Amazon Addresses Fire Phone Missteps, Admits It Was Overpriced

31 Oct 2014 | Author: | No comments yet »

Amazon beats off Apple in US tablet satisfaction standings.

Speaking to Fortune, Amazon Senior Vice President of Devices David Limp acknowledged that the company has made mistakes with its first smartphone. “We didn’t get the price right,” Limp said, referring to the Fire phone’s initial $199 on-contract price tag. “I think people come to expect a great value, and we sort of mismatched expectations” Amazon has since slashed the price to $1 with a two-year contract, and AT&T is even bundling Amazon’s Kindle Fire HDX tablet for just $49. The Seattle-based firm reported a net loss of $437 million, and Amazon CTO Tom Szkutak disclosed the firm took a $170 million charge “primarily related to Fire phone inventory valuation and supplier commitment costs.” In other words, sales of the Fire flop have been poor, and approximately $83 million in smartphone stock remains unsold — despite an eventual price drop to 99 cents in the United States.

That may be the case, but a survey of people who were prepared to take part in a survey about tablet satisfaction found that the most contented looking punters take their medicine from Amazon. Tablet satisfaction is ranked on five criteria: performance, which has a 28 percent weighting, ease of operation 22 percent, features ditto, styling and design 17 percent, and cost 11 percent. “As value-priced tablet brands continue to flood the market, customer attention is turning away from just the price of the device to a perception of the combined value of price, features and performance,” said Kirk Parsons, senior director of telecoms services at JD Power. “Tablet brands that continue to successfully convey more value, and package more performance at a reasonable price, are more likely to satisfy tablet owners and increase loyalty and advocacy for the brand.” Amazon has topped the tables with an overall satisfaction score of 827. Limp said the company will continue supporting the phone through software updates–it has released two major ones already–and pointed out that the Kindle e-reader took several iterations before it became a hit. “We are going to keep iterating software features to get it better and better,” Limp said. Why this matters: Limp may have a point about the Kindle, but the difference in that case was that Amazon was effectively creating the e-reader market.

While the small number of Fire phone owners should be relieved to hear of Amazon’s commitment, everyone else will simply need better reasons to consider the phone in the first place. However, Amazon may have shot itself in the foot by failing to undercut rivals in the mobile device industry — as the company is known for offering lower prices for items online.

If you view reviews of the smartphone on Amazon’s website, customers have complained of a myriad of problems, including a lack of apps, overheating and poor battery life. Some analysts like Mark Mahaney, Managing Director at RBC Capital Markets, contend it’s “too late” for Amazon to salvage the Fire phone, but Limp claims Amazon isn’t yanking support any time soon. “When you’re taking risks, they’re not all going to pay off,” said Limp. “Those are the facts.” Limp pointed out other Amazon devices, like its Fire tablet line and Fire TV streaming box, that he described as being “very successful” with customers, but he declined to discuss sales numbers.

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