Why Does Amazon Discount Echo Dot To $39

By Douglas A. McIntyre Updated Jan 12, 3:16AM EST · Published Feb 18, 7:25AM EST

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Why Does Amazon Discount Echo Dot To $39 — © pianodiaphragm / Shutterstock.com

Among the most visibly promoted products at Amazon.com (NASDAQ: AMZN), the Echo Dot is on sale for $39.99, down $10 for its normal price. It is, based on a percentage, a big drop. The deal does have strings attached, which is the key to Amazon’s discount.

The Echo Dot which is on sale is the second generation, and most recent, version. To get the deal, however, the shopper has to be a member of Amazon Prime. The streaming-media, get-discounts-on-some-products, free-shipping Prime club program costs $12.99 a month. Amazon recently raised that fee from $10.99. A Prime membership paid in advance for a year remains at $99.

Several pieces of research show that Prime members are more likely to shop at Amazon than people who come to the site who are not members. If this is true, Prime may drive an important portion of the company’s e-commerce business. Amazon has also invested hundreds of millions of dollars for original programming to support Prime’s streaming services. It probably needs membership growth and ongoing increases in membership subscription fees to make the service profitable. Of course, if Amazon loses money on Prime, and has to discount the price of the Echo Dot to get new Prime members, it loses on two counts.

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The Echo Dot is also used to attract people to “upsells”, a way retailers make more money on some products. An Echo Dot buyer is offered an accident protection program for $6.99 in case the product is broken in the first two years of ownership, a “connect” plan which allows Echo Dot to connect with other consumer electronics systems in the home. The price of this is $34.99. People who buy this service need to have a home phone and smartphone. As Echo Dot buyers check out, they are also offered an Amazon gift card for $70, which means $70 more in revenue for Amazon later. As people check out, they are also offered cases for their new Echo Dot. The prices for these range from $9.99 to $19.99

The Echo Dot may cost $39.99 on paper. However, if Amazon’s sells other products and services as people check out, it is worth a great deal more to the huge e-commerce and cloud company.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.