Amazon.com, Barnes & Noble Cut E-Book Reader Prices (BusinessWeek)
Amazon’s quick response to Barnes & Noble’s price cut for its electronic book reader seems to conflict with what many believe should happen to products in a growth market. As discussed in the Planning with the Product Life Cycle tutorial, marketing strategy suggests that, in a growing market, early entrants should be able to charge higher prices as long as strong demand exists for a product.
E-book readers moved from the Introduction stage to the Growth stage of the PLC with the release of the Amazon Kindle in 2007. This product category has expanded rapidly and continues to grow. If a company in this market follows the strict teachings of the PLC, they are likely not to compete on price but rather focus on building brand awareness through promotion. So why the price war between Amazon and Barnes & Noble?
Well, as this story suggests the blame falls on Apple. The launch of their iPad product has essentially changed the E-book market by introducing a product that far exceeds what many perceive to be an E-book reader. In fact, a large percentage of customers now believe an E-book reader should only be a single application within a larger electronic component and not a stand-alone device.
Where did these people get this idea? From Apple which has mastered the art of getting customers to think the way they think. You do not have to look further than the iPhone to see how they have convinced customers to view their product as more than just a cellphone. In this case, Apple’s iPad is creating a new market in much the same way as the iPhone created a new market.
So where does all this leave Amazon, Barnes & Noble and to a much lesser extent, Borders, Sony and few others? Probably battling for the already maturing market for limited function E-book readers. And, if that is the case, then the PLC is quite clear in suggesting that not all will survive.
The Kindle’s price was cut from $259, Seattle-based Amazon.com said in a statement. Earlier today, Barnes & Noble said the Nook, released last year for $259, will sell for $199.
In two years what will the E-book market look like? Which current competitors are likely to remain and which are likely to be gone?
Image by James Britton