Behavioral Marketing

Amazon.com is releasing the international version of Kindle DX on January 19, 2010. I am sure there must be other reasons for releasing a larger e-book reader. (I find the smaller one good enough.) But one possible reason (may be this is just my guess) is consumers will find the smaller Kindle more attractive now that Kindle DX is available.

Psychologists say that consumers always compare the prices of products with prices of some related products. When new products are released into the market, consumers get confused as to whether to buy the product or not as consumers just do not know if the price is just right or not. (There are some tech-addicts who buy all new products anyway. I am not talking about them.) Will you pay $259 to buy the smaller Kindle? Is it too high? Just OK? Too less?

It is difficult to say. There is no comparable product available (other products do not have international 3G connectivity). Now that Kindle DX is available, there is a reference. The Kindle DX is priced at an exhorbitant $489.

Now that makes decision making easier. I do not know how much the ebook reader should cost. I do not know whether $259 is enough or not for a smaller ebook reader. But if I find two products, I know that $259 is cheaper than $489. May be people will buy smaller Kindle more now that Kindle DX is available.

I remember another instance where an American company started selling a biscuit making machine for the first time. The sales were low and the company appointed a marketing consultant. The consultant advised to sell a bigger biscuit making machine at the same time at a much higher price. Earlier consumers did not know how much to pay for a biscuit making machine. They did not even know whether they need one or not. But now that a reference price is available, it is easier to compare and take decisions. The company apparently realized an increase in the sales of the smaller biscuit making machine (which is exactly what it wanted).

Compare this situation with a hypothetical situation: You go to a new city for the first time. A taxi says "Pay me Rs.100 to go to a particular place." What do you do? It is very difficult to say yes or no as you have absolutely no idea as to whether the price is right or not. But suppose you find another auto driver says "pay me Rs.90 and I will drop you there." You know what to do. Decision making becomes easier when you have something to compare with.

I have absolutely no idea if this is in fact the reason why Amazon is going to release the international version of Kindle DX. But my guess is, it will increase the sales of the smaller Kindle now that people know it is cheaper to pay $259 to buy a smaller Kindle than to pay $489 and buy a larger one.

What do you think?