About two years ago, John Walkenbach a Microsoft excel guru was one of the first people to notice that the Kindle’s price had been dropping at a consistent rate since its release. As Kevin Kelly recently put it in a blog post of his own: its price has been lowering “almost on a schedule”. Walkenbach went on to remark that should this trend continue, the Kindle would essentially be free around July 2011. Since then, several have concurred with his hypothesis. With the summer of 2011 not too far away, this raises some significant questions for the Ipad or any other product competing for some e-reader market share. As Mike Auraz, strategy director at Undercurrent put it on Twitter: “The Kindle doesn’t sound so bad compared to the iPad…if it’s free”

Kindle Price Forecast according to John Walkenbach

While many analysts have hopped onto the Ipad bandwagon and called it a winner, I urge them not to preemptively jump to any conclusions. A fulfillment of John Walkenbach’s hypothesis would readily dismiss the numerous analysts that believed that the Ipad would be a ‘Kindle Killer’. In fact, it would most probably have some dramatic effects on the e-book market, increasing e-book consumption (and Amazon revenue) exponentially and assuring Amazon a significant lead as an e-reading platform-note my use of the term e-reading platform rather than tablet. One can also suppose that this would compel many publishers to back Amazon energetically. While it is certain that the Ipad will continue doing well (and it deserves to as it is a pioneering product) I don’t think the Kindle will be disappearing anytime soon!

In fact, should things unfold according to Walkenbach’s predictions, I believe this would drive a systemic shift in the tablet/e-reader market. We would once and for all stop lumping e-readers and tablets into the same product category. There would be an e-reader market dominated by Amazon (and fueled by publishers) and a tablet market dominated by Apple (fueled by apps & programmers). Tablets would be perceived more as computers (that can also read e-books) and e-readers would be perceived for what they truly are: book-reading devices. I personally think this shift is long overdue, because as Steve Jobs proved (once again) today: with applications such as Imovie or Garage Band, the Ipad is much more than an e-reader!

While I remain doubtful that the kindle will ever become completely free (as in 0.00$ and absolutely no costs attached), it might very well attain some form of what Chris Anderson described as “20th century free” in his book Free: the Future of a Radical Price. In other words: some form of agreement that the retailer will provide the product freely if the consumer agrees to certain terms. One of Anderson’s examples of this phenomenon was 20th century disposable razors: the consumer would receive the disposable razor freely and then have to purchase his own blades. A more contemporary example to think of would be cell phone plans (as Kevin Kelly discusses in his post), where one has to sign up for a significant period to get a free phone. Thus, as Anderson points out, it’s really about “giving away one thing to create demand for an another”. In Amazon’s case, distributing the Kindle freely would enable it to generate enormous growth and scale in its e-book sales (thus compensating for the fact that it distributed the technology freely in the first place).

Kevin Kelly suggest that they might propose to give the Kindle freely if if the consumer agrees to purchase X number of e-books. Michael Arrington from Techcrunch thought it could be a plausible gift for their prime customers only. When discussing the subject with a friend, he suggested that they might choose to provide it freely to people that sign up to specific book clubs or packages. While all of this might never happen, one thing remains sure: a continued downward adjustment in the products price would definitely help it gain valuable e-book market share. What do you think? Does the strategy make sense? Is it realistic, utopian or delusional? As always, your thoughts, comments and feedback are welcome!

Microsoft had one big problem: They weren’t listening to their customers. While this model could work in the past (because nobody could really express their anger efficiently), this has changed. In this day and age, it has become more important than ever to listen to your customers. The social networking & publishing tools of the internet let anybody publish their opinion and talk about their brand experiences to the rest of the world. As Jeff Jarvis brilliantly states in his book “What Would Google Do?”: Today, when you lose a customer, you don’t lose just that customer, you risk losing that customer’s friends. And thanks to the internet and blogs and consumer rate-and-review services, your customers have lots of friends all around the world.”

Not listening to their customers meant that they weren’t satisfying their needs, expectations and desires. If your product doesn’t meet the customers needs, they will stop buying your products and eventually all their friends will too. The important thing to remember is that it’s all about the customer: At the end of the day he is the one that will be buying your products, so it seams logical to try and please him. Unfortunately, many companies still haven’t understood this idea. Fortunately, Microsoft finally has.

Their previous product (Windows Vista) was a blatant failure. How did they attempt to make this one better? They listened to their customers and added the features they wanted. Jeff Jarvis states that “Your worst customer is your best friend”. He is quite right. Today’s publishing tools have given your customers the power to tell you what you are doing wrong. All you have to do is listen. Your product will inevitably get better and this will help you in the long run. Remember, that your customers have a lot of friends, and if they like your product, they’ll spread the love. This is a two way model, so embrace it.

More importantly, Microsoft finally understood that in our present market you can’t compensate for a bad product with more advertising. A bad product will inevitably lower you reputation and will definitely have negative impacts on your business. Advertising is of no use until you product meets expectations. If the quality of your product isn’t there, don’t waste your money on advertising, invest it in developing a better product. Once you have a good product, then start promoting it. Furthermore, a good product becomes advertising in itself. People will eventually become so loyal to your company that they will embrace it and spread the love. Don’t believe me? Look at Apple. They understood all this a long time ago.

Microsoft’s latest advertising campaign demonstrates all these ideas brilliantly. I firmly believe that these changes in their brand strategy will pay off. It took them a bit of time to adapt but they are finally moving in the right direction. Now, all they have to do is keep it up.

Check out their latest campaign here:

Windows 7 Collaboration Campaign