Why Amazon might have thought Fire Phone was a good idea?
First things first, the content of this story is completely fictional and is set in an era where the world hadn’t seen the fiasco called Fire Phones by Amazon. Launched by Amazon in 2014, Fire Phones weren’t exactly a hit. Far from it. But if a company like Amazon forayed into making phones, something should explain it.
So here it is. My take on why Amazon might have thought Fire Phone to be a good idea.
Problem Statement
Should Amazon launch a smartphone?
About Amazon
- Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.”
- Amazon’s vision is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
- Core values :
- Customer obsession
- Long term thinking
- Eagerness to invent
- Pride in operational excellence
Approach
- What is the product -> Smartphone
- Why make it ? Is there demand?
- Smartphone market is growing at a rapid pace
- Ample scope to penetrate further in the market
(Data-Global smartphone users increased by 40% in 2016–2020
-By 2023, mobile device users will increase to 7.33 billion
-By 2025, 72% of all internet users will solely use smartphones to access the web )
- Why is Amazon considering launching it when there are other sellers?
Amazon’s private brand products have on average higher customer review ratings, lower return rates and higher repeat purchase rates than other comparable brands in the Amazon store. So in essence by doing this Amazon will :
- helps its existing customers better
- Know its customer better (data insights)
- grows/retains customer base
- Will the launch be worldwide?
- If not, who is the competitor in the region and how can Amazon stand apart
- Who will it target to sell this product to? (User Persona)
- User pain points
- Can it deal with market competition?
- Is the venture profitable
Assumptions
- It will be outsourcing the manufacturing via a third-party as is done for its own products (Kindle, echo,etc.)
- Profit generation is not the top-most priority right at the beginning
Target Demography
- While launching a product which already has many alternatives in the market, Amazon should use its brand loyalty as an advantage (demography with maximum number of amazon customers, i.e. United States ).
- The US also has about 79% smartphone penetration which means the majority of its population has a smartphone.
On the basis of these two data points, choosing the United States as the target market for the launch for the first iteration.
User Persona
Based on the board analysis, following conclusions are derived wrt target users:
If Amazon plans to launch, its target customer would be non-budgeted smartphone users (users who don’t mind the price) :
- Tech savvy
- Non tech savvy
(->User who own a feature phones : External dependence on data plan charges
->User with no phone : pricing has to be very low, effort to educate the user to teach the basics (high effort, low impact)
->US is a developed nation where most popular smartphone brand is Apple which offers niche but is expensive)
User Pain points
Market Competition
Apple and Samsung rule the chosen demography. Apple also addresses the majority pain points of a tech savvy non-budgeted user barring innovation in offerings.
This leaves ample room to innovate(for tech savvy users) and target the non-tech savvy user base.
Goal
Build a niche product (Innovate)
The primary goal is not to generate revenue. Given Amazon’s current market condition(high growth), it can afford to take this risk by launching a MVP (by only including the features tagged in the board) only for the selected demography and iterating further on it depending on the acceptance rate.
