Is $99 a Fair Price for the Palm Pre?
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Over the weekend, Best Buy committed a serious blunder that sent the blogosphere into a frenzy. Instead of offering the Palm Pre at its customary $199 price, the company advertised the smartphone for $99. Consumers hoping to catch a good deal hit Best Buy stores only to find that the company had fixed its pricing error and the $199 price was in effect. But some Best Buy stores didn't get the memo and a few lucky people walked out of the store with a $99Pre in tow.
Best Buy admitted in a Twitter post over the weekend that the lower price was a mistake. The company said that it's an organization of "humans, and humans make mistakes."
Although the news of a cheaper Pre has led to a black eye for Best Buy, it has highlighted an important issue that deserves more attention: Was the Palm Pre, at $99, a good deal?
According to the Wall Street Journal, it interviewed a variety of Best Buy store managers over the weekend. Those managers indicated that there was more Pre traffic in stores.
At first glance, that must mean that the Pre is just a little overpriced, and thus, not providing the kind of value proposition expected by the device, right? Well, it gets a little worse. After a little digging, the Journal found that the number of "cheaper" Pres sold, about two or three at most locations, was about the same as those the company sells when the price is higher.
Of course, a single morning at multiple stores can't tell us exactly what would happen to Palm Pre demand if the device's price was $100 cheaper, but doesn't it say something about the Pre if, at $100 cheaper, it can't entice more consumers to buy the device?
Although Palm has said that the Palm Pre has been successful thus far, evidence is piling up that sales have hit a wall and internally, both Palm and Sprint aren't so happy with how the Pre is performing.
"You wont know if we have a real hit on our hands until its been out three months, four months, five months. Its too early to tell," Sprint CEO Dan Hesse said last week at Fortune's Brainstorm: Tech conference. "Were just getting it rolled out in decent quantities for direct distribution."
Hesse's comments tell us everything we need to know about the Pre. Was there any doubt that the iPhone was a success at launch? How about the BlackBerry at its launch? Going further back, was there any doubt that the Motorola RAZR was a success when it was released? In the cell phone business, if your phone isn't a success in the first week or two, it won't be. By three, four, or five months, it's obsolete.
It gets worse. Market research firm CL King said that Palm Pre sales are slowing. And although Palm posted a much better quarter than it has in the past, it might be a short-lived victory.
"Our channel checks suggest sales of the Pre have indeed slowed," CL King analyst Lawrence Harris wrote. "Store traffic at Sprint stores has declined since mid-June. Th e Pre, which initially was not available for online purchase from Sprint's Web site, became available last week. We believe a majority of the Pre sales have been made either to existing Palm users or Sprint subscribers. It also appears not to have been as successful as the iPhone in terms of winning subscribers from other carriers."
Could all that change if the Palm Pre was offered at $99? If one day's figures are any indication, probably not. So, maybe the Palm Pre's issues go beyond the basics, like price, and have much more to do with more serious problems, like quality, distribution, and appeal.
Even for $99, it seems the Pre just isn't the best option on the market.
Don Reisinger is a technology columnist whose work has included popular columns for CNET.com, Computerworld, InformationWeek and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.