The eReader Price Squeeze

eReader devices like Amazon.com's Kindle face a pricing conundrum: The cost of the display component is high and sales volumes are still modest, yet consumers demand and expect ever-lower prices. Competition from adjacent categories like smartphones and netbooks doesn't help. Forrester surveyed 4,706 US online consumers to better understand consumer expectations for eReader pricing and to gauge the impact of lower-cost devices like Sony's new $199 Pocket Reader. Using a Van Westendorp Price Sensitivity Meter, we found that most consumers substantially undervalue the devices, but the more informed the consumer, the more their price sensitivity approaches reality. The bottom line: eReader product strategists will have to educate consumers and innovate to bring prices down. Even if they are entirely successful at both of those feats, eReaders will never be mass-market devices like MP3 players, but they can exceed current forecasts for adoption.