Here’s a novel idea for when you’re looking to gain a little customer loyalty: try giving something away for next to nothing! I know, I know—it seems counterintuitive. Well, the fact is that a little generosity goes a long way when it comes to impressing your customers. At least, that seems to be the rationale over at Amazon.
The online retailer became something of a game changer last year with the success of its Kindle, and now they’re looking to revolutionize the way we purchase and store music with their cloud-based music service (click here for more info about it). That’s a blog for another day though. What’s more noteworthy is the extent to which Amazon is obviously willing to gamble on the sheer potential and marketability of its relatively new service.
Last month, in a promotional move, the company decided to offer digital downloads of Lady Gaga’s album, Born This Way, for a mere 99 cents on the day of its release. Yep, 99 cents! And the catch? Umm, there wasn’t a catch; the album was yours for a dollar.
You don’t even have to like Lady Gaga to know that a one-buck album is a sweet deal if there ever was one! The real question: why the sudden generosity from Amazon? Well, they used the offer as a way to promote their new service, the Amazon Cloud Drive. Users of the Cloud Drive are given 5GB of complimentary online storage space when they sign up, and after purchasing any album from Amazon’s mp3 store, that storage capacity is immediately bumped up to 20GB; this incentivizes both future participation in the service and, more importantly, future purchases from the store.
Free online storage space for my music? Sign me up! A one-dollar Lady Gaga album? Sign me… err… sign my girlfriend up!
Again, it’s very generous on Amazon’s part, but why exactly do they want us to take part in this new type of music service? In short, they’re trying to stay ahead of their competition. Cloud-based storage is online storage that has the potential to dramatically change the way people listen to and store their music files. Google already offers a similar service (though they don’t provide a platform for downloading music), and Apple will be on the bandwagon very soon with its iCloud. So, what we have here is yet another instance of Amazon staying ahead of the game.
Amazon’s move actually speaks to a fundamental principal of retail: sometimes, you have to take a loss in one area in order to reap rewards in another. Here’s how one site describes it: “Back in the old days, when people used to buy CDs, it wasn’t unusual for Best Buy…to mark down big albums from $16 to $10 as loss leaders…to get people in the doors: the retailers took a loss on the discs in the hopes you’d buy a stereo or a TV, too.” Same deal here, but in a digital setting. Amazon essentially used Gaga’s album as a “loss leader.”
Sure, the company took a loss on it partly because they could afford to do so, and the promotion actually ended up being more of a success than they were prepared for (many of the people who purchased the album had to wait up to a day for the data to transfer), but people took notice nonetheless. While there’s still no guarantee that their cloud service will catch on, it doesn’t change the fact that Amazon has set a bold example here.
All in all, it takes a move like this to stay ahead of the competition. The Amazon brand is one of the most highly regarded brands on the net, and risks like this are part of the reason why. The company obviously has a great deal of faith in their new service, and once upon a time they had faith in something called a “Kindle,” so I for one am inclined to give them the benefit of the doubt.
Should Amazon have organized this promotion differently, or was it a good move? What else can we take away from this online giant?
Image credit: here.