With Amazon's Fire phone, persistence is key

Bezos says 'stay tuned' for future iterations

Amazon fire phone
Jared Newman/PC World

Amazon, one of the world's most powerful online retailers, has focused considerable marketing attention on its first-ever Fire smartphone, which by all accounts got a skimpy customer response after it launched in August.

In its most recent maneuver, Amazon extended its recent $199 discounted price for its unlocked Fire phone because the customer response was "exceeding expectations," an Amazon spokeswoman said Wednesday.

The $199 offer (including a full year of its Prime service, valued at $99) was set to end at 11:59 p.m. PST Wednesday when the unlocked price (for use on several GSM carriers) reverts to $449.

With the lower price, Amazon also created a separate web sales page for the unlocked Fire phone that left out thousands of earlier customer reviews, many of them negative.

Creating a separate web page for the unlocked device earned scorn from Patrick Moorhead, an analyst with Moor Insights & Strategy. "With the Fire phone, Amazon has done a masterful job in gaming its own review system ... showing just how intent Amazon is to flush excess inventory to get at least some value out of the Fire phone before it becomes obsolete next year," he said.

Another analyst, Jack Gold of J. Gold Associates, said starting unlocked sales on a separate page with a new set of customer reviews is just par for the course. "All vendors try to manipulate reviews to favor their products, and those who say they don't are not truthful," he said.

When the discount began on Nov. 25, Amazon said the $199 price for the 32 GB version of the Fire would last only through Cyber Monday (Dec. 1), but Amazon extended that by two days.

Amazon's $199 price was 69% below the original $649 price first offered in August for a 32 GB Fire phone that was locked to AT&T's network but sold with no contract. In September, Amazon dropped the price to $449 while the subsidized price on AT&T with a two-year contract dropped from $199 to 99 cents.

What's driving Amazon

The pricing changes and other marketing moves have clearly been designed to boost Fire sales because of a poor customer response, bad initial pricing and a highly competitive smartphone market. Depending on whom you ask, Amazon has either been masterful with its marketing adjustments or manipulative.

After its successes in selling its earlier Kindle e-readers and Fire tablets, Amazon's response to boost lackluster sales of the Fire phone offers a case study on how an online retailer works to prevent a disaster.

In October, Amazon Senior Vice President of Devices David Limp told Fortune that "we didn't get the price right" when the Fire was first introduced at $649. "And so we corrected."

But there were still $83 million worth of unsold Fire phones at the end of October, and Amazon disclosed during its last earnings call that it took a $170 million charge, mostly associated with the Fire phone and related supplier costs.

All that happened well before the discount to $199 on Nov. 25. Analysts said the September and November discounts were intended not only to reduce unsold inventory, but also to make way for a newer version of the Fire Phone.

A new Fire OS 4.0 early next year

Amazon has said a new version of the Fire OS is on the way that moves the phone from Fire OS 3.x to 4.0 ("Sangria") early next year, according to an statement in September. The Fire OS is an Android variant.

Gold said the Fire discounts are intended to sell more of the old phones while a new version is in the works. "Getting rid of older inventory is important," he noted.

The unlocked version that went on sale for $199 has some revisions over the original device, including text translation, a secure corporate VPN and user interface and performance improvements. All of those added features will be rolled out to Fire customers over the air in coming weeks.

Customer review dust-up

Some Computerworld readers, Fire customers and analysts have argued that Amazon created a new web page for the $199 discounted unlocked Fire phone partly to obscure negative customer reviews seen on the earlier Web page for the locked AT&T version.

In the world of product marketing, unpopular products and even entire businesses get renamed or rebranded to help boost sales.

Some have called what Amazon has done with its Fire phone unlocked discount a manipulation of customers, but it does seem to follow a pattern with other devices sold on the Amazon site.

In the case of the Fire phone, there is the newer unlocked Web site, selling it temporarily on $199 discount. It includes more than 250 customer reviews from its first week of sales, many from customers praising the low $199 price. The average review is 3.9 out of 5 stars.

Amazon has also continued selling, on a separate web page, the original locked version that includes 3,897 customer reviews with an average of 2.4 out of 5 stars.

To its credit, Amazon has a long tradition of allowing customers to say what they want in their reviews, even damaging and negative comments. Other examples of Amazon selling both locked and unlocked versions of smartphones on separate web pages include the Galaxy S5 locked through Verizon as well as one unlocked version. There is also a locked HTC One M8 web page and one for an unlocked version.

Bezos on the Fire phone: 'Stay tuned'

However one interprets what Amazon is doing with its marketing and web promotion of the Fire phone, there's little doubt that the company plans to keep innovating with the smartphone, regardless of sales volumes.

When the Fire phone was first announced in June, Amazon CEO Jeff Bezos talked about its position in the larger Amazon ecosystem. One of the device's significant innovations, the Firefly button, allows quick connections to Amazon's web pages where purchases can be made.

Just this week, Bezos told Business Insider that it's too early to call the Fire phone a failure. "Some of these things take iterations," he said. "With the phone, I just ask you to stay tuned ... It's going to take many iterations."

Gold had another take. "The Fire phone was targeted squarely at the Amazon faithful, those who are regular Amazon customers and who have Prime and other services," he said. "It's not meant to be a general replacement or competitor to generic Android phones. So many of the customer reviews that slammed Fire phone for not being able to compete head-to-head with other Amazon devices are being unfair. Use it for what it is meant to be and it's not that bad a device."

Copyright © 2014 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon