The Story Behind Kindle Price Drop

Amazon has not had too much trouble selling Kindles in the past few months. It’s not had trouble surprising us consumers either. Just a couple of months after Kindle 2.0 was released, Amazon shocked us all by rolling out Kindle DX fast, and then came yesterday’s $60 Kindle 2.0 price drop. Throughout the past few months, Amazon has been aggressive in pushing Kindle hard, and the latest development can only help Amazon sell more Kindles. But did Amazon dropped its Kindle 2.0 price to increase sales?

You can argue that Amazon did drop prices to sell more units but that was not the only reason. Amazon did drop Kindle 1.0’s price by $40 last year. But at the time Amazon was trying to gain momentum for a newly released device that is just starting to make a headway in the consumer market. Kindle 2.0 may be young, but a lot of people had heard about it thanks to Kindle 1.0. This latest move seems to more than just gaining momentum. Sure. Amazon will sell more units in the short-run. But Kindle is still pricey at $299.

A few experts have argued that Prime View acquiring E-Ink has contributed to this latest price drop by Amazon. After all, two of Amazon’s partners have now become one, and there may be synergies and cost-savings that Amazon can pass down to consumers. But I tend to believe that Amazon has been wanting to break the $300 barriers to make Kindle a more recession friendly gadget. A lot of people look at a $299 gadget and think by getting it they are saving more money that they actually are. It’s one of the oldest pricing tactics in the book and Amazon is certainly taking advantage of it.

I happen to believe that Amazon wants to create a bigger gap between Kindle 2.0 and Kindle DX as far as price is concerned. Priced at $359, Kindle 2.0 was too close to Kindle DX in price. Now, Amazon has clearly drawn the line between two gadgets, making it easier for consumers to get what they need for their reading needs. Besides, Kindle 2.0 is now priced the same as what an decent netbook costs. Coincidence?

Amazon will get a little bit of momentum from this move which is nice. I was hoping for a bigger price drop, but my hunch is Amazon is planning it for future holiday seasons. Kindle 3.0 won’t be released till next year, so Amazon will have another opportunity to bring Kindle 2.0’s price under $250. Let’s hope the next Kindle is priced more conservatively.