What’s in a Price Tag?

Three days ago, I wrote a post about how pricing and promotions are as much a part of the brand as the product and the imagery. I used the example of Amazon’s Kindle line, and how consumers expect its prices to be more affordable than Apple’s iPads. Today, Amazon revealed the next generation of Kindles, and the pricing was a bit of a surprise to me.

When Amazon launched the very first Kindle, it was priced at $400. Then, the price began to steadily decline. I held out from buying a Kindle as I watched the price dip below $300… and then below $200… it really was like the Kindle went from luxury item to impulse buy. I received one as a present when the price was down to $139 (let’s just say I mentioned how much I wanted a Kindle frequently enough for my boyfriend to take notice). The price was definitely the main selling point in this 2010 ad:

Then, the Kindle Fire was launched last year for $199 and the most basic Kindle sold for only $79. The Kindle Fire with all of its tablet features cost only $60 more than the basic e-reader had at its lowest price.  Again, affordable, and definitely much more likely to be purchased as an impulse buy than an iPad. So for a new generation of Kindles, I’d expected a modest price increase for the new version with more features, and a price drop from the rest of the line. That prediction was way off in the first aspect.

The new addition to the Kindle line is the Kindle Fire HD. The 8.9″ 4G LTE version starts at $499. That is much more expensive than the original Kindle Fire (which now costs $159). A 7-inch HD Kindle Fire costs $199, and an 8.9″ HD Kindle Fire starts at $299. The price range for the Kindle line is now $69 – $599.

While I probably won’t be running out to buy a $499 Kindle, I can see the strategy behind this new pricing. Amazon will retain the customers that would buy a tablet for $199 and not for much more, but it’s also breaking away from the image that Amazon only sells cheaper tablets. The new features on the HD Kindles include better image and sound quality and faster performance, so consumers who tend to use their tablets for watching TV and movies and playing games will be drawn to them. I use my Kindle mainly for reading, Pinterest, and the ocassional YouTube video, so these features are not as important to me. Consumers with similar uses for their tablets will still prefer the less expensive version since they are a better value for them. Now, the Kindle line includes both models priced like luxury items and models priced like impulse buys.

Do you think Amazon made the right move by significantly pushing up the higher end of their price range?

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