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Through this strategy, Amazon packaging some of the digital content into services to increase more loyal customers, who will constant the revenue. Amazon has tried to do this with the new Kindle Lending Library program that offering to their major customers who hold Kindles and Kindle Fires. If Amazon can show to the publishers that this method can be used, then provide an e-book subscription service could be a best way to change occasional e-book purchasers into Amazon’s loyal customers and a continuous subscription-based revenue flow.
Besides that, Amazon also need to bundles its movie and television stream services alongside its other rental services, this will make consumers think that its offering alike competitive with Netflix while Amazon do not have as great of a content library in this point. However, Amazon added these services to prime devoid of increase the annual member fee, so Amazon is consume some of their expenditure for this extra service and try to attract its major membership. This is one of the ideas in the short term as Amazon is trying to set up its existence in the streaming space, so that it can more effectively bargain the movie streaming agreements with the major of movie and television producers. However, long-term, it might be create more sense to provide its content services in a separate subscription bundle and/or raise the expenditure of the major membership bundles that contains access to these content services.
When Amazon selling their products with bundles strategy, means that they could sold out more products compare with single item, the total product sale will be increased even in they earn less but lead a lot of profit in long term period. This is because some of the items are not easy to sold out, putting this items together with a value products is the best way to help them selling those items with more easy. Therefore, Amazon is able to get a maximum profit even selling a product that difficult to sell out.
Toward success, Amazon needs to convert their customer base into loyal customers instead of occasional buyers, while the margins for service subscribers will be increase and revenue streams will be predictable.
Business dictionary.com. Retrieved from http://www.businessdictionary.com/definition/bundled-pricing.html
Brandon Hickie (Nov 18, 2011). Bundling Its Way into Competitive Position. Retrieved from http://blog.openviewpartners.com/amazon-pricing-strategy-bundling-its-way-into-a-competitive-position/
Competition Pricing Strategy
Competition pricing means set the price of a product or service in comparison with competitors. Competitive pricing is usually used when seller or producer selling alike products, as services can vary from business to business as the attributes of a product remain comparable. It is normally used once a price for a product or service has reach the equilibrium level, which frequently occurs when a product has been existed on the market for a long time and met a lot of substitutes for the product. There are three options when setting price of a product, which is price lower, price the same or price higher than competition.
Generally, Amazon always provides the lowest price for most of the products selling to customers. This is because Amazon realized that a lower price can attract more customers willing to make their consumption on their products and services. Amazon doesn’t have to charge sales tax in all but a handful of states, so their customers no need to uniformly pay the sales tax. This situation allowed Amazon enjoyed the advantage in pricing. Amazon is lower than the base price compare to local retail shops. When people shop at either a physical store or Amazon, they will look at the price first. Besides that, people usually compare a similar product with price to the price they would pay elsewhere. Often, the difference prices a product or service is significant. Even if people were forced to pay sales tax on it at the same locally applicable level, Amazon’s price would be better.
Therefore, Amazon needs to set a lower price than it competitive for the normal goods that highly elasticity to avoid the substitution products steering in market. This is because highly elasticity means that people are very sensitive with price of products. The lower the price will lead the higher the demand. If the demands increase, Amazon can get more revenue. It is inversed for the inelasticity products. However, Amazon should be not affect by the price of competition for some of the luxury products. It is because cutting price for those products could seeming as disastrous as break the product’s brand image that may causing fail to increase sales and revenue.
Amazon wish to follow in the road of companies like Wal-Mart by making a lot of profits based on a large sales volume of low-priced items rather than a lower volume of marked-up inventory. So far these profits not steady much, but Amazon customers are hoping that they willing to putting the customer’s benefits first then will successfully sustain the company long into the future.
Investopedia. Retrieved from http://www.investopedia.com/terms/c/competitive-pricing.asp
Kent Anderson (Dec 27, 2011). Getting Real About Amazon- Taxes, Prices, Competition, and Long-term Strategies. Retrieved from http://scholarlykitchen.sspnet.org/2011/12/27/getting-real-about-amazon-taxes-prices-competition-and-long-term-strategies/
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