The complaint has been made that the new Amazon Kindle is the death of the book. However, while their invention has cut down number of trees being destroyed every year, this complaint couldn’t be further from the truth. As I sit on a coach traveling the width of Japan enjoying my Kindle, I cannot help but stop to consider the genius behind the business model that is the Amazon Kindle.

In part, we have seen this business model before; the mobile phone for example. The expensive handset worth £400+ is given to us free on the basis we sign into a yearlong contract with a telecommunications company. In doing so we end up more than paying for the handset.

Mobile phone companies worked out a long time ago that in order for the mobile to take off it had to get them into the hands of the masses – people had to be able to phone anyone they liked and not just the select few. The price of the handset was a huge barrier for many consumers. So, instead of asking for all the money up front, they offered them a lucrative deal that seemed too good to be true. (They then, of course, made more money on insurance and accessories).

Late 2010 Amazon launched the new branded Kindle and really made it its own. Sales shot up following an extensive marketing campaign on and off line.

The Kindle came to the market late 2009 but didn’t really take off immediately. The number of books available for Kindle limited its appeal and stunted growth. Without some serious help the money invested in research and development for the device itself, all was about to be lost. The Kindle Application was became available on other technologies, such as the iPhone, iPad, Mac and PC, all of which would soon out do the need for an actually device altogether.

In order for this small, ingenious device to really take off, it needed a business like Amazon to get behind it. Priced at £109 for the basic Wi-Fi version and £149 for Wi-Fi and 3G, it feels very much that Amazon are sponsoring the purchase, similar to the mobile phone, though the device is not free. But let’s look at some interesting phenomena that happens to Kindle users: (things that I myself have experienced since my purchase just 2 weeks ago)

 Upon its arrival, I log on to the Wi-Fi and start downloading books. I find myself spending money on books that I already own in physical copy and wondering just how much I’ll need this book on the move – should I buy it again? My backpacking trip being my main purpose for the purchase led me to re-buy many titles just so I could carry them with me, without needing physiotherapy on my return.
 The availability of some books and not others, had me more curious about the book suggestions provided for me in the store lending to me purchasing things I wouldn’t have felt ready to buy in paper back. The discount price (normally half the price of the physical book) speeded up my buying decision. Priced at under £5 in most cases, it felt like peanuts for such a great book normally retailing at £9+. It appealed to my need for a ‘bargain’.
 While reading my purchased copy of ‘Made to Stick’ by Chip and Dan Heath on the Kindle (latest favourite book), I am thinking, ‘Gee, my friend Nathaniel will love this book. I should lend it to him when I’ve finished’ – only I can’t! It’s on the kindle and unless I intend on letting him read when he is with me or giving him my Kindle, no sharing is allowed (One up for the publisher!) My only choice is to recommend he purchase the book himself.
 As my original copy of this book is in the UK and Nathaniel is in Japan, I can’t give him my original copy, like I did when I gave my colleague Lenka my copy of the ‘Four Hour Work Week’. My logic was spot on until it came to hitting my monthly ‘Education Budget’ limit. I figured I would re-purchase the Four Hour Work Week on Kindle and happily use it as a reference guide for my new remote working career while on the road. No, I don’t want to carry the big hard back book around Japan like I carried it around New York. I have to repurchase it – score for Amazon.
 The more books I now can read the more recommendations and giving presents as books I’ll be doing, again increasing my spend on books.

With this wonderful new business model, Amazon provides its customers with a real need and pressing desire to re-purchase something they already have, in other words they have managed to re-sell the same product to the same person TWICE. Talk about increasing your ‘average customer spend per person’ in one clever little wave of the hand!

Moreover, they have just killed the ‘book swapping’ and second hand book market. Each person will have to purchase their own copy – either on Kindle or physically. As people start raving about the ease of which they can carry their entire library in the bag, giving them an endless choice of reading all day long. The sales of Kindle are going to take off, repeating the above phenomena over and over again.

And it isn’t just the Kindle device itself that is creating this. Kindle is also available for the iPhone, iPod, Mac and PC as an application, further opening this ocean of increased revenue – for no extra overheads, I might add! With no physical copy being posted, the company simply make more money on 1 digital file without paying out for printing, storage, postage and packaging. The cost of creating that digital file? Passed on to the publisher!

This is genius business thinking. It reduces your overheads, increases customer spend and opens the door for a landslide of new business – who else wants some of that? Plus, for the best of my knowledge Amazon is the only place to buy Kindle books, and even if it’s not, the Kindle comes already synced with your Amazon account plugged in to your credit card, so why would you go anywhere else?

Oh, and did you get that? No need to keep entering in your credit card details, you simply purchase with the click of a button? Meaning the customer is completely disassociated from the reality of spending real cash, making them trigger happy spenders!

Thanks to a basic marketing campaign that saturated our senses during October 2010 the word Kindle is now on every person’s tongue. Not just with consumers considering the purchase, but especially among the book writers and the publishing industry- a group I spend a large amount of time with. Everyone is now beginning to ask ‘Are you making your book available on the Kindle?’ In fact, the number of hits on the webpage ‘How to convert book for kindle’ dramatically increased from x to y in this period. All I can say is this market is set to grow dramatically. The book is far from dead!

That reminds me – I must buy shares in Amazon this year!