Strategic Plan for Kindle

SUMMARY PAGE

This assessment will develop a three years marketing plan for Kindle, the Amazon Strategic Business unit for eReaders. The Kindle story has to be told through the history of two main characters, the eBook and Amazon. The origin of the eBook has been widely discussed but it is usually located in the early 90’s, while Amazon was founded by Jeff Bezos in 1994 as an online bookstore, both paths merged in 2007 when Amazon launches the first version of its eReader Kindle. Kindle was a game changer for the eBooks and eReaders market and it has become the reference on eReaders since then, but since 2014 sales are decreasing.

This plan is expected to deliver the following key results in the books market in UK.

1. Recover the 9% of the market share lost in the last years against physical book.
2. Increase the revenues by 10%, in order to recover the situation back in 2016.
3. Increase revenue in new markets.

It will implement the following key strategies related with the four identified segments:

1. Launch of advert campaign to improve the CSF “feeling” of Reading lovers.
2. Launch themed editions to improve the profitability of the millennials segment.
3. Achieve a market development in the secondary students in UK.
4. Reward the loyalty of previous customers to keep their market share

As per the DPM analysis showed later:

1. Students segment has a strong market attractiveness and business strengths.
2. Reading lovers segment has also strong market attractiveness but low business strength due to the competition against the physical books.
3.  Tech lovers and millennials are not so attractive markets but Kindle performance is strong on them

It will require an initial investment of £6.5m to cover initial promotion, outsourcing and machinery. The project will have a NPV of 2.6 million and a payback of 2.5 years.

The key assumptions for this marketing plan are:

• The total kindle units sold (all models) between 2007/2018 will be considered 100 million units, and 6.4 million units in UK.

• The digital content sold is equally distributed per Kindle.
• Brexit will not affect the political and economic situation of UK.

MISSION STATEMENT

The mission statement for this three-year marketing plan (McDonald and Wilson, 2011)is defined as:

1. Role of the unit: Stop sales decreasing and increase revenues by 10% through customer acquisition and eBooks sales increasing. This will include:
   • A market development in the secondary schools of UK (at least 150 schools)
   • Improve the market share lost against print books, 9%.
2. Business definition and positioning:

Amazon

“We seek to be Earth’s most customer-centric company. We are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.” (Amazon, 2017)

Kindle

 “To make available in less than 60 seconds every book, ever written, in any language, in print or out of print; and bring the same ease-of-use, deep integration and superior selection of content to movies, TV shows, music, magazines, apps, games, and more.”(Yarow, 2013)

3. Distinctive competence: Kindle as part of Amazon is part of one the biggest and most developed companies ever, this allows Kindle to have a huge infrastructure behind it and to have always available the latest technologies.
4. Indications for the future: Kindle will never lose its main purpose which is being the most advanced eReader, but at the same time without being too much developed to become a tablet. Kindle must expand its market in UK and exploit the educational sector, and it has to recover the market share lost against the print book.

MARKET AUDIT

This plan will target the British book market. Here it will be considered that it contains not only eBooks and eReaders but also print books. Recently audio books have grown so quickly that they have become an important market factor.

In order to have a global view of this market, below it is shown some bullets points describing the Kindle market for eBooks and print books, mostly extracted from the PESTLE and Marketing mix in appendix, a SWOT analysis for Kindle as Amazon SBU, an analysis of the segments used and finally a description of the assumptions.

• Since its launch in 2007 Kindle has been the absolute leader of the eReader and eBooks market. Today it is considered by the analysts that 88% of the eBook market share in UK belongs to Kindle(Jentetics, 2017)
• EBook market continuously grew during the following years, e.g.  from 2011 to 2012 in UK the overall revenue growth for eBooks had an increase of 89,1%(MarketLine, 2013).
• It was such a big impact that it was thought that the end of physical book was near, see PESTLE. Appendix 2.
• This ended in 2014 when the volume sales of eBooks reached its peak, £163 million and since then eBooks have been losing market share against the physical book, and losing sales, £105 million in 2017(Sherwin, 2018)
• Amazon gets around 30% of gross margin per eBook, as described in the Marketing mix. Appendix 4

 SWOT

Strengths	Weakness
Strong brand name. Huge selection of products Amazon distribution and logistics system.	Not a physical book.
Opportunities	Threats
New authors. New markets. Climate change	Competitor’s technology Print books raising sales. New book stores.

For more details, see SWOT in Appendix 3.

Segment Analysis

Kindle is a very special product because combines new technology, which needs continuous re-invention, with being a traditional cultural product, a source of infinite information. This mix makes characteristics as variety of content, capacity to contain it and some other technological features (as battery life, light weight…) basic factors for the customers (see hygiene factor in appendix 5) and therefore all the eReaders must have them.

But on the other hand, Kindle offers some features which makes them different to other eReaders. As mentioned in the marketing Mix in appendix 4, Amazon is one of the companies which invest the most in innovation and this allows the Kindle family having always top technologies and a very recognisable, elegant and modern design. These two factors will have different impact in the customers as it can be seen in the perceptual map below. This will be used to identify some important segments used in this plan, see Appendix 1 for description.

 

Figure 1 Perceptual Map

The impact of the external design will be different depending on the segment. While technology lovers and Millennials are very interested as they want to have the trendiest design, for reading lovers and students is not a big deal, as they are looking for functionality over design.

On the other hand, the use of technology, although in different grade, is a desired factor for all of them, for that reason the range is from 50% to 80%. In this sense, technology lovers will obviously be very interested and also students as technology can improve and facilitate their teaching/learning performance. Finally, for millennials technology is not a key factor in comparison with design, and it is not either a key factor for reading lovers, but it is more important than the design.

Key assumptions

• It will be considered that in the last year the sales trend in terms of eBooks sales was constant from 2017.
• Amazon do not publish the number of kindle units sold, but they announced that between 2007 to 2018 tens of millions were sold(Kozlowski, 2018).Here it will be considered 100 million units, and taking into account that UK means the 6,4% of the Amazon business(Statista, 2018), that gives 6,4 million units sold in UK from 2007 to 2018.
• As per appendix 7, the Kindle sales yearly would be:

• Finally, it will be considered that the digital content sales (Kindle 85%) are proportionally distributed per Kindle; therefore every kindle user spent around £143 per year and Kindle.

• It will be considered that the political and economic situation in UK will be stable during the three years of the marketing plan, i.e. Brexit (see PESTLE analysis in Appendix 2) or any other external factor will not affect:
  • UK GDP.  Still the second highest in Europe and raising.
  • The pound sterling value, still being a strong currency.

MARKETING STRATEGY FORMULATION

The strategy of this marketing plan will be focused on the Kindle Paperwhite performance in the four segments described in the previous chapter (other segments, like travellers, were considered but discarded as they could have excessive overlap). This selection, which can be found in the following Product-market table, is based on the fact that the Paperwhite is the bestselling eReader of Amazon.

Market attractiveness factors: 

It can be seen that the most attractive segment is the students/schools: it has the biggest potential growth as it is a new market, it can be profitable as it has an important budget and finally, once it is developed it would be unlike they will look for better competitors as schools would have to change their internal processes. The second most important segment is the reading lovers with moderate scores in all of the factors, e.g., there is a potential growth after losing market share against print books. 

Technology lovers and Millennials have lower scores as they have less potential growth as Kindle is already nicely positioned, and they are more likely to check competitors as they look for new technologies or new designs.

Critical success factors

To analyse how the different segments are influenced by CSF´s, two different analyses have been done, firstly, a traditional CSF analysis against the main eReaders competitors and secondly, and only for students and reading lovers, against print books, as these two segments are highly impacted in the market by them.

Below it is shown the analyses for students and reading lovers and also “value in use” analyses of them used to support CSFs definition.  The CSFs for millennials and tech lovers segments can be found in appendix 6:

For reading lovers, in the first analysis, the Kindle is the winner but with a smaller difference as the Kindle Paperwhite and their competitors have similar performances in the main CSFs, price and customer experience (Customer reviews, books recommendations). Kindle loses regarding files supportability as they do not support ePub, the most commun eBook file.

In the second analysis, the Kindle clearly loses against the print books as for the reading lovers the physical book has a strong sentimental factor.

For students and teaching institutions, the kindle is a clearer winner in both analyses:

For example, now the waterproofness becomes an important factor as we are talking in an environment with children, and in the second analysis, functionality is more important the than the feeling during teaching.

Value in Use

 

Figure 2 Value in Use. In the eye of customer. Reading lovers

 

Figure 3 Value in use for Students

DPM

Finally with the analysis done previously, we can get the following DPM chart(McDonald, 1990), where it can be compared the present with the forecast position in three years:

Figure 4 DPM analysis

As per the chart, it can be understood that students’ segment is the most interesting to invest on, it is a new profitable market where Kindle has a big strength, while Reading lovers segment, due to its competition with the print books, requires investments to improve its situation. Finally, technology lovers and millennials are quite stable customers but new investments are required in order to maintain their cash, especially millennials where the revenues can be improved.

MARKETING OBJECTIVES AND STRATEGY

Segment	Objective	Strategies
Reading  lovers	Increase market share by Improving “feeling” CSF balance with print books, from 2-10 to 5-5.	Promotion: Re-launch climate change campaign In order to convince some loyal readers to print books, a powerful commercial campaign against the use of paper could convince a part of the segment.
Millennials	Increase profitability from 7 to 8. Increase market share	Product: Launch Bespoke designs The launch of special themed editions of the device and accessories could take advantage that this segment is starting to have purchasing power, exploiting the shopping instinct of this age using specific themes (Star Wars, Harry potter…). These themed editions could have an extra price, in order to get profit from the kindle, unlike the regular version as explained in the price section of the marketing mix. Appendix 4.
Technology  lovers	Maintain Market share	Promotion: Improve customer retention This segment will be always a sure Kindle customer; given that Amazon will keep on improving the technology, another option would be giving purchase priority for new versions, and even proposing a discount delivering the old version. Product: Product versioning. As discussed earlier, it is very important keep on improving the technology, but also new versions could be launch modifying the design.
Students/ Schools	Market development	Place: Develop Whispercast in UK. Whispercast is the software that allows schools and different business to manage (buy and distribute) eBooks with Kindle. The software and structure are already available in US, so it is a logic movement to expand it to Europe and more precisely to UK. This will enhance the use of these devices in schools and universities. Price: Special discounts Although there are special prices for bulk purchase, a special discount for books would be an incentive: 5% discount. Amazon gets 30% of the publishing’s.

Expected results

The expected result is to get a positive NPV of more than £2.5 million, which is feasible considering the following:

• If the promotion campaign in five top magazines works, it is expected to recover 300k users. These will give revenues thanks to the digital content they will purchase as explain previously. This increase is expected to be gradual (75k-10k-125k).
  • The investment will be distributed every year, with an initial promotion in 4 magazines, £100k per monthly magazine, and then reduce it to 3 in year 2 and 3.
• Regarding the themed editions with an extra price +£20 per Kindle, it is expected to sell 125000 units in three years.
  • The whole investment will be at the beginning of the plan, with the purchasing of 4 engraving machines, £200k each, and outsourcing the theme edition designs with a maximum budget of £600k.
• Regarding students, as this is a new market in UK, it is planned to make promotions in 200 schools, 50 more than the target. It will be considered a success in 175 schools, starting from year 2, which gives space for improvement.
  • A budget of £900k is available to outsource the promotion.

For more details about the cash flow analysis, please see Appendix 9.

APPENDICES

Appendix 1. Segments

• Reading lovers:  Men and women, between 30-65 years old for whom reading is one of their main hobbies. They have an important purchasing power. 18.53 million people in UK in that range in 2018 (GOV.UK, 2019), 17% heavy readers (Cooke, 2019): 3,15 million people.
• Millennials: Generation of people born between late 80´s and late 90´s, around 6 million people. They are the first digital generation. This generation is more interested in reading than previous generations (Perrin, 2016), and they are a game changer factor for saga books (Harry Potter, Game of Thrones, Twilight…). They are starting to have purchasing power. 50% are readers and potential user: 3 million people.
• Students: In this segment it will be considered any group of people or institution that could make use of the Kindles for teaching. In this plan it will be firstly aim the secondary schools. According to the BESA (British Educational association) there are 5168 secondary schools in UK (Department for Education, 2019), with around 3,3 million students.
• Technology lovers: Men and women, between 30-65 years old for whom technology is one of their main hobbies. It will be considered the same market size than the reading lovers.

Appendix 2. PESTLE

Political

• BREXIT may mean the departure of many companies from EU and an impact on the circulation of goods between UK and EU.

Economical

• In 2018 UK GDP was the second highest in Europe after Germany(International Monetary Fund, 2018).

Social

• Society is changing its shopping habits; e-commerce is becoming the main way of shopping.
• Customer reviews in websites are key for customers and companies are enhancing this habit through promotions.
• Reading habits, the intensive use of eBooks during the last years meant a growing fear that traditional book could die, but now  people are returning to them after a growing nostalgia (MarketLine, 2018)

Technological

• Big data analytics are transforming retails. Retailers have much more access to customer’s information, and this is translated to a more bespoke service.

Legal

• Technology companies have faced different lawsuits in EU during the last years. Amazon for example:
  • European Union over antitrust settlement about books sales(Reuters, 2017) and tax arrangements(The Guardian, 2017).
  • The UK Advertising Standards Authority (ASA) is considering whether to launch a formal inquiry, as some customers are complaining that Amazon is failing to meet its next-day delivery policy(BBC, 2017).

Environmental

• Climate change is becoming a major concern for the society. And although last years the focus has been in the seas and oceans contamination with plastics, deforestation is still a big concern.

Appendix 3. SWOT

Strengths:

• Strong brand name. Amazon is considered as the most customer-centric company in the world, and that has been translated in an important loyalty from the customers to Amazon, which means that every time a person needs to buy something, they will look for it in Amazon first and that includes books. In UK in 2019 there are 15m Amazon Prime members (Dawson, 2019)
• Selection of products: Amazon allows the costumer access to a huge selection of choices,  Amazon offers more than 6 million eBooks (Haines, 2018).
• Amazon distribution and logistics system, which allows receiving the device in two days if the customer has the Prime subscription or 3-5 days without it, or getting any eBook instantly in the eReader (Amazon, 2019).

Weakness:

• An eReader is not a book and it will never be a book. This statement although simple is a huge barrier to penetrate and consolidate some markets.

Opportunities:

• New authors can easily publish their works in Amazon, which makes them ambassadors of Amazon in various social networks.
• New markets: eReaders can be a useful tool for education and Amazon has already the existing tools to exploit that market.
• Climate change: Due to the threat of the climate change, Kindle can take the opportunity of the environmentally friendly trend and promote the use of these paperless devices as a way to fight the climate change.

Threats

• Competitor’s technology: Mark&Nobles and specially Kobo have been launching new devices with similar features.
• Print books: Despite the powerful beginning in the market of Kindle, after some years the effect in the market has been the opposite, and books have recovered market share after customers realised how they missed print books (MarketLine, 2018)
• Increase in the openings of local book stores first time in 20 years(Mintel, 2018).

Appendix 4. Marketing Mix

Product:

Kindle is an eReader whose original mission was the substitution of the paperback books, but as mentioned in the SWOT during last years this mission has evolved to a coexisting life with paperback books.

Amazon has developed different Kindle devices in all those years to cover the range of eReaders users with different needs and capabilities.

• Kindle 8 launched in Jul 2016.
• Kindle Paperwhite. 4^th Edition launched in Nov 2018.
• Kindle Oasis. 2^nd Edition launched in Oct 2017

Kindle is the Amazon brand for eReaders, which means that this product will always have the newest technologies on these devices. This is one of the reasons why this product is so demanded and loved, offering technologies that help people who love reading, from screens that allow reading for hours, contrary to mobiles or tablet, to memory which allows to store thousands of books.

Place:

Amazon and Kindle are worldwide brands and they can be found everywhere. Initially Kindle was sold only in US, and it was not till 2009 when, with the second generation of kindle, that it became international.

Kindle devices and eBooks are mainly found in this website, from where they can be bought and also from where they can be managed. In UK Kindle can be also found in Waterstones, the main brick-and-mortar book seller(Waterstones, 2019)

Price

• The kindle portfolio covers a wide range of prices, from the most basic one for £69.99, to the newest and most advanced device for £229, the flagship of the brand the Paperwhite can be purchased by £119.99. Competitors with similar range of products and prices.
• Kindle products have 0% profit margin, as the strategy is to get profits through the digital content(MarketLine, 2013).
• EBooks prices, usually cheaper than the paperback versions and cheaper than other eBooks suppliers.
• Kindle Unlimited where after a subscription fee customer can access to a service read. Amazon usually gets a 30% of gross margin per eBook (Gobry, 2011)

Promotion

Amazon has based part of its success in big promotion campaigns, with important presence in TV and different media. Regarding Kindle, Amazon based its initial promotion from an environmentally friendly focus, but recently the new adverts were focus on highlighting the new features which have been differentiator against its competitors.

Figure 5 Kindle adverts

Appendix 5. Differentiators and hygiene factors

 

Figure 6 Differentiators and Hygiene factors

Appendix 6. Extra CSFs

Appendix 7. Kindle Sales

In 2014, eBooks sales achieved its peak with £163m, and as per the first assumption in 2018 they would be £85m. It is considered in this report that Kindle sales are similar to eBooks in terms of growth per year, and also it is considered lineal.

Appendix 9. Cash Flow analysis

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