Amazon's Kindle: A customer relationship management appliance?

Amazon's Kindle: A customer relationship management appliance?

Summary: The Kindle's real benefit to Amazon may never show up in the profit and loss statement directly. Instead, the Kindle is about keeping the top 5 percent of Amazon's customers engaged since they account for 20 percent of the e-tailer's sales.

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The Kindle's real benefit to Amazon may never show up in the profit and loss statement directly. Instead, the Kindle is about keeping the top 5 percent of Amazon's customers engaged since they account for 20 percent of the e-tailer's sales.

That argument was laid out by ThinkEquity analyst Edward Weller. He's wildly bullish about the Kindle's effect on Amazon's business. In many recent research notes, Weller can barely contain his enthusiasm. Weller, who pens some fun reads on the retail sector, writes in his latest missive:

Kindle's most-important benefit to the company, one that may appear indirect and secondary, one we view as utterly central: Kindle firms up and solidifies Amazon's connection to its most important customers, and not just the heaviest users, but a special class of heavy users who were at the beginning—and probably still are—at the very heart of the franchise: better-educated, higher-income, early-accepting, serious readers, the kind most motivated by depth of selection, the kind that seem increasingly dedicated to Amazon as the default go-to for media... and, increasingly, everything else.

Weller reckons that the top 5 percent of Amazon's customers account for 20 percent of the company's sales. The upshot: Amazon will enable these folks to buy non-media items from the company.

Consider the following:

Like a warehouse club’s membership, Kindle enhances customer commitment and, with the convenience it provides, and perhaps even more importantly, indirectly, through “Kindling” on other devices, it also adds to the customer base.

The risk here is pretty obvious. If Amazon screws up the Kindle---with cracked screen flaps and digital rights management problems---then it risks annoying its most important set of customers.

If Weller's theory is right---and I'm not sure I completely buy it---the Kindle is really a customer relationship management appliance that will drive more revenue and earnings that will ever be directly attributed to the Kindle.

Who would've thunk it?

Topics: Amazon, Enterprise Software, Tablets

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8 comments
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  • WOW

    As we all know from reading these forums, anything can be spun, and
    this article proves it.
    gertruded
  • RE: Amazon's Kindle: A customer relationship management appliance?

    Following this logic an alternate explanation is possible -- Kindle is primarily a walled-garden distribution platform for maximizing sales by cutting out intermediaries. As we saw with the deletion of post sale copies of unlicensed Orwell books, though, the downside is putting too many eggs in the DRM basket and risking a loss of control over ownership. For the folks who care about such things, this will bring Kindle sales prospects to a screeching halt. But a lot of people won't care and will be happy to trade ownership for convenience.
    ddmcd
  • They've already failed for me

    I think Amazon really made a mistake with this device. The
    idea that you cannot load your own PDFs onto it and now
    the recent issue with the George Orwell ebooks being
    erased off people's devices wirelessly just showed
    Amazon's true colours.

    Amazon COULD have created the iTunes of the book
    business. Instead, they decided to continue selling ebooks
    on average for prices that are still way too close to the
    prices of physical books to generate a change of attitudes.

    To me, it is a really sad story and if they continue down
    this road, a missed opportunity.

    [I own an IRex iLiad ebook reader]
    williamfs
  • RE: Amazon's Kindle: A customer relationship management appliance?

    Does anyone know of anyone/anyplace that offers a hands-on demo of the Kindle? I am a vision-impaired individual who loves to read and think the Kindle might be for me. I hesitate to put our the $$$s for one without being able to "see" what it is like. Thanks.
    Paula J
    • Re: Amazon's Kindle

      Sorry, I don't know where you can get "hands on" with a Kindle. But there are other ebook readers out there, with similar screen capabilities. Some are available in stores and can be tried out. All reader's that I've researched do allow you to change (expand) font sizes. I have a Bebook and a CyBook Gen3; both are nice, easily readable, and neither "phone home" like the Kindles do. Both support MobiPocket books, both DRM'd and DRM free.
      Kenton W. Irby
    • Amazon Return Policy

      From Amazon's web site:
      "You can return your Kindle for a full refund within 30 days of the day you
      received it as long as it is in new condition and returned with all the
      original packaging, manuals, and accessories. Your Kindle is not eligible
      for return and refund after the 30-day return period has expired."

      So you can try it for 21 days without any risk.
      prw3505
  • RE: Amazon's Kindle: A customer relationship management appliance?


    The only thing worse than how Amazon has been acting toward their customers is that the press has not reported it well. This is the first story I have read which indicates that Amazon may not get away with all of their draconian ways. This, of course, is not the first time Amazon has deleted books. It is amazing and their user terms of service need to be class actioned because they would never hold up in court. They really threaten the very future of computing. Suppose I had bought an app for my iPhone. Suppose Apple had been sued or threatened with suit by a copyright holder. Would Apple, simply because they are the hardware manufacturer, have the right to delete that app from my iPhone? What Amazon should have done is to delete it from THIER servers, and emailed all downloaders to ask them to delete their copies and to reply to the email that they had done so for a full refund (with maybe a coupon for a free book too).

    There are lots of reasons to despise Amazon at this point:

    1) The above delete-your-books situation.
    2) Fonts that are absolutely lousy and although there is a well-known font hack that replaces them (and legally so under Adobe's published license agreements) Amazon officially ignore its existence.
    3) Screens that have failed in the sun, screens that have failed in not correctly forming characters, screens that are far grayer in the background then they should be -- without one recall.
    4) The world's worst DRM. They hide the Kindle's serial number which generates a secret PID. That PID must be there to read the book. So if you buy a Sony next year you have lost all your books. Compare to other DRM schemes which protect using a credit card number so your books can be read on other, future devices.

    I loved my Kindle 2 when I got it. Now, thanks to Aaazon's policies, I hate it. It was a gift from my kids so I cannot just eBay it but will get rid of it at some point.

    Word to the wise: If you are looking for an eReader the Kindle 2 is probably the best out there and yet the worst choice to buy thanks to its manufacturre's greed and lack of understanding of the most basic consumer priorities.
    NeilShapiro
  • RE: Amazon's Kindle: A customer relationship management appliance?

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