Will Amazon Give Away Free Kindles To Gain Customer Loyalty?

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The idea of Amazon.com, Inc. handing out free Kindles may seem farfetched. Even though eReader sales have skyrocketed over the last year (6.6 million eReader devices were sold in 2010), Amazon.com has dropped the price of Kindles from $399 to $140 over the last three years to remain competitive and to increase its market share. Competitors, like Apple’s iPad, Barnes & Noble’s Nook, and Google Books for the Android, are fighting for Kindle’s market share. Is the next step to give away free Kindles?

A few business insiders speculate that increasing consumer loyalty to spur repeat purchases of ebooks may be worth giving Kindles away for free.

Analysts predict that Amazon will still have a dominant portion of the eBook market share in 2011 (about 68% market share), but Apple’s iPad is becoming a growing threat to Amazon’s Kindle. Apple’s iPad has grown from a 16% eBook market share in August 2010 to a 32% market share as of November 2010. Additionally, earlier this year, Barnes & Noble claimed it now controls 25% of the U.S. e-book market, thanks to its Nook color eReader device.

Amazon.com has recently finalized negotiations to put their WiFi Kindles in electronic stores around the country. AT&T is one of the first companies that has jumped at this opportunity and will offer the Kindle WiFi beginning on March 6. These newest partnerships will help sell more Kindles for another financial quarter or two, but we can only speculate what will happen in later quarters.

Many ebooks are priced nearly identically between Amazon’s Kindle and Barnes & Noble’s Nook, which means price points on e-books do not necessarily influence a consumer’s decision to buy a Kindle over a Nook. The decision to buy a Kindle is largely influenced by Amazon’s stellar reputation of offering the best customer service experience. Kindle users can download an entire eBook in seconds; they can tap into thousands of books in one place; and they have access to an online registry to save books in case of loss or theft. Additionally, Amazon.com has made reviewing, browsing and buying ebooks a viral online and offline social activity among Kindle users.

The idea of Amazon giving away Kindles for free could be justified by the fact that new loyal Kindle owners would make repeat purchases of ebooks and digital content exclusively through Amazon.com for an indefinite amount of time. But who really knows for certain?

Will Kindles be free by the next holiday season? The reality, right now, is most likely not. It is not that hard to imagine that the price of Kindles may break $100, if not closer to $50, within a year.

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