Can anyone compete with the iPad? The new Kindle Fire, from Amazon, is going to try. Amazon has had success with its eReader, the Kindle, and its Kindle Fire is in full color and priced at only $199, well below the iPad sale price of $499. The Kindle Fire is getting good reviews and analysts are reporting projected Kindle Fire sales figures of 5 million by end of 2011.

Amazon certainly has its work cut out for it: Apple sold 11 million iPads during the most recent quarterly reporting period, and seems to have an insurmountable competitive advantage in delivering sleek, easy-to-use tablet PCs that are easy to integrate with other devices. Other tech companies like HP and Research in Motion have tried (and mostly failed) to emulate Apple’s success in the tablet PC market.

Two potential competitive advantages that should help the Kindle Fire be a big hit:

  • Focused on media: Amazon is positioning the Kindle Fire as a tablet specifically for media consumption – books, magazines, video and music. It’s not trying to be all things to all people. It’s not trying to offer everything that the iPad might offer in terms of apps. Instead, Amazon is saying, “Here is a compact, easy-to-use tablet that you can use to watch movies or TV, listen to music, or read – and oh by the way, it’s a lot cheaper than an iPad.” This angle might be a relevant competitive advantage since many Amazon customers buy their movies, books and other media from
  • Drive customers to the Amazon store: Amazon’s strategy seems to be that the Kindle Fire is a loss leader to put an Amazon storefront in people’s hands – it’s a loss leader as a portal to the rest of the Amazon store items, so they can then sell more books, movies, streaming TV, and other Amazon products. Amazon is creating a more robust platform to sell its products, even if that means taking a loss on every Kindle Fire sold.

Despite these early signs of success, I have a word of caution for the Kindle Fire: they should not allow their marketing to focus on price alone.

Here’s why: Are people who buy tablet PCs really motivated by price? Or are they buying tablet PCs because these devices are new, cool, fun, and are bringing new experiences and efficiencies and abilities into their lives?

Is anyone who hasn’t bought a tablet PC hesitating to buy one because it’s “too expensive,” or are the holdouts doing so because they haven’t yet found a use for a tablet PC and don’t know how it would benefit them or fit into their lives?

I’d be curious to see what customer research Amazon did prior to setting a price point for the new Kindle Fire. I doubt that price is truly the biggest consideration in a product like this. With the iPad, it was a big hit with early adopters and tech evangelists; they wanted one, and the price didn’t matter. For people who aren’t such big tech enthusiasts, they might just be waiting awhile to buy a tablet, or they might still need to be convinced of the value.

Competing on price alone is misguided. We always tell our clients: don’t compete on price, deliver more value instead. If you know and accurately convey your competitive advantages, your customers will be willing to pay more. So even though Amazon is selling the Kindle Fire at a cut-rate price, they should not market the product based simply on price.

Instead, the marketing should focus on all the great things you can do with the Kindle Fire, its ease-of-use, why it’s so great for viewing movies, TV or reading books, or why it’s so convenient if you’re a big Amazon user.

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