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Posted by James McQuivey on September 25, 2013
Watching Amazon.com cut the prices of last year’s Kindle Fire devices shortly after they debuted, you may have concluded that Amazon’s tablets weren’t performing well. You may have further speculated, as I did earlier this year, that maybe Amazon didn’t need to commit to the tablet strategy. After all, Amazon has a great relationship with its customers whether they’re on PCs, mobile devices, or iPads. You (and I) would be wrong. Today Amazon doubled down on a tablet strategy, announcing three new devices for sale later this year. A new 7-inch Kindle Fire HD (starting at $139), a 7-inch Kindle Fire HDX (from $229), and an ultra-skinny 8.9-inch Kindle Fire HDX (from $379). In one fell swoop, Amazon:
- Commits to tablets as a way of committing to customers. Yes, tens of millions of people already have iPads, but another 40 million people in the US will get their first tablet between now and the end of 2016. And chances are very, very good that Amazon has a credit card on file with most all of them.
- Ups the ante on tablet cost/performance ratio. The iPad Mini goes for $329 in its cheapest form, while the significantly cheaper Google Nexus 7 goes for $229. For $139, you can get a Kindle Fire HD. Amazon calls it a “breakthrough price,” and it's right. Step up to the significantly more equipped 7-inch Fire HDX, and the prices rise to meet the Nexus 7. But Amazon’s price move will help first-timers feel like their budgets have been taken into consideration. Plus it will give families the courage to buy a cheaper tablet or two just for the kids. At $379 the 8.9-inch Fire HDX is priced $20 below the Nexus 10 and $120 less than the cheapest 10-inch iPad. Granted, you get an extra inch of screen for your money with the other two machines, although as the success of the 7-inch form factor has proven, people are willing to trade size against price — and some even prefer the smaller size.
- Takes any concerns about Amazon’s hardware off the table. This was a problem for Amazon last year as the prior Fire HD devices didn’t always respond as quickly as sophisticated touch-screen users would expect. These new devices have been upgraded with better chips, more memory, longer battery life, and a redesigned Fire OS (the first time Amazon has branded its version of Android as an OS), removing any lingering doubts about Amazon’s gadget performance. Then the company went beyond merely compensating with the HDX line. The screen resolution meets or beats the competitors, but the real shocker is how light the 8.9-inch Fire HDX is. Amazon calls it “startlingly” light. At nearly half a pound lighter than its predecessor, that will prove to be an understatement.
- Deepens the digital customer relationship. In a world of digital disruption, it's imperative that companies strengthen the digital connection to the customer, eventually making it both personal and pervasive. To that end, Siri lets you talk to a simulated human as something of an amusement; Google Now went a step further, rummaging through your files and your web history to anticipate and deliver things you want. But Amazon wants to give you the ultimate in digital interaction: A 24x7 portal to a real human being. Called Mayday, the round-the-clock service model puts an Amazon customer service resource at your beck and call. Aiming for 15-second responsiveness, the Mayday service does something for Amazon that the company has never been able to do before: put a human face on what is essentially an algorithmic company. The company that has from its beginning avoided 800-number call center access is suddenly jumping way beyond anybody else, putting human beings within reach using sophisticated digital tools. When you contact a Mayday rep, you see him or her on your screen, but the rep can’t see you. Instead, the rep sees your screen and can direct your screen at your request or can mark up your screen to show you how to access specific features. It’s like having a teenager in your family who knows how to use your devices better than you do. Only, unlike a teenager at home, this person will be glad to help and will simultaneously pretend to tolerate your technology ineptitude.
This is a much bigger announcement than it at first appears. It may seem overkill to create a 24x7 customer service model just for a tablet. But if the Amazon people are as smart as they seem, helping you get the most out of your tablet is only the first step. The real value of having this customer relationship is being able to apply it to any aspect of Amazon’s service. Having trouble with a purchase decision on Amazon? Why not try your Mayday rep? Carry this out far enough and Amazon will one day be using personal assistants to help you buy cars, book elaborate travel, and manage your healthcare decisions (all with the help of your Kindle pedometer, heart monitor, and home scale). None of this is written in the press release, but if people at Amazon aren’t thinking this through, then they’re missing the point: The company already has a largely self-service relationship with tens of millions of customers; now it can connect to them more deeply than anyone else, because it can pay for the interactions with retail transactions, something Apple and Google can't ever do. For those who think Amazon should get into physical retail, this move effectively provides a more compelling — and scalable — model for delivering in-person value without a physical presence.
It’s a bold move, one that Amazon would never want to launch as part of the Web store but one that can be easily tested inside of the confines of the Kindle Fire relationship and then scaled up to meet the needs of millions.
James McQuivey, Ph.D., is a VP, principal analyst at Forrester Research and the author of the book Digital Disruption. For more information, see forrester.com/disruption.
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