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Why Sprint Should Be Giving Away The Palm Pre For Free

from the just-get-that-sucker-out-there dept

There was plenty of hype around the launch of the Palm Pre, which by all accounts is a pretty damn good phone (I've played around with it, and like it). However, Palm and Sprint made two huge mistakes in marketing it. First, they didn't have a really well-developed developer community building apps for it, so the app store is pretty weak. Apple did this with the iPhone when it launched (and we dinged them at the time as well), but Apple got away with it for two reasons: Apple is leading the field in such smartphones, and it's Apple, who seems able to bring developers to the table with cultish enthusiasm and loyalty.

Palm doesn't quite have that.

If the problem was that the SDK wasn't ready, Sprint and Palm should have waited. Launching before the phone was really ready was a mistake, and the company may be paying for it with rather weak sales after an initial burst. However, one analyst has a suggestion that I think makes a lot of sense, saying that Sprint should drop the price of the Palm Pre to $0.99. Basically, let Sprint subsidize more of the phone -- which it would easily make back in service fees (since the phone requires a two year contract with its most expensive data plan). Pricing the phone at $199 makes it a direct comparison to the iPhone, and that's the last thing that Palm or Sprint should want. But dropping the price to $1 (or, hell, give the damn phone away for free with a two year plan), would get it a lot of attention, and give people a real reason to switch away from other carriers or other phones, and give the Pre a shot. Trying to compete with the iPhone by just saying "but we're better" doesn't work. Rather than spending tons of money on creepy TV commercials that make no sense, why not use that ad budget to subsidize the phone in a way that really builds up a lot of attention and serious buyers? If Sprint did that, I'd go sign up for a Palm Pre that very day.


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  1.  
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    Anonymous Coward, Aug 27th, 2009 @ 4:05pm

    Wait a second - didn't you rail against locked in cell phone contracts before? ;)

    As for "give it away for free", it isn't really a money making game. You take away $200 on the purchase price, and the monthly package has to go up about $10 a month to make up for it. There is no free lunch. So if you take the cost of the phone, the cost of the package, and figure what the phone will cost you total for 2 years, the numbers will be the same.

    There just isn't enough profit in cell phones to be tossing $200 more out the window for every user.

    Further, you cannibalize all of the rest of your market. If a Palm Pre is "free", how much for a motorola phone, or a standard Nokia? They would have to pay people to take those phones. Effectively, those manufactures would likely not want to deal with Sprint in the future, at least not on the same terms.

    Pretty much all parts of your idea hurt Sprint's business. They lose on phone sales to current clients, they lose on phone sales in general, they lose on the Pre, and they lose face with the other phone manufactures (who will likely want very strict price non-compete style clauses in the future).

    What is the upside again?

     

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    TheStupidOne, Aug 27th, 2009 @ 4:10pm

    Re:

    the free phone is just the price of acquiring a new customer. once you have them it is easier to keep them

     

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    Mike Masnick (profile), Aug 27th, 2009 @ 4:40pm

    Re:

    Wait a second - didn't you rail against locked in cell phone contracts before? ;)

    No. I have no problem with bundled deals. I have spoken out against bad ETF agreements, but that's different.


    As for "give it away for free", it isn't really a money making game. You take away $200 on the purchase price, and the monthly package has to go up about $10 a month to make up for it. There is no free lunch. So if you take the cost of the phone, the cost of the package, and figure what the phone will cost you total for 2 years, the numbers will be the same.


    You are assuming that volume of sales doesn't increase. Which would be wrong.

    There just isn't enough profit in cell phones to be tossing $200 more out the window for every user.

    There absolutely is. By far. If you don't think there is, you don't know much about telco pricing.

    Further, you cannibalize all of the rest of your market. If a Palm Pre is "free", how much for a motorola phone, or a standard Nokia? They would have to pay people to take those phones.

    Not so. The Pre would still require a very expensive service plan, which many wouldn't want to pay. Plenty would still be willing to buy those other phones knowing they need to get a cheaper plan.

    Pretty much all parts of your idea hurt Sprint's business.

    No, it wouldn't.

    They lose on phone sales to current clients, they lose on phone sales in general, they lose on the Pre, and they lose face with the other phone manufactures (who will likely want very strict price non-compete style clauses in the future).

    None of those things seem true. They're all based on assumptions of yours that are unlikely at best.

    What is the upside again?

    Many more customers locked in at their highest service plan rate (which has the highest margins).

     

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    shermcraig (profile), Aug 27th, 2009 @ 4:51pm

    Thought the same thing

    It's funny. I was thinking the exact same thing. I am within a few months of the end of my contract with TMo which is why I haven't taken the plunge yet. If the phone were free, I'd do it today. I completely agree with you thought process - I think that would be just enough incentive to draw new customers - in droves. Sprint needs more than a new device or two - it needs to literally "steal" customers away. Offering arguably the best new device on the market would do the trick.

     

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    Ben Robinson (profile), Aug 27th, 2009 @ 5:03pm

    It will be free in the UK

    In the UK pretty much all phones that come with contracts are priced on a sliding scale depending on the per month price. You can get just about any phone free, including the iphone, so long as you are prepared to sign up for a sufficiently large monthly package.

     

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    Ben Robinson (profile), Aug 27th, 2009 @ 5:06pm

    Re: It will be free in the UK

    This is an example of what i mean. Just about all phone contracts are priced like this.

    http://shop.o2.co.uk/update/paymonth.html

     

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    Dharma, Aug 27th, 2009 @ 5:10pm

    I would have to disagree with you on this one, Mike. The quickest way to lose your current customers is to offer the cow for free to newer subscribers. Also, there is a snob appeal with new and innovative products. Giving an innovative and must-have mobile phone away for free takes away the panache of ownership to the upper-income buyer. It's not such a great thing if the homeless guy living in the bus shelter has a free Palm Pre in his hand. Why would I want one?

     

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    John Niman, Aug 27th, 2009 @ 5:12pm

    Small Correction

    The Pre doesn't actually require their most expensive plan (Simply Everything for $99.) I just bought mine with the lowest cost unlimited data plan available ($69.99) and with a little poking around the internet, it's possible to get 25% off of that price per month, bringing the monthly cost to around $55 before taxes.

    Granted, they'll still be making about $1300 off of me over the course of the next 2 years. Even if the Pre costs $600, giving it away for free would cut their profits in half, and tick me off, but -might- still make sense.

     

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    Anonymous Coward, Aug 27th, 2009 @ 5:23pm

    and i know that we arent here really to discuss the ads for the phone, but really... if you think THATS a creepy ad... or creepy in any way shape or form... you are pretty weak.

    weird uninspired and nonsensical? absolutely.
    creepy? not even close


    /here, someone else can have my soapbox now that im done with it.

     

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    Mike Masnick (profile), Aug 27th, 2009 @ 5:29pm

    Re:

    It's not such a great thing if the homeless guy living in the bus shelter has a free Palm Pre in his hand.

    Again, you seem to be assuming that everything is free. It's not. It still requires a high end plan, which the homeless guy isn't paying.

    All I'm saying is that to stand out against the iPhone, the pricing should have been different. Hell, if anything just let Sprint include the fee on the back end, and bump up the service fees. But it needs to do something to stand out, because Palm Pre sales started out not so high and then fell off that low cliff.

     

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    trench0r (profile), Aug 27th, 2009 @ 5:30pm

    but mike...

    isnt the palm pre the more scarce good? the one good they have the most control over because it's tangible? shouldnt they give away free apps? since it's the least controlled aspect of the goods? (as far as the old, digital vs tangible goods) I agree the service itself could be considered a scarce good as well but why not just use the money from the phones and service plans to fund an "app store" that would be the one to beat?

    or was that the point you were trying to make until this idea cropped up? sure as a consumer $1 palm pre's sounds like a huge reason for anyone to consider sprint.. but wouldn't they do better to focus less on charging for things like metered data and digital downloads and charging more for things that actually cost a ton of money to produce? like a smartphone? also, I thought you were against loss leader mentality when it came to "compete with free" arguments

     

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    Dirk Belligerent (profile), Aug 27th, 2009 @ 5:40pm

    Re: Small Correction

    You beat me to this crucial point; one that Sprint cleverly points out in their "Dunkin Donuts in space" ad. The reason I never entertained getting an iPhone - in addition to knowing AT&T blew goats - was the cost of the service, which I figured to be ~$140/mo. Unless the phone could summon a life-sized Cortana to give me lap dances, I wasn't gonna pay that much.

    Because of my work discount, I'm paying ~$67/mo. for my Pre with the Everything Data 450 plan and insurance and taxes. With evenings starting at 7 pm and mobile-to-mobile calls unlimited and just about everyone I know on cells, I wish I could cut back to a 300-minute plan for even less.

    It never ceases to amaze me how much slack Apple gets cut by people who hold their competitors to an unfairly higher standard. "Palm should've foregone months of sales until they could get their App Store and SDK up to full speed. It was OK that Apple didn't have an App Store for a full year because, well, they're Apple and Apple is just the ginchiest!!! [swoon]"

     

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    Dax, Aug 27th, 2009 @ 5:43pm

    my sprint/pre story

    When the Pre was first announced I was blown away and was happy I was w/Sprint and couldn't wait. After 6 months of nothing but "we'll release it in the first half of the year; pricing TBD" I was getting pretty frustrated. It finally came, but it was only a week before they announced the new iPhone. Under the hood their processors/RAM are pretty equivalent w/the iPhone having two years of polish & user feed-back. I was mid contract w/Sprint so I called to see if I could get a break w/o paying $549 to buy a Pre outright (I'd been w/Sprint for 8+ yrs through 3 different states) and was basically told there was nothing they could do for me, but I could break my contract and re-sign to get the subsidized price. I ended up breaking my contract and buying the iPhone 3GS. I really thought I'd miss a keyboard, but I don't at all. Sprint's only convincing argument is that there rates over two years will save you approximately $1200, but since my company pays for my cell service that's a non-issue for me. To Spring and Palm I say almost, but if you really want to set yourself apart and stand out from the pack you have to be bold and trend setting, not timid and an imitator.

     

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    Mike Masnick (profile), Aug 27th, 2009 @ 5:48pm

    Re: but mike...

    I'm all for giving away free hardware when there's a long term service involved and that's where the profits are.

    For years I said TiVo should have done the same thing. Give away the hardware for free with a 2 year contract. Lower that hurdle and build in a nice recurring revenue stream. That's a great business model.

    TiVo didn't do that, and now they're left suing others for patent infringement, rather than leading the market.

     

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    Jeremy, Aug 27th, 2009 @ 5:55pm

    Re: Re: Small Correction

    Please don't make assumptions about pricing if you don't know what it is. I have an iPhone (yeah, yeah fan boi, etc). it costs me $97 a month for the same thing you have (except for maybe nights, not sure when that starts). Granted, that is a large amount more than your $67, but way less than the $140 you quote.

     

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    DJ (profile), Aug 27th, 2009 @ 6:09pm

    Re: Re: Re: Small Correction

    "Please don't make assumptions about pricing if you don't know what it is"

    I, too, have an iPhone. It is by no means the "best on the market", and there are things about it I do not like; but overall, I'm satisfied. That being said, I DO pay about $130 a month. It's the middle plan, not the low or high. So...he DOES "know what it is".

     

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    Loydster, Aug 27th, 2009 @ 6:10pm

    Sprint also shot themselves in the foot not allowing us on the SERO plan to buy it outright and use it on our plan. I had a Pre for 2 weeks. it was nicely done but when you add up the increase in service cost over 2 years and the $200 for the phone it made the actual cost of the phone for me $1160 (just in case $70 per month for service - $30 per month for my current service equals $40 per month increase X 24 months = $960 plus $200 for the phone = $1160) I have not had any issues with their service and have never had any poor customer service. I can understand not giving us a subsidy on the phone with our plan but they are just ticking their customers off by preventing us from getting the phones we like.

     

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    DJ (profile), Aug 27th, 2009 @ 6:12pm

    Re:

    Exactly...
    A "glowing" woman talking soothingly creeps you out???
    You must curl up in the fetal position when watching Snow White then....

     

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    DJ (profile), Aug 27th, 2009 @ 6:18pm

    Re:

    So...saving $1200 in two years huh?

    1200-1160=40

    You NETTED $40 bucks, dude. Yeah that's $40 bucks you didn't have before, but...

    40/24=3.33333333

    $3.33 a month...woot(?)

     

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    Michael Long, Aug 27th, 2009 @ 6:30pm

    And what if the problem is not the fee, but the phone?

    And what if the problem is not the fee, but the phone? As near as I can tell the Pre is pretty much a knock-off of the iPhone with a keyboard added.

    The software isn't bad, but a friend has one and it's not significantly better than the iPhone's. And worse in some aspects. Build quality is plastic blob so-so and, like it or not, it's competing against the Apple/iTunes/iPhone cache and the App Store's 65,000 applications.

    In short, you can't really show someone the phone and generate any excitement, as it doesn't really do anything more than the iPhone or Blackberry they already have in their pocket.

    I think this ties more into your earlier comments regarding innovation and copycats. Apple did it right and covered the essentials the first time out of the gate, then proceeded to refine their design over the next two generations.

    Palm got complacent and let their technology lead slip away, then tried to hit the market with a "me too" product, and one tied to a third-tier carrier, to boot.

    They could give it away, as you say, but I suspect that in this case that a "free" phone will be worth every dime you paid for it.

     

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    Steve R. (profile), Aug 27th, 2009 @ 6:48pm

    Sprint Bad

    Even if Sprint gave the Palm Pre for free, I wouldn't get it. Sprint is not a reputable company. They are still losing customers. You may have good technology, but it the company is bad, it will still fail.

     

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    Pjerky (profile), Aug 27th, 2009 @ 7:21pm

    Re:

    While I agree with you on some points. I disagree with you when you suggest that raising their monthly fees $10 would make it just as costly to own as an iphone.

    I have an iphone and this weekend I looked into the cost of the unlimited Sprint plan versus the not-so-unlimited AT&T plan. At current prices I would save $30-40 per month with Sprint. As much as I hate to say it I am seriously considering switching back to Sprint. I used to have them and left because the prices of the phones, the lack of sim cards, and the horrible customer service.

    Sprint seems to have dropped the price of phones (thank goodness), they have immensely improved their customer service, and they offer some phones with sim cards. If they make the Pre or a Google phone with a sim card they will have me sold. AT&T and Apple can kiss my rear-end with their restrictive phone and excessive prices.

     

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    Brian K, Aug 27th, 2009 @ 7:32pm

    Sprint and the Pre

    Sprint and Palm could never afford a free giveaway.

     

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    Anonymous Coward, Aug 27th, 2009 @ 7:42pm

    Re: Re: but mike...

    Mike, you are thinking like a marketing guy, not a guy worried about the bottom line.

    If you are suggesting to take a $200 product and turn it into a $0 product, you need to say where you are going to make the $200 back up. Remember, at $200, the phone is already HEAVILY subsidized, it might be a $400 phone retail without a plan. It isn't like you are taking a $200 item and making it free, the $200 item is already heavily discounted.

    It's like the Iphone - the $199 price is HEAVILY discounted (actual retail would be around $600 unlocked without a plan, if you could find such an animal in the US - that is the going price in Hong Kong, where the phones are all unlocked).

    $200 up front written off is pretty much exactly $10 a month over a 24 month contract ($200 of lost income and $40 carry & costs for 2 years). So now you have a free phone, but service plans that are outside of what people really want to spend. People are VERY sensitive to price plans, most users are experienced in being locked into a plan in the past, and fear that way more than anything.

    So, if your suggestion is just for Sprint to "eat it", I think you need to check their financial situation. I don't see them being in the position to eat that $200 right now.

    You know, there is an answer somewhere between "price" and "FREE!". Your constant push on "FREE!" is simplistic first year marketing student stuff, not a plan.

     

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    Anonymous Coward, Aug 27th, 2009 @ 8:13pm

    Re: Re: Re: but mike...

    They operate at the loss whether they sell for $200 or $5. The phone was already made, so the money was already lost. Saying they can't afford to "eat that $200" is stupid, because they've already eaten all of the costs. The important thing is to make those costs back and return profits.

    The point of 'FREE' is that has amazing marketing power. Pricing something at $50 bucks has nowhere near the same oomph to it.

    Here's the key thing to remember: phones are mutually exclusive. If I already have an iPhone, you're going to have to give me a very, very good reason to ditch it for a Palm Pre.

     

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    vincent, Aug 27th, 2009 @ 8:23pm

    I've been with Spring for years and carry a Palm Centro, which I like since I can type w/o dirtying the screen. It's no iPhone, but then, I pay $15 per month for unlimited Internet + 300 text messages. The calling plan is also far cheaper than what ATT offers. Sprint has to charge for the Pre because they keep their plans cheaper than the competition. Besides, they need to put $$$ into more towers/better coverage, not subsidizing phones. Spotty coverage is the main reason people stay away from Sprint.

     

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    johnney (profile), Aug 27th, 2009 @ 8:44pm

    I totally agree with you but for one simple fact. None of the phone carriers actually make their own phone. The now consistent forced data plan mentality coupled with ALL of the idiot carriers attempts to lock-in outsourced devices is a scam, plain & simple.
    As long as people keep buying these pathetic devices with their ripoff contracts the thiefs will continue to peddle them because we are led to think we have no choice in the matter.
    Really a shame. In other words people are paying the carriers who want to keep these same people in slavery over a simple phone call using puposefully crippled devices they shovel in your face.

     

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    Big Al, Aug 27th, 2009 @ 9:25pm

    Re: It will be free in the UK

    We have the same situation in Australia, where the expensive phones are all free on expensive plans - cheaper phones on cheaper plans and so on.
    Only people on pay-as-you-go pre-paid plans actually buy phones.

     

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    Dirk Belligerent (profile), Aug 27th, 2009 @ 10:08pm

    Re: And what if the problem is you're an iPhone fanboy?

    Your post is nothing but blind Apple cultist fanboy talking points combined with a healthy dose of ignorance.

    "Plastic blob"? More like "sensuous pebble" instead of hard bar. It's smaller in the pocket; feels better in the hand; and when opened, it has a slight curve that fits the hand and face better.

    But because Lord Jobs didn't give it to you, you don't think you need it. Lord Jobs knows all.

    Doesn't generate excitement? I had someone who'd just bought an iPhone a few weeks before get a case of buyer's remorse when I showed him the multitasking, THE killer app of the Pre over the iPhone.

    As I bounce from email to multiple web windows to SprintNav while streaming Pandora via Bluetooth to my car's Sync system and, oh yeah, make phone calls, I wonder how the iPhone users get along with Apple's gimped one-at-a-time setup. (And no, running the iPod in the background doesn't count!)

    But because Lord Jobs didn't give it to you, you don't think you need it. Lord Jobs knows all.

    How's that $10/mo. GPS nav service working for you? Sprint users get that free. Are you able to send MMS yet? Nope, cuz AT&T's collapsing network can't handle it.

    You see, the facts are plain: it's Apple that's falling behind in innovation. If Lord Jobs ever deigns to let his herd have multitasking, that would make Apple the me-too company, wouldn't it?

    Apple's got a two year head start and plenty of status-over-usefulness sheeple willing to ante up to hop the hype train. But the Pre doesn't have to "kill" the iPhone - it just has to serve the needs of those more discriminating users than the iPhone typically attracts.

     

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    Charney, Aug 27th, 2009 @ 10:32pm

    Palm

    As a developer I don't want to write ecmascript for my application, not because ecmascript is a bad language, it's a wonderful one but I don't want to expose my application source to everyone when it'd be a commercial app! What a dumb move by palm!

    Also noteworthy is palm's creepy reporting of usage statistics, sure the os will report by app crashes (fine), apps installed (fine but can also be a bit creepy) but also reports the user's gps location! (NOT FINE). I don't know if they changed that yet as it did cause a bit of an uproar.

    All in all, I will stick with the saturated iphone market than go to palm's poorly executed strategy.

     

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    Griffon, Aug 27th, 2009 @ 10:32pm

    not 199

    It's worse, it's actually 299, they are just working around that with a crappy mail in rebate for c note.

     

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    Anonymous Coward, Aug 27th, 2009 @ 11:08pm

    Re: Re:

    You offer a retention solution, not a growth solution.

     

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    Anonymous Coward, Aug 27th, 2009 @ 11:10pm

    Mike Mike Mike Mike

    Mike should have Mike create a Techdirt App for the iPhone.

    We'll see who wins.

     

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    Anonymous Coward, Aug 27th, 2009 @ 11:14pm

    Mike Mike Mike Mike

    Hell, that's a RTB.

    I can see the headline now:
    "Mike Ho, Employee of the Month for the next three months, makes a reason to buy."

     

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    Loydster, Aug 27th, 2009 @ 11:47pm

    Re: Re:

    If this is aimed at my post you missed what I was saying. I already have a treo 800 so no new cost there and my plan is $30 a month for everything (voice data text). my new plan would have been $70 per month. So that is $40 more per month plus the cost of the pre at $199. Total cost to have a pre for me is $1159 more than keeping my treo 800 and current plan. Not even the apple fanboys can justify that amount of money for their phone let alone for a plastic phone with limited battery life and apparently durability aissues as well.

     

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    Michael Long, Aug 27th, 2009 @ 11:47pm

    Re: Re: And what if the problem is you're an iPhone fanboy?

    Sensuous pebble? More like a creaky plastic bar of Ivory soap with a cheese-cutter attached.

    Multitasking? You mean like making a call, checking contacts, merging in a second caller, and then going out and getting movie times off the internet all while still on your conference call? That kind of multitasking?

    Doesn't generate excitement? Nope, it doesn't. A few card tricks does not a killer app make. And the sales numbers reflect that fact.

    Palm's real problem is that all it has is a phone. Buy an iPhone, however, and there's an entire ecosystem of applications and accessories, not to mention iPods, MacBooks and iMacs, downloadable music, movies, and TV shows, hooks into Apple Mail and iTunes and iPhoto and MobileMe, live in-store support, and more.

    All backed by a technology company with a stellar reputation, outstanding consumer satisfaction ratings, and billions in the bank.

    Sprint and Palm? Sprint is bleeding customers and the Pre is Palm's Hail Mary pass play... and it's beginning to look like the wide receiver just fumbled the ball.

     

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    david, Aug 28th, 2009 @ 12:21am

    why not give the pre for free?

    1. Name hree products given for free a contract: 1. a free dvr when you buy 3 years of cable, 2, free oil changes for 2 years when you buya new car, 1 month free frent while signing a lease to rent a property. No where does the telcom industry play in to this type of advertising. Phones cost money. Take alook at websites that break down the costs manufacatueres spend to bring a phone like th iphone or palm pre to market. NOw people will see what phones cost, and why should companies sell them for $149, $199, 249.99, or $299.99 Well here is a really novel ideal. We are in business to make money. You go to work to make money, and so do we. Pleased don't tell me how long you have been a customer and how long you have paid us for service, becasue I can then thank you, and tell you we appreceiate your business, and we have used that money to build our network, satisfiy our investors and make sure you have a great network along with a customer service and repair team, all while trying ot take what's left and return some investment to the shareholders. Don't tell me you agreeing to this 24 month contract means I should give youa free phone. If your an averag custoemr yur going to call me 4 x per year for some reason and take 20 min of my time, which is goiong to cost me $20 to 4100 or more, so your monthly money you spend makes sure I can run my business and be there for you; it is not to give you free phone. Just to put this in a final prespective. I deal with consumer clients and business clients. Since I can not talk about actual clients for confidential reasons, lets just say their was a small deal of a business account for a group of 5000 phones that had to go to this softdrink company, and they wanted a flat rate price on equipment. Welll considering that they hy verey large plasn with lots of direct connect and text features for all 5000 phones, we sent them some $500 plus dollar blackberrys for about $25 each with a 2yr contract, and even gave them 18# off their bill for 2yrs. They were very happy. They all have unlimited service at around 287,000 per month. So when you spend 287,000 per month on my phone service, call me and I will get you a 600.00 pda for $25, and if it breaks and is water damaged or physical damaged lost or stolen you will file and isurance claim and pay $100 for a new one, but if it breaaks and can not be reapaired, we will jsut give you anew one and thank you for your business.

     

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  38.  
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    david, Aug 28th, 2009 @ 12:27am

    why not give the pre for free?

    1. Name hree products given for free a contract: 1. a free dvr when you buy 3 years of cable, 2, free oil changes for 2 years when you buya new car, 1 month free frent while signing a lease to rent a property. No where does the telcom industry play in to this type of advertising. Phones cost money. Take a look at websites that break down the costs manufactures spend to bring a phone like th iphone or palm pre to market. NOw people will see what phones cost, and why should companies sell them for $149, $199, 249.99, or $299.99 Well here is a really novel ideal. We are in business to make money. You go to work to make money, and so do we. Pleased don't tell me how long you have been a customer and how long you have paid us for service, because I can then thank you, and tell you we appreciate your business, and we have used that money to build our network, satisfy our investors and make sure you have a great network along with a customer service and repair team, all while trying ot take what's left and return some investment to the shareholders. Don't tell me you agreeing to this 24 month contract means I should give youa free phone. If your an average customer your going to call me 4 x per year for some reason and take 20 min of my time, which is going to cost me $20 to 4100 or more, so your monthly money you spend makes sure I can run my business and be there for you; it is not to give you free phone. Just to put this in a final perspective. I deal with consumer clients and business clients. Since I can not talk about actual clients for confidential reasons, lets just say their was a small deal of a business account for a group of 5000 phones that had to go to this softdrink company, and they wanted a flat rate price on equipment. Welll onsidering that they have very large plans with lots of direct connect and text features for all 5000 phones, we sent them some $500 plus dollar blackberry s for about $25 each with a 2yr contract, and even gave them 18# off their bill for 2yrs. They were very happy. They all have unlimited service at around $287,000 per month. So when you spend 287,000 per month on my phone service, call me and I will get you a 600.00 pda for $25, and if it breaks and is water damaged or physical damaged lost or stolen you will file and insurance claim and pay $100 for a new one, but if it breaks and can not be repaired, we will jsut give you anew one and thank you for your business.

     

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    zato, Aug 28th, 2009 @ 3:01am

    " why not use that ad budget to subsidize the phone in a way that really builds up a lot of attention and serious buyers?"

    I don't think that would help much.
    Palm and Elevation Partners have mainly marketed the Pre to the Apple-hater all along. The parents-basement living, MacSux T-shirt wearing, PC gamer/Apple hater. The Engadget/Gizmodo gamer/losers. How are these creeps going to pay a monthly fee for the contract? And besides, who would they call?
    Palm's Pre marketing strategy makes no sense at all, except for the creepy girl, who would appeal to the target audience.

     

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  40.  
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    Anonymous Coward, Aug 28th, 2009 @ 5:02am

    Sprint actually does have an option to get the Pre for $1, and they will even reimburse you for your ETF. Its not something that is widely advertised for whatever reason, but I was able to take advantage of it, and so have dozens of other people on a forum I'm on. If you contact a Sprint Business Account Rep, they should be able to hook you up. I don't want rep to get overwhelmed with responses.

     

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  41.  
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    CastorTroy-Libertarian, Aug 28th, 2009 @ 5:42am

    Re: Re: Re: And what if the problem is you're an iPhone fanboy?

    Don't forget, the Pre has SERIOUS problems with Exchange, you know that thing we need for WORK emails, Apple did to at first, but fixed it pretty quick, the PRE still doesnt work... hope it does soon, my brillant IT guy made a case to put everyone on these things, instead of get what you want, we listened and now EVERYONE is pissed because email suxes, doesnt work, or half the time out of the service area... The Pre could cost him his JOB...

     

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  42.  
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    Anonymous Coward, Aug 28th, 2009 @ 6:09am

    Re: Re: Re: Re: but mike...

    Sorry, but it is Palm that eats the phone cost, not Sprint if the phone doesn't sell. If Sprint is selling 100,000 Palm Pre's at $200, they aren't going to order 500,000 of them and pay the bill up front. That would be stupid. That would be Palm's problem, not Sprint's.

    Second, Palm is also smart enough to know that "FREE!" has amazing market power, but it also has both the ability to lower the perceived value of their product and has a pretty strong whiff of desperation. They also know that today's informed consumer (this isn't their first phone) knows that the monthly cost is what gets you, not the up front cost of the phone. After all, you love the phone, you don't love the service.

    Phones are not entirely mutually exclusive. They are contractually exclusive. If you already have an Iphone in the US, you are likely on a 2 or 3 year contract, so you are screwed into it. Your early termination fee to switch would kill any deal, free or not.

    Remember, "FREE!" is the easiest marketing tool, but it is also one of the most expensive and least supportive of things like product value and market place position. If making the phone free makes Sprint more popular (they get 100,000 new clients) but they lose $200 over the client's life, they why would they want to do it?

    Free in this case would be lazy man's marketing, and not a very well thought out idea at all.

     

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  43.  
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    hegemon13, Aug 28th, 2009 @ 7:19am

    Re: Re: Re:

    Given the astronomical churn rate in the mobile telco industry, a retention solution IS a growth solution. Most telcos are scrambling to bring in enough new business to replace what's going out the door. If they can keep business, while still taking in new customers at about the same rate, that's growth.

    That doesn't even consider the fact that having an extremely well-reviewed and feature-rich phone like the Pre available for very little money (I think even $49 would be fine) would bring in a LOT of new business.

     

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  44.  
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    Anonymous Coward, Aug 28th, 2009 @ 8:29am

    Re: Re: Re: Re: Re: but mike...

    "Phones are not entirely mutually exclusive. They are contractually exclusive. If you already have an Iphone in the US, you are likely on a 2 or 3 year contract, so you are screwed into it. Your early termination fee to switch would kill any deal, free or not."

    And why is this relevant? Those people won't buy a contract with Sprint no matter what cost you put the phone at, so focusing on them is absolutely pointless.

    You're supposed to focus on the people that are interested in buying/renewing their contract, and give them a good reason to switch over to you.

    "Remember, "FREE!" is the easiest marketing tool, but it is also one of the most expensive and least supportive of things like product value and market place position. If making the phone free makes Sprint more popular (they get 100,000 new clients) but they lose $200 over the client's life, they why would they want to do it?"

    ...because the total net profits are more important than the profits per customer?

     

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  45.  
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    The Infamous Joe (profile), Aug 28th, 2009 @ 8:50am

    Re: Re: And what if the problem is you're an iPhone fanboy?

    I'm sorry, you can't call someone a "cultist fanboy" and then refer to *any* phone as a "sensuous pebble".

    Seriously. Fanboy vs. Fanboy hate is awesome. :)

     

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  46.  
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    Josie, Aug 28th, 2009 @ 9:18am

    Overall, I'm kind of over the iPhone in general. I think the Palm is much more interesting (especially with the key pad), and I would totally pay for the phone if it were a little less expensive. Maybe $99? That way I would totally be willing to wait for better apps to come along. Also, I would enjoy the phone more if it were open to other providers. Unfortunately, Sprint has poor service anywhere outside of metropolitan areas (at least in the North East). I'd like to see some more competition there.

     

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  47.  
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    sprint guy., Aug 28th, 2009 @ 9:50am

    Re: my sprint/pre story

    with 8yrs if service with sprint its hard for me to believe they wouldnt be willing to give you a break on the price and just make you sign a contract extension. you obviously didnt do very much research because sprint is one of the best companies at retention. If you threatened to end your service with them they would have been more than willing to make a deal with you especially if youve been a customer for 8yrs. you didnt try very hard or your lying.

     

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  48.  
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    bob, Aug 28th, 2009 @ 10:04am

    Re: Re: my sprint/pre story

    If you want a deal on the pre, the only deal you will get is this lead - 1. Sprint Retention can not sell or discount the phone. If you mention the word pre to retention, you will get NOTHING! 2. Bestbuy's website has upgraded sprint customers in the past - with no mail in rebate but (no guarantees on this) 3. www.letstalk.com hahd promo to sell new cusomters not existing customers on pre for $200.00 with a $100 mail in rebate, don't know if promo still exists.

     

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  49.  
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    Aaron, Aug 28th, 2009 @ 10:54am

    It appears that you overlooked the fact that Sprint will allow you to upgrade your phone at the new customer price (2 yr renewal pricing + any rebates that are available) if you are a Sprint Premier customer. By virtue of the Everything Plans being required with the Pre, you will be able to upgrade your device in a year as opposed to having to wait for the full 2 years or pay the full retail for the new handset. Its a great program and one that Sprint doesnt advertise nearly enough. Also if your spending 69.99 on a single line or 99.99 on a shared line, then you would have been able to upgrade to the Pre if you were indeed 'half' way through your contract.

    Personally, I like Apple's products, I think they are intuitive to a user though I wouldnt quite say that they are as cutting edge as some people believe. I have a pre and have had since launch and have to say IMHO the phone is amazing.

     

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  50.  
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    John, Aug 28th, 2009 @ 12:11pm

    Re: Re:

    Sprint is alredy undercutting AT&T on there monthly prices. On my family plan, my wifes blackberry is 129.00 a month and my Pre is free. Shared 1500 minuets, unlimmited everything else. How can you beat that. Pluss I get to upgrade every year instead of waiting till the end of my contract. At&t and the Iphone cant even come close to that.

     

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  51.  
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    vastrightwing, Aug 28th, 2009 @ 1:21pm

    No smart phone for me

    Even if the Pre is free, I would not take it because the long term cost of an expensive data contract far outweighs the benefits. Sure, it's a great phone and I'd love to have it if I didn't have to pay the data charges. Until the monthly data charges are part of the monthly air charges, I won't go for it no matter how cool the phone is. Consider that my FIOS internet is $39/mo. for over 2Mb speed. Telco carriers charge that much and more for an experience that is shameful! The CPUs in smart phones are less than acceptable and the speed of the data connections are not that good either. Marry that with a small touch screen, browsers that are not fully compliant with WC3 standards, don't execute a full javascript language, won't run Flash, Silverlight and multitudes of other extensions and short battery life, it AMAZES me that so many people go nuts over a smart phone at all. They have a long way to go.

     

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  52.  
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    Anonymous Coward, Aug 28th, 2009 @ 1:24pm

    You can't give it away for free. Then people will associate that as the device's actual cost, no matter how much they pay for a contract. Look at all the whinebags that had kittens when they couldn't get the latest and greatest iPhone 3GS for the same price as new people because they still had time left on their old contracts. They actually thought it cost $199.

     

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  53.  
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    SethP in NC, Aug 28th, 2009 @ 2:08pm

    Pre for me

    Debated a long time between the Pre (I'm on Sprint but my contract time was up) and switching to the iPhone. In the end, I was adequately impressed with the Pre, loved the much less expensive plan, and also didn't want to just have the same phone that everyone else has.

    I've had my Pre for 6 weeks now and absolutely love it.

    And ever since I discovered the growing library of homebrew apps on precentral.net, I'm up to the gills in useful and useless apps (most of what apple app store has too). Many of these apps will be in app catalog soon.

    I love the WebOS interactions. I've gone back to iPhone and find it clunky and not smooth to navigate around.

     

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  54.  
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    Edaze55 (profile), Aug 28th, 2009 @ 3:16pm

    The Palm Pre might currently be the best phone Sprint has to offer right now, but it wont stay that way for long, and as it stands its served its purpose.

    As Dan Hesse has already stated, Android device(s) will be hitting Sprint before the end the year. At least one will most likely debut Oct 11th, with pre-sales starting as early as Sept 13th, if you believe the rumors.

    With the HTC Hero & Samsung Instinct Q on the way, the Pre is only filling a void in Sprints hardware for a limited time before their are more (and better) choices out there.

    It should also be noted that the Pre is only exclusive to Sprint for 6 months and then it should hit VZ, and then what? Will you write how VZ should also be giving the phone away?

     

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  55.  
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    Ronald J Riley (profile), Aug 28th, 2009 @ 5:12pm

    Re: Re:

    I am afraid I have to agree with Mike Masnick on this one.

    Sprint has been steadily losing market share, mostly due to poor service and billing errors.

    I have been using their wireless data for a few years after dumping AT&T's data plan. Cingular/AT&T flat out scammed me for two years with a steady stream of drivel about how hard they were working to deploy 3G. I was stuck in a contract for two years at $60 a month for a connection which was usually slower than a dialup.

    I was considering trying their voice service, willing to buy a phone outright but not willing to sign a two year contract. They refused to allow me to add voice to my data contract and as a result they are not getting a crack a five lines of business.

    I have made attempts to talk with upper marketing management and those communications went unanswered.

    In addition to offering lower cost phones Sprint needs to give at least a ninety day grace period on contracts. Sprint also needs to offer rollover minutes.

    Their reputation is so bad that most people are going to be unwilling to sign a two year contract.

    They should give people a choice between contracts and subsidized service and month to service if people buy the equipment outright. As long as they actually deliver good service churn should not hurt them.

    I cannot see how they can be hurt any worse than they have already caused by their customer service problems.

    I believe that Sprint's EVDO network is superior to all others. To survive Sprint must increase its customer base and they are going to have to buy that base back with exceptional terms and service. I do think they can do this but I am by no means certain that they have the vision or will to forgo short term profits in order to grow the business.

    Ronald J. Riley,


    I am speaking only on my own behalf.
    Affiliations:
    President - www.PIAUSA.org - RJR act PIAUSA.org
    Executive Director - www.InventorEd.org - RJR at InvEd.org
    Senior Fellow - www.PatentPolicy.org
    President - Alliance for American Innovation
    Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
    Washington, DC
    Direct (810) 597-0194 / (202) 318-1595 - 9 am to 8 pm EST.

     

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  56.  
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    Justin, Aug 28th, 2009 @ 9:01pm

    Bogus

    I gotta disagree, the Pre had real apps on launch, most of them pretty decent.

    And in just 2.5 months, 1.5 since the SDK was released there are almost 200 homebrew apps, along with 50 official apps.

    The pre is more open than the iphone, so while apple had a 2 year head start expect the pre to catch up and surpass it in usuability.

     

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  57.  
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    Anonymous Coward, Aug 30th, 2009 @ 9:21am

    The statement that "Apple is leading the field in such smartphones,.." is totally wrong.

    Nokia is..

    Check again the sale numbers in the smartphone market.

     

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  58.  
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    Mike Masnick (profile), Aug 31st, 2009 @ 12:38am

    Re:

    The statement that "Apple is leading the field in such smartphones,.." is totally wrong.

    You're wrong.

    Nokia is..

    No, Apple is.

    Check again the sale numbers in the smartphone market.

    Ahhhh. I see. It ain't sales we're talking about (and, actually, can you name me a specific Nokia smartphone that outsells the iPhone in head to head competition? Not "all of Nokia" but a specific phone?)

    The iPhone is head and shoulders above any other smartphone in terms of what the market wants right now.

     

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  59.  
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    S-man, Aug 31st, 2009 @ 9:37am

    Re: my sprint/pre story

    I am sorry about the customer support folks that told you there was no way to get the lower price. With your number of years as a customer (if your service was over $90 a month) then you qualify for a new device at the discounted price every 12 months...not every 24. This is often called Whiteglove. Sorry that Sprint lost you as a customer, but hope you enjoy your iPhone.

     

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  60.  
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    Griff (profile), Oct 23rd, 2009 @ 4:41am

    Inconsistent, Mike ?

    I'm sure within the last few days I read you criticizing Virgin for seeking to legally prevent folk from reprogramming phones for another network.

    So what happens when someone starts reprograming their "free" Palm Pre ? Or is that different ?


    Also, in the UK, cellphone usage really rocketed when they introduced "pay as you go" tariffs (people hate contracts and being surprised by big bills).
    Now PAYG and contracts probably hold comparable market share. You can't heavily subsidize a phone on PAYG so people see the real price of the phone.
    When people can compare the price of the phone on PAYG with that on a contract they figure out how much of the plan is paying for the hardware.
    The decision between PAYG and contract thus gets distorted.

     

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