Compare Palm Pre sales at Sprint versus iPhone sales at AT&T when first released:

There are many consumers that take a wait and see attitude when a new device or technology surfaces, and the Palm Pre is no exception. When the iPhone was released, its first three quarter sales at AT&T were: 900,000 (4Q 2007), 800,000 (1Q 2008), and 400,000 (2Q 2008). In comparison, the Palm Pre 1Q Sale (i.e. first full quarter) was estimated at 600,000. But in fairness, the iPhone was introduced at $600 (while the Palm Pre was introduced at $300).

Why the price of the phone matters:

We also know that price – especially in this challenging economy, is both a catalyst and hindrance to action. It’s been argued that even with the Palm Pre’s recent price reduction, it still cost $250 at Sprint before a $100 mail-in rebate; versus Verizon selling a number of BlackBerry smart phones for $0.99, and consequently Verizon has continued to add subscribers. Now back to the iPhone. After a significant price reduction, the 3Q 2008 sales for the iPhone jumped to 2.4 million, pretty impressive! But it also show the effect price has on a product. The vast majority of consumers sat on the sidelines until the iPhone saw a signification price reduction to $200. The same may also be the case for the Palm Pre, but we are yet to see such a drastic price reduction from Sprint. Sprint could offer a one month special in November of $0.99 to really test the market – but alas, it’s her choice!

What Sprint can learn from Verizon:

AT&T gained a lot of new customers because it was reported that Apple had signed a five year agreement. So it was either going to AT&T or no iPhone. In the case of Sprint, the minute it was announced that the Palm Pre was coming to Sprint, Verizon announced that they were going to get the Palm Pre in early 2010. This is like the British navy (a prevailing world power at the time) in the eighteenth century, firing cannon (or warning) shots from the brows of her ships. Even AT&T stated that they also will get a Palm device. These actions were devised to take the wind off of Sprints “sails” (as regards to a ship) from the outset of the launch of the highly acclaimed Palm Pre smart phone. So if a Verizon customer can simply wait a few months, then their patience will be rewarded. Verizon’s announcement that they will get the Palm Pre was a tactical move that unfortunately for Sprint, caught them flat-footed. Verizon effectively nullified the exclusivity argument. Business is not just about service with regards the customer, and warfare with competitors, it is also strategy, and therein lies leadership. Don’t get me wrong, I believe that Sprint has shown a lot of boldness in the last few months, for example, free mobile to mobile, reducing their churn rate, etc., but neglected one of the biggest weapons in business, and that is price. Google’s dominance is based upon the “free” model. Verizon has used the “free” model to push the BlackBerry smart phones. And Sprint is selling the Palm Pre phone for initially $300, and more recently $250, if one does not like dealing with mail-in rebates. I just don’t get it. Or maybe it is Sprint that just does not get it!

The Missing Piece of Sprint’s puzzle:

The argument that the cost of “Post-paid equipment subsidies soared to $139 per subsidized subscriber in Q3” cannot be ignored. But is Sprint alone in this conundrum? AT&T used it to their advantage. Verizon used it to their advantage. So why can’t Sprint use it to their advantage? Clearly a lot of things they (Sprint) have done have worked. Sprint has matched AT&T in the smart phone segment (with the Palm Pre smart phone and it’s awesome user interface and multitasking smarts of the WebOS operating system); Sprint has surpassed both Verizon and AT&T in providing the lowest priced monthly plan (and introduced the innovative free mobile to mobile feature); but Sprint is yet to match Verizon’s aggressive marketing of free BlackBerry smart phones. Maybe Sprint is one piece away from completing the puzzle. Let’s hope she sees it before it is too late.