Tuesday, January 10, 2012

Nook Competing With A Pricing Strategy

The marketing strategy of business works predominantly on two different scenarios, product differentiation or price differentiation. In the tablet and e-reader space, Barnes and Noble is employing the low price strategy to compete with Amazon and others. Their latest announcement, following on the heels of the idea to split the businesses, is to discount the price of the Nook; "the bookstore chain is offering discounted or free Nooks to those who purchase one-year subscriptions to the Nook editions of People or the New York Times. It’s the first time a major retailer has offered an e-reader free with a content subscription." Their Nook Tablet promotion offers a cash discount.

For those who are price sensitive, such a marketing move will draw consumer interest. And partnering with content is not such a bad idea. This particular promotion runs about two months so it will be noteworthy to measure the effect on sales for both partners. At the same time, pricing discounts are easily matched by competition until they become lose-lose for both.

I also wonder what happens to these new customers, especially the ones receiving free e-readers with their NYT subscription. Does B&N have a strategy in place to push additional product purchase by these consumers? Or is it naturally assumed that they will become enlightened consumers once they pick up their first Nook.

It also seems to me that with the push toward more tablets, the e-reader as a product may quickly become obsolete. The tablet offers more versatility and gives the digital reader more choices, including access to video stories connected to the written materials. Perhaps B&N recognizes that as well and sees this promotion as a means to unload inventory as it readies for its next generation of Nook Tablet.