What do you do if you're Amazon and you have to dent Apple's iTunes juggernaut and its upcoming launch of its cloud music service? Compete on price---early and often.
That's what Amazon is doing in spades today. Its 99 cent one-day offer for Lady Gaga's new album is exactly what it should be doing if it's going to grab some of Apple's market share. And guess what? You fork over 99 cents. You get Lady Gaga's album, which I had no intention of buying until it was 99 cents. And you get 20GB of Amazon's cloud storage.
Meanwhile, you may stick around despite a few server glitches. You may even stick with Amazon's Cloud Player and buy more storage in the future.
Amazon has the scale to do loss-leaders. This move, much like its free video streaming for Amazon Prime subscribers, gets people in the door. The end game for Amazon is to get you become more of an everyday user. Today, Amazon's customer base is highly transactional.
Peter Fader, marketing at professor at Wharton, lays out Amazon's challenge in a Knowledge@Wharton article:
"Amazon isn't part of your daily life. Consumers touch Google, Microsoft and Apple all the time. They are only reaching out to Amazon when buying something. Amazon wants to be a part of people's lives multiple times a day."
With Amazon's Kindle, likely tablets, streaming video and cloud music the company is grabbing everyday users. If Lady Gaga and a 99 cent album is what it takes to acquire customers Amazon will take that loss leading bet all day.
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