On stage yesterday Jeff Bezos delivered a terrific one-line explanation for why Amazon charges so relatively little for its tablets: “We want to make money when people use our devices, not when they buy our devices.”
He expanded on this philosophy in an interview with Tricia Duryee at All Things D:
Jeff Bezos: We do not like the razor and razor blade model, where you lose money up front and then somehow make it up on the backend. We also do not like the other model, where you make a lot of money on the device, because it doesn’t follow our approach.
By the way, one thing I should tell you is that our approach is our approach, and we don’t even claim it’s the right approach. It’s not something that’s new, but it’s something we’ve done since the founding of the company. In my view, you set up the business in a way that is aligned with the customer, or you can set it up in odds with the customer. When you have the option, you should figure out a way to be in alignment. Sometimes that requires you to be more patient, so it’s part and parcel with long-term thinking.
But if you were a short-term-oriented share owner, you might say let’s get the money up front. That’s where I decline to say that approach is wrong. I won’t say that. But it’s not ours. I work with the teams to set up the business models.
Bravo to Jeff Bezos for this attitude. Unlike Apple, which makes obscene amounts of money, Bezos is willing to leave some money on the table to win take market share and win over consumers. It also pushes Amazon to figure out new ways to make money on its other services. This works as a both a business plan and a marketing stunt.
In fact, Amazon may be pushing hard to take the number two spot in the tablet market:
Produced by Daniel Goodman
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