Picking a debut price for Amazon's Kindle e-reader

You own the launch price of Amazon's Kindle e-reader. Explain how you would decide what to charge. ```hint Bound the price first Before choosing a strategy, work out what each device costs, what it is worth to the readers most likely to buy first, and what Amazon earns from an owner after the sale. ``` ### Clarifying Questions - Are we pricing the very first Kindle, entering a market with few e-readers, or a new model joining an existing Kindle lineup? - What matters most to Amazon here: profit on each device, the number of devices sold, or growth in ebook sales? - Is ebook pricing part of this decision, or is it fixed and outside my control? - Which market and sales channels are we launching in? ### What a Strong Answer Covers - A pricing objective tied to how Amazon makes money from Kindle owners - A cost floor, a value ceiling by reader segment and the competitive reference points, with assumptions stated - Two or more pricing strategies compared, ending in a specific recommendation - How the device price and ebook prices work together over an owner's lifetime - A plan to test the price before launch and adjust it afterwards, with the signals that would trigger a change ### Follow-up Questions - Launch inventory sells out within hours. Do you raise the price, hold it, or do something else? - Six months later a rival e-reader launches at a much lower price. How do you respond? - How would a cheaper version subsidized by on-device advertising change your pricing ladder?