As most companies have taken the traditional path, in the past, to increase profits and revenues, Amazon is trying its’ own approach. Amazon is attempting to decrease the price of ebooks from $14.99 to $9.99 for consumers so that the writers, editors, and Amazon, it-self, can make more money.
This intrigued me because at first it seemed like the exact opposite of what a company should do, however, by applying economic, managerial, and marketing strategies I was able to decode this step taken by Amazon.
The concept of opportunity costs plays into accordance with this plan set forth by Amazon. By decreasing the opportunity cost of ebooks for the buyer, the buyer will then be more inclined to buy more ebooks because it would make them physiologically happier. This is due to Amazon dropping the prices of most ebooks from the current price of $14.99 to $9.99.
Managerial wise, increasing the demand for ebooks is the best option because it reduces almost every cost to $0.00. This occurs due to there no longer being shipping, printing, storing, manufacturing, ext. costs that are associated with printed books; thus maximizing profits.
After taking all of these factors into consideration, it clearly contrasts the traditional view that a higher price is better. Sometimes, like in this case, by decreasing prices you can increase the demand, and thus make a greater profit.
If you are intrigued about this move by Amazon click “here” to read the entire article.
-Gurinder Mahal
Works Cited:
“Amazon Spells Out Objectives in Hachette Negotiation.” Digital Book Wire. Ed. Digital Book Wire. N.p., 29 July 2014. Web. 22 Sept. 2014. <http%3A%2F%2Fwww.digitalbookworld.com%2F2014%2Famazon-spells-out-objectives-in-hachette-negotiation%2F>.