Amazon came out with their much talked about e-book reader – Kindle. The device is no doubt impressive, but it is $399. To place it one way, well if you can buy a music player for this much (remember iPod early days?), why not an e-book reader? This is fair, and yes, Kindle will get its share of early adopters. But what Amazon must be wanting is to get this reader in as many hands as possible so that it can build and sell its exclusive library of e-books. I think it will be really hard for the company to get deep penetration with the reader if it is sold with this price tag. So what are the alternatives?
Well one alternative is to subsidize the reader and sell it at a loss with the hope to make it up with e-book sales. This is a time tested strategy used by everyone from printer manufactures, betting on cartridges, to gaming console manufactures, developing market for the video games. Thought this might not work that well for Amazon, because Amazon is selling e-books for $9.99, and this includes royalty costs for the publisher/writer and transfer cost for the wireless service provider. So it is very much possible that the lion share of Amazon profits are coming from selling the Kindle hardware, and not the e-books.
But there is another, much compelling and hopefully much more successful alternative. That is to make Kindle adware-able. Adware is the growing source of subsidizing cost of many things online, be it news, search or communication applications. So why not an e-book reader? Kindle has wireless access powered by Whispernet (runs on Sprint network in USA, and by other cellphone providers globally as and when Amazon takes it to global markets.) Amazon uses this wireless access to download e-books, newspapers, and even wikipedia articles on customers’ Kindle device. At the same time, it is very much possible for it to download advertisements on the device. Amazon has an added benefit here. It can very well serve contextual or location based advertisements to make them more effective for the customers and compelling for the advertisers. I believe customers won’t mind seeing advertisements on bottom corner of their reading screen every ones in a while if they get the Kindle for substantially low price, or may be for free. Amazon can of course use its creativity to make ads as less obtrusive as possible.
Amazon can make this adware enabled Kindle optional. They can sell a premium version of the device for the existing price tag, which will have no ads, and sell an adware version of device for the ones willing to go for it. Even if Amazon is making its money just by selling the device, I believe it will be an incredible business opportunity for Amazon to try an adware based Kindle, as it will be a win-win for both the customers and the company.
When people enter a BMW (replace with your favorite car) showroom, what are they looking for? Are they looking for a car with a great performance and cool interior? Or a car with 5 years/40,000 miles warranty? Or something else? Well I think both, a great car and a top notch service, but that’s not all. Most of the time they are also looking to buy the experience, the experience of owning and driving this car. Many times, great product and service just do not make it lucrative enough for the customer, and that’s where experience kicks in. In a market where there are many choices available, you need to differentiate your offering from the competitors’, and one way to do that is by hooking an experience with your offering.
So what is this marketing experience? You can think of this as just another form of de-commoditization. It’s like you are still selling a product coupled with service, but you are packaging it as something more. Something virtual that adds value to your offering. There are several ways of marketing experience. One way is to attach a story to the product, something that the prospective customer can connect with. By doing this, the product creates a special place for itself in the hearts and minds of the customers, and when they finally go to buy it, they are buying that experience.
Yet another way is by adding a vibe to it, like in case of Trader Joe’s: a classic example of marketing experience. People shop at Trader Joe’s because they trust the quality of products they get at this place and they experience shopping at Trader Joe’s as shopping at a local store, a store that does not have that big chain kind of feeling. So here we are talking about a company with about 300 stores nationwide, a chain enterprise with the highest sales per square foot numbers (about $1300 to $1400, compared to industry average of $400 to $500) in its class and yet creating an experience of the local grocery store, which forms the base for its success. And to make it more firm, here’s the tagline of Trader Joe’s: Your Neighborhood Grocery Store. That’s what is marketing experience at its best.
Marketing Experience goes even further. Companies sell experience of working at their company to prospective employees. Business schools attract top talent by selling experience of studying and networking at their schools. The army and the marines sell the experience to get the best of the best to join the forces. Politicians sell a dream of an experience, an experience of a better tomorrow, to buy the votes. The list goes on and on.
The basic strategy is to put the product aside and concentrate on marketing the experience. The experience that can be only filled when your product comes in picture. If you are successful enough to make customers look for that experience, your product will automatically sell.
Change is inevitable. There is nothing that stays constant for ever. Things change, businesses change, markets evolve, customers move and to succeed in this continuously evolving world, you need to stick to only one constant, and that is change. Any entity, be it an individual, a group or a business needs to change with time to succeed. Businesses change and evolve in many ways, sometimes to lead a change in the industry and sometimes to adjust to the changing environment, sometimes using an experimentation approach and sometimes using a gradual approach, and at times even out of desperation to succeed.
One of the best examples of change, as described by Jim Collins in his book Good to Great, is the change in the retail industry led by Kroger in the early 1970s. Kroger understood and managed radical change in the way Americans wanted to shop, and changed the way Kroger stores sold goods to the people by shutting down its small stores and opening superstores. Kroger understood what customers wanted and gradually went on to replace all its small grocery stores into big superstores. This exemplifies the importance of change very well because during the same time, other grocery chains like A&P did not feel the importance and need to change and suffered major losses loosing most of their market share.
Another way change occurs is when companies explore different ways to sell their products to the customers. An example that comes to mind for this type of change is the change and development in the software industry. With the advent of Internet and increasing penetration of broadband connections, more and more software companies are operating like service companies providing services to customers by hosting their software and letting customers access it through the web. The change is making the world of software better in many ways like reducing the cost of the products for the end customers, better manageability of the software at central locations and faster evolution of the software over time. With more people spending more time on the Internet, and increased budget of ad money spent online, another change that has been seen in the software industry is the way companies make money. The software companies can now subsidize their services which they provide to the end customers with the help of targeted advertisements alongside their services.
Yet another way change occurs is in the way products are developed and owned by the companies. More and more companies are moving to a more open model of development as compared to the closed model with strict ownership. One of the most clear evidence of this change is the change in the way Apple operates and develops on its platform. A traditionally closed company Apple, even after striking gold with its end to end controlled platform of iPod, now plans to open up to let third party developers and individuals develop software on their iPhone framework.
There are lots and lots of examples of how companies drove change or adapted to change to succeed in the industry. At the same time, there are equal number of examples of times when companies refused to change and suffered in the long run. The success of any business largely depends on how well it manages change and sooner they move in the right direction to implement change, stronger it builds the foundation for success.