In today’s news, it was reported that the price of the still relatively new Amazon Fire Phone has been slashed to just 99 cents. Yes, CENTS. Here, see for yourself.
It should be noted that that’s the price if you take a two-year contract with AT&T, the phone’s exclusive provider. Still, that’s a steep markdown considering the phone launched just a couple of months ago in July at a price of 199 DOLLARS with a two-year AT&T contract.
The TV report I saw said that this drastic price cut appears to be in response to poor sales of the phone, saying it has been “struggling.”
I have some thoughts on this “struggling” product, which I feel shouldn’t be dismissed just yet — I think we may one day be surprised by its longevity and eventual popularity.
First, some background
I don’t own the phone, although I have been intrigued about buying it for two reasons. First of all, I like Amazon and their products; for example, I own their Kindle PaperWhite and find it great. So I’d be open to a phone made by them. Secondly, I don’t currently own a smartphone; I still have an old flip phone. (Stop laughing!) So for me, this would be a fine transition into the smartphone realm.
However, I do see that people who already have a smartphone won’t necessarily be compelled to switch. The Fire Phone’s operating system is a custom-built version of an Android system, so it doesn’t offer the full spectrum of Android functionality; for instance, from what I’ve read, you can’t use many popular Google apps and services on it.
According to this article by Ryan Whitwam for Extreme Tech, “When you buy a Fire Phone, you get Amazon’s services in place of Google’s. That means no Chrome, Play Store, Google Play Music, Google Drive, or Gmail. Instead you get Silk Browser, Amazon Appstore, Cloud Player, Cloud Drive, and Amazon’s generic email client.”
Clearly, this makes the Fire Phone less than appealing to customers who are used to a full-fledged Android operating system and enjoy these Google services, or those with an iPhone and the wide range of apps and services available on that system as well.
Once you add in the fact that customers would have to use AT&T, you can see why the Fire Phone does have some issues; I know I personally prefer Verizon, so this aspect alone has been a major reason why I decided against movin’ on up into the smartphone world with this phone even though I was initially excited by it. So it’s even more understandable to me why someone who already has one, especially if they’re not already an AT&T customer, would hesitate to make this change.
I also didn’t like Amazon’s advertising strategy for the Fire Phone at first. Have you seen the commercials for it, featuring pretentious kids schooling adults around them about how great it is? If not, here’s one of them, from the Fire Phone’s YouTube channel:
When I first saw these ads, I thought, “Does Amazon really want its phone to be considered a kids’ phone?”
Yet think of this advertising strategy in light of what Apple did over the years to position itself as a leader in the tech industry: early in its history, and even today, Apple has made deals with schools to provide them with computer equipment for free. This has been a great charitable move on their part, but let’s be honest — there’s also a benefit to them as well. They’ve wanted Apple to be familiar to kids in order to plants the roots for a strong customer base in the years to come; their view from the outset was that the system you first learn on is likely to be the one you’ll buy later on. This approach has been well-documented; take a look at this article by Todd Oppenheimer in The Atlantic, which mentions how Apple “shrewdly” went about turning “legions of families into Apple loyalists” with strategies like this.
So my guess is that’s what Amazon is striving for, too — gaining customers in the future by planting the seeds now. Step one: target kids in the ads and now slash the price so low there’s really no barrier to getting one. That way, parents are more likely get the phone for their kids — or better yet, kids may proactively start begging their parents for one.
Then, who knows, maybe some parents might actually be more open to switching their own phones once they have exposure to it from their kids; but even without that, those children may one day be loyal Fire Phone customers due to their exposure to it at an early age. I mean, I know I have a fondness for Apple computers to this day from my time learning on an Apple IIe in school! So it just might work, and is likely the best advertising approach Amazon could use at this phase in the Fire Phone’s existence.
It’s not just about the phone
Besides, I don’t think the Fire Phone is supposed to be a powerhouse product on its own, but rather a driver of increased sales for Amazon overall. This fits in with the business approach commonly used by Jeff Bezos of Amazon, who’s always been more focused on long-term standing versus short-term gain. Some examples:
- Even in Amazon’s early days, Bezos wanted to offer products more cheaply to build a strong customer base, even if it was at a loss to Amazon in the moment.
- He was also willing to direct customers to other external sites if they searched for a product he didn’t sell; the goal was to make Amazon a customer’s first stop, even if that meant referring them on to other businesses when necessary. (I’ve noticed Amazon still does this to this day, although their inventory has grown so much it’s rarely necessary to be directed to an external site now.)
- Jeff also allowed customers to post negative reviews of products before anyone else did so; people found that shocking at the time, saying it would adversely affect the site’s business, but Jeff wanted customers to view Amazon as a place they could trust buying from, as well as a one-stop-shop where they could both research and purchase the right product for them.
Amazon has also sold its hardware, like its Kindle e-readers and tablets, relatively cheaply; the focus has typically been on gaining customers and purchases for accompanying electronic books and services versus on sales of the hardware itself. Similarly, its Fire Phone offers Firefly which makes it easier to identify and purchase products directly from Amazon; you can read more on that feature in this CNN article by Doug Gross, which confirms this approach and says that “the Fire Phone is designed to pull you into Amazon’s growing universe of products and services and then keep you there.”
So to me, the Fire Phone is just another example of Amazon hardware being offered at low prices in order to boost its sales in other areas. This makes the phone a win-win situation for Amazon; I can see loyal Amazon customers enjoying that benefit, and Amazon is positioned to really benefit from that convenience to the customer. The phone becomes just one small part in its overall strategy to increase sales even further.
Plus, down the line I wouldn’t be surprised if Amazon’s phone offers better features than it does currently, much like the evolution of the Kindle, which took years to develop and improve.
Incidentally, if you’d like to read more all about Amazon’s growth and strategies over the years, in addition to the linked articles here I highly recommend reading One Click: Jeff Bezos and the Rise of Amazon.com by Richard L. Brandt. I learned a lot about Amazon’s history and sales practices from this book, plus it’s an interesting read as well.
So, don’t dismiss the Fire Phone just yet. It may seem to be “struggling,” but that’s only if you look at it in black-and-white terms, on a standalone basis. I believe it has some tricks up its sleeve that may just position it for long-term success in ways many might not expect — and besides, it’s just one part of Amazon’s overall, big-picture approach for ongoing growth in the future.