G and the $199 Kindle Fire. $99 and $199 are “magic” price points, that tend to increase adoption of electronics devices faster than slightly higher price points.

So is the Kindle Fire an iPad killer?

First, it’s worth noting that Amazon has already had a lot of success with the Kindle as an ebook reader. They are committed to this market, unlike some other entrants. They have great content to provide a compelling experience, and can take advantage of their cloud storage expertise to sync everything to the cloud, while saving costs by only providing 8GB of onboard storage (they do have a USB port). And for people who mainly want to consume media on this device, the price is compelling. (Note that for reading, the black and white Kindle’s are far superior to the more expensive color screens on the Fire and the iPad, both on the eyes and on the battery.) Much of the rest of the Fire experience will depend on the depth and quality of the applications available, an area where Apple has a huge lead. Apple also provides more storage, camera(s), and microphone– so if you want to make voice or video calls, the Kindle is not for you.

There are all kinds of feature/benefit comparisons you can do to find out which device, or any, would be better for you. But the pricing and user experience differences are born of the companies’ different approaches. Apple makes money from selling devices, and they have a huge software and media ecosystem around that to provide a good experience (and which now makes what most companies would consider a good deal of money). Amazon makes money from people buying content, and they sell devices as a means to encourage content purchases. Indeed, it is thought that Amazon is losing money on each Kindle Fire sold. What is right for one company may not be right for another. Both Apple and Amazon do a great job crafting a pleasant (valuable) user experience, and they price to their target market. While there is considerable overlap, there’s also a lot of differentiation (and a lot of people who already have both an iPad and a Kindle).

To draw lessons to apply to your business, you don’t have to attack another offer head-on. Take what your customers will care about and design the experience and the price around that. Amazon has done that, and that’s why their tablet effort will be much more successful than more traditional electronics manufacturers who simply tried to copy the iPad while adding a few more features or charging less money.

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