The strategy follows the classic shaver and razor model: sell a cheap shaver-likely at a loss-to a customer, and make it up when they go back to buy replacement razor blades.Īt $199, the Kindle Fire makes for one expensive shaver. "You can also think of it as subsidizing the hardware and getting the return on services and content." "The Kindle is about other Amazon services gaining customer traction," said William Ho, an analyst at Current Analysis. The good news for Amazon: the tactic often pays off. In reality, Amazon and the Kindle Fire is only the latest example of a company willing to take an upfront hit to ensure a profit down the line. The company is using price as the hook, even if it loses money on each unit.īut before you sing Amazon's praises for breaking new ground, you should realize that undercutting the competition to drive adoption is far from a new strategy. ![]() ![]() Industry analysts, blogs, and even our own site cooed at the $199 price point of Amazon's freshly unveiled tablet. Amazon unveiled the $199 Kindle Fire, which some believe it's taking a loss on.Ĭommentary While the Kindle Fire's dramatically low price may seem revolutionary, Amazon is actually taking its cues from a well-worn playbook.
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