Amazon
Amazon is hoping the lower price point of its Echo Buds will set it apart in the crowded field of wireless headsets.
Internal documents obtained by Insider showed that Amazon is positioning its new Echo Buds wireless headsets — code-named "Powell" — as a more affordable option than those offered by Apple, Google, and Samsung. The documents also said that it is primarily targeting shoppers with an annual household income of under $50,000.
While Amazon highlights other features, such as longer battery life and greater noise cancellation, the emphasis on affordable pricing reflects the company's strategy of going after budget shoppers to drive sales for its new Alexa-powered headset — and reaffirms its strategy of typically launching price-competitive hardware devices. Most of Amazon's hardware devices, including the popular Echo smart speaker, have been priced at about $100 or below to make them as widely available as possible.
Amazon forecast a total of 5.21 million units of the new Echo Buds sold in the first two years, resulting in $349 million of lifetime value (excluding fixed costs) and a 129% internal rate of return rate, the documents showed.
"The target customer is someone who is new to the true wireless headphone category, or is an existing Alexa customer who wants to interact with Alexa while on the go," the document said. "These customers have noticed the popularity of AirPods but have been hesitant to purchase their own because (1) they don't quite understand the benefits, (2) are turned off by the ID, and/or (3) are not willing to spend over $150 for headphones."
Amazon's spokesperson declined to comment.
Amazon announced the launch of the new Echo Buds on Wednesday, which are expected to be available for a limited promotion at $99, a discount from its original sales price of $119. The new headsets offer wireless charging, are 20% smaller, and cancel "twice as much noise" compared to the first version that came out in 2019, the company said. The new Echo Buds were initially supposed to be released late last year, but were delayed, internal documents showed.
'Price performance'The internal documents also showed that "price performance" was mentioned first in a list of five top differentiators and customer benefits. They said that Amazon wants to pursue a "differentiated" price strategy because it anticipates the wireless-headset category's average selling price to "remain above $100" for the "next several years," and specifically listed Apple's AirPods, Google's Pixel Buds, and Samsung's Galaxy Buds as more expensive options.
"To ensure we continue increasing value for our customers, we are planning our next generation hearable now with a focus on size and cost reduction," the document said.
Amazon planned for a separate non-wireless charging headset priced at $99, the document showed. It's unclear whether those headsets will be released at a later date. The documents also highlighted as key strengths the Echo Buds' smaller design and its active noise cancellation, which is not offered by some of its competing products. Other features, including the growing set of Alexa capabilities (for example, you can check your calendar with a simple voice command), are also mentioned.
In an analysis of target demographics, Amazon estimated 61% of the buyers for the new Echo Buds to come from households with less than $50,000 annual income. Just 8% are expected to have an annual household income exceeding $200,000, the documents showed. The documents listed forecast buyers alongside general-population consumers, and showed Amazon targeting an outsize proportion of consumers from low-income households.
Amazon is also targeting a less tech-savvy customer. Only 11% of the buyers are forecast to be an "early adopter," while 84% are expected to fall under the "early majority" or "late majority" in the tech adoption scale. It does expect its buyers to still be more tech-savvy than the average customer, of which only 6% are so-called early adopters. Roughly 54% of the buyers are expected to be aged between 25 and 49, the document says.
"Powell's promise of providing convenient access to Alexa while on the go is exciting to them. But it's the discreet and comfortable design, active noise cancellation with great audio, and Alexa features — all for under $100 — that finally compels these customers to purchase their first true wireless headphone," it says.
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