Amazon Kindle Product Launch: South Africa

April 7th, 2012Presented by Team Zulu Global Marketing 5849

Today’s Agenda Introductions Product Overview Competitive Analysis Cultural Influence Targeting and Positioning Pricing and Financials Marketing Communication Promotion and Packaging Pricing and Place Strategy Sourcing and Distribution Channels Contingency Plan Team Zulu’s success Questions

Kristen Poggensee:Product overview and Competitive analysis

Who we are

Amazon’s International Marketing and Business Development Group: Team Zulu

Our mission: “is to introduce, develop and expand the presence of Amazon’s Kindle e-Reader into the SA school system”

Meet Team Zulu

Kristen Poggensee – Director of Product Marketing and Legal Affairs

Shaku Ramachandran – Director of Supply Chain and Cultural Affairs

Breanna Speed – Director of Market Targeting and Positioning and Finance

Jeff Salle – Director of Marketing Communication and Distribution

Our Value Proposition

“To effectively deliver Amazon’s Kindle e-Reader into schools to help revolutionize education and improve literacy in South Africa”

Definition of Product Kindle e-Reader holds 1,400 books Most advanced e-ink display Read in bright sunlight Built-in Wi-Fi – Get books in 60 seconds 6” screen-fits in your pocket, 6oz One month battery life Support for six international language

Actual cost to manufacturer Kindle is $185 and selling price is $79 Value added (difference between wholesale cost and retail cost) Amazon is well-positioned to capture Kindle’s value back through its:

e-books wireless data service

Kindle Vs e-Content Pricing Strategy(Razor Vs Razor Blade Concept)

Product Positioning

Traditional TextbooksAmazon’s

Kindle

Barnes & Noble’sNook

Apple’siPad2

Ideal for use in SA schools

No use in SA schools

No access to textbook e-content

Access to textbook e-content

Competitive Pricing

Cost per studentAssumption: 7 booksper student per year

* Currently not available Kindle has exclusive license

AMZN “Kindle” BKS “Nook” AAPL “iPad2”

E-Reader Device $79 $199 $399

Case $29 $29 $39

Adapter $14.99 $20.99 $29.99

Import Duties $16.79 $16.79 $16.79

Shipping $30.00 $30.00 (not avail in SA) $30.00 (not avail in SA)

Total $169.78 $274.78 $514.78

Total cost of license per e-textbook

$235 $235* $235*

Total Products $404.78 $509.78 $749.78

Cost to buy textbooks ($100 x 7 books)

$700 $700 $700

Cost / Savings $295.22 $190.22 ($49.78)

Discount 10% (500 units)

$76,401.00 $123,651.00 $231,651.00

Discount 15% (1000 units)

$152,802.00 $247,302.00 $463,302.00

Competitive AnalysisCompetitor Information

Competitors

Text Book Publishers

McGraw Hill Education,Cengage, Learning, Pearson, Wiley

Apple “iPad2” Barnes and Noble “Nook”

Amazon “Kindle”

Revenues $6,246M $127.84B $7.12B $48.08B Strengths Long history as

leading global provider of educational content

BrandProduct design Multiple product lines

LightweightPage turnBattery life

DistributionExclusive for e-contentPrice

Weaknesses TechnologyProductWeightOutdated

PriceDelivery time Reflective display

Not available in SA

Product design

Targets Students and schools

All consumers including student e-book users

Reading enthusiasts

Schools, students and reading enthusiasts

Shaku Ramachandran:Cultural influence

Opportunity Assessment

Large potential market Increasing Amazon’s market share First mover into SA school system Exclusive license with publishers Increase literacy in SA children Improve corporate responsibility

Prime Customer: Ministry of Education Private Schools Public Schools

End User: Students (ages 7-18)

Profile of Prime Customers

Relationships and business negotiations In South Africa, education plays a huge role Government spends 20% of the central budget on education Technology has become an increasingly important lever READ Program Library - portable and book in the box

Cultural Influence

Cultural Word of Mouth

Affect on buyer behavior Drive towards technology acceptance Word of mouth in South Africa rates highest in the world with regards to brand advocacy

Cultural Impact on Kindle

Breanna Speed:Targeting & Positioning Strategy and Financials

Positioning - Targeting

14M Students in SA Initial target market share 5% Three bands of education:

General education and training Further education and training Higher education and training

Grades R – 9 Grades 10 -12

Market Segment

Primary; 5,992,863

Secondary; 3,831,937

Combined Intermediate; 2,445,473

FET; 320,000 ECD; 400,000

South African Market: Target Cities

Secondary Markets

Phase III Botswana Lesotho Namibia Swaziland Madagascar

Grant Donors: SA government: $10,000,000 World Bank: $2,000,000 * Gates Foundation: $2,000,000 Grant from Oprah: $500,000 Clinton Fund: $750,000

Total subsidized funding = $15,250,000

Financing

* Through World Reader Foundation

Annual Sales Forecast

2013 2014 2015 2016 2017

Annual Sales Growth

299643 308632.29 317891.2587 327427.996461

337250.83635483

285000

295000

305000

315000

325000

335000

Axis Title

Financial Analysis

2013 2014 2015 2016 2017$0.00

$10,000,000.00

$20,000,000.00

$30,000,000.00

$40,000,000.00

$50,000,000.00

$60,000,000.00

$70,000,000.00

Annual Revenue Income from OperationOther Income Annual Net Income Before Taxes

Jeff SalleMarketing Communication Strategy

Marketing Communication StrategyThree Point Approach:

1. Market to the South African Ministry of Education.2. Market to individual school districts (metro + rural)3. Market to the end user using a pull strategy to create demand to

bring the Kindle into more school systems

Marketing Communications

Program

Market to Ministry of Education

Market to end user: Students

Market by School

Districts

Marketing Communication Strategy

Advertising

Marketing Communications

Program

Direct marketing

Personal selling

Sales promotion

Events & experiences

Public relations & publicity

Word-of-mouth

marketing

Direct &Interactive marketing

Brand awareness

Brand image

Brand responses

Brand relationships

Modes of Communication

Brand Equity

Kindle Packaging and Labeling

Print Ads in educational magazines like Scholastic’s book club

Point-of-Purchase displays at Ministry of Education and urban schools

Brochures to schools

Advertising

Amazon’s ‘frustration free’ packaging Amazon’s smile logo & Kindle barcode logo Eco-packaging is recyclable & compostable Accessories are shipped separately Open your Kindle and begin your story “Once upon a time…”

Packaging: Outside

Animal print Kindle covers! LED light for night reading Kindle personalization:

*Each student will be able to choose and personalize their own Kindle

Packaging: Outside

Booth at Trade Shows

Demonstrations, Coupons and Contests

Direct and Active Marketing

Electronic Shopping: Amazon.com

Website: Company website, and Social Media, Facebook and Twitter

Sales Promotion

Promote Good Will: Through grants, we will make Kindle

e-Readers available to those in rural school areas who cannot afford to purchase

Helping students improve literacy through the practical use of e-Reading on a Kindle and demonstrating the value of green technology

Public Relations

Person-to-Person; Family, Friends and Colleagues

Social Platform; YouTube, Twitter and FacebookPersonal Selling

Celebrity endorsements: Bono of U2 musician Lucas Radebe SA soccer star

Social Platform; YouTube, Twitter and Facebook

Word of Mouth Marketing

Sponsor of Events:

Sporting events such as FIFA World Cup soccer and SASCOC Olympic Youth Games

Higher education is linked to sports and sets the stage for expansion and going global on a world stage

Events and Experiences

Amazon is headquartered in Seattle WA Kindle components are sourced in a number of locations, assembled in China, and then shipped to the US Fulfillment centers in 10 states e-Reader content is downloaded from account with Amazon. License agreement for text books Software development center currently in Cape Town SA

Sourcing the Kindle

Channels www.kindsouthafrica.com Bulk discount for S.A. schools Amazon Export Sales, Inc. manages contract

with S.A. Ministry of Education

Transportation and warehouse Courier choice depends on shipping time Amazon’s co-sourced fulfillment center and

customer service center JV with PostNet Courier in country

Distribution Channel Strategy

Contingency Plan Maintain ~ 5% Market Share Monitor and adapt to competition through innovation Contract license negotiation

Ministry of Education (SA Gov) Individual school districts Textbook publishers

Sourcing – Manufacturing suppliers Currency exchange Natural disasters

Our talented marketing team’s multi-tiered communications strategy will ensure the rapid implementation of Amazon’s Kindle e-Reader through reaching our target audience and demonstrating the superior benefits of our value proposition through continued education and support.

Our marketing communication program will promote the Kindle e-Reader as a major player in the marketplace and introduce our e-Reader to the world of education in South Africa.

Team Zulu‘s Success

Thank You

Questions

Appendix

R450,000 (US$105,634) to build one school library with an

area of 300 sq.m

$ 303 117 portable library

US$0.12; Cost of the service per school student at level one

US$2; The cost of the service per school student at level two

US$51;The average cost of a book box for level

US$288:The cost of a book box for level two

US$17; costs per book pupil

US$18: the cost of READ classroom library per pupil

Cost effectiveness

South African ContextPer 1000 SA UK US Aus

Personal computers

85 600 762 683

Internet Users 109 473 630 698

Broadband subscribers

3.5 163 166 103

Bandwidth (bits pp)

19 13062 3306 5903

Cost Internet (US$ pm)

63 27 15 22

Mobile subscribers

724 1088 680 906

ITU/World Bank 2005

Market Segment

PEST Analysis

Ecologically safe Favorable legislation trend

Funding/ Private and public Regulatory bodies

Wars and conflicts

Cost of production

Import fees/Taxation

Specific industry factors

Global recession recovery

Lifestyle trends Demographics

Consumer attitudes

Media views

Lenient legislations

Major events

Competing/ evolving technology

Replacement Technical/ Solutions

Associated/dependent technologies

Product Maturity

Technology, contracts, licensing,

Political Economical Social Technological

Marketing Timeline Milestones

2012 2015 2020 2025Milestone 1- Commit to Ministry of Education in SA for initial trail into public and private schools as we enter new market.

Milestone 2-As we expand into rural areas, realize return on investment with estimated sales of over $50 million.

Milestone 3-Slowly faze Kindle into Southern Africa countries using same strategy.

Milestone 4- Capture 40-50% of the Southern Africa school market for e-Readers.

Milestone 1

Milestone 2

Milestone 3

Milestone 4

P&LAnnual Revenue

Income from Operation Other Income Annual Net Income Before Taxes

2013 $50,873,388.54 $ 7,631,008.28 $8,989,290.00 $ 16,620,298.28

2014 $52,399,590.20 $ 7,859,938.53 $ 9,258,968.70 $ 17,118,907.23

2015 $53,971,577.90 $ 8,095,736.69 $ 9,536,737.76 $ 17,632,474.45

2016 $55,590,725.24 $ 8,338,608.79 $ 9,822,839.89 $ 18,161,448.68

2017 $57,258,447.00 $ 8,588,767.05 $ 10,117,525.09 $ 18,706,292.14 $169.78 $514.78 $274.79

$235 $235 $235

$404.78 $749.78 $509.79

ROI Port of Entry

Kindle only 299643$169.78 $50,873,388.54 500$169.78 $84,890.00 $8,489.00 $76,401.00

license 299643$165.00 $49,441,095.00 1000$169.78 $169,780.00 $16,978.00 $152,802.00

other 299643$70.00 $20,975,010.00

Nook 299643$509.78 $152,752,008.54 500$274.78 $137,390.00 $13,739.00 $123,651.00

1000$274.78 $274,780.00 $27,478.00 $247,302.00

$169.78 $25.47 $7,631,008.28

500$514.78 $257,390.00 $25,739.00 $231,651.00

1000$514.78 $514,780.00 $51,478.00 $463,302.00

http://www.sabookcouncil.co.za/pdf/PICC_Cost_of_books_studyFinal.pdfwww.kindsouthafrica.comwww.apple.comwww.barnesandnoble.com/nookhttp://www.mcgraw-hill.com/http://www.education.gov.za/http://www.rogerfedererfoundation.org/en/projects/education-in-africa/read-south-africa/http://en.wikipedia.org/wiki/List_of_countries_by_literacy_ratehttp://www.education.gov.za/dynamic/dynamic.aspx?pageid=306&id=10877Nelson Mandela – Long Walk to Freedom – ISBN 0-316-87496-5www.marketingmix.co.zawww.uneca.org/com4dev/workshop/TV_africa_presentation.ppthttp://www.southafrica.info/about/education/education.htm#ixzz1qTOLq8krPicture http://ebookreaderreview.co.za/http://www.southafrica.info/about/education/education.htm#ixzz1qwvOjndghttp://www.southafrica.net/sat/content/en/us/top-10-citieshttp://www.education.gov.za/http://www.worldbank.org/http://www.oprah.com/angel_network.htmlhttp://www.clintonfoundation.org/

References

Marketing Management, 13/e, Kotlerhttp://www.youtube.com/watch?v=84yOJvTwX6ghttp://articles.businessinsider.com/2009-02-24/tech/30062573_1_first-e-book-reader-kindle-boxhttp://www.squidoo.com/leopard-print-kindle-covers-and-skinshttp://www.sascoc.co.za/http://www.fifa.com/worldcup/index.htmlhttp://blogs.hbr.org/hbr/restoring-american-competitiveness/2009/10/the-us-cant-manufacture-the-ki.htmlhttp://www.amazon.com/Locations-Careers/b?ie=UTF8&node=239366011http://www.kindsouthafrica.com/Home_Page.htmlhttp://www.reuters.com/finance/stocks/companyProfile?symbol=AMZN.Ohttp://www.southafrica.info/about/education/education.htm

References