174-The Pre Looks to Go Post

Nine months ago, Palm introduced its new Pre smart-phone. On the occasion of that introduction, we wrote a blog (See Blog Here) predicting that the Pre would have a difficult time competing in this fast-growing market. It’s problem? Lack of apps. At the time, Apple had 35,000 apps. That number has now grown to well over 100,000. Other competitors today have as many as 20,000 or more apps available. The Pre has relatively few. Its shortage of apps has shown up in its market share. Recently it had 5% of the smart-phone market, a long way behind Apple’s 18% and Blackberry’s 43%.

In response to its failure to generate excitement in the market, the Palm plans to increase its advertising and add 200 company trainers to help Verizon’s sales representatives sell the phones. This won’t work either.

Returning again to the Customer Buying Hierarchy that we use to analyze a market, we recall that customers buy Function, Reliability, Convenience and Price. They buy in that order as well. Customers keep moving through the Hierarchy until they have found a single competitor who can offer them something important to them and that no other competitor can offer. (See “Audio Tip #70: Several Rounds in Evaluation Failures” on StrategyStreet.com.)

Function innovations dominate very fast-growing markets. The smart-phone market has been a very fast-growing market. Function innovations in the form of applications are today’s name of the Function game. If you don’t have apps, you can forget about the other Function innovations in your phone. Today’s competition can copy virtually any Function innovation that resides in the phone itself. Apps are something else again. (See “Audio Tip #97: How Do We Know if an Innovation will Remain Unique?” on StrategyStreet.com.) They require a large installed base, strengths of Research In Motion’s Blackberry and Apple’s iPhone. Application developers have little incentive to design new applications for the Palm operating system when at least three other phone providers, Research In Motion, Apple and Google, stand in front of the Pre and its smaller sibling, the Pixi.

Unless all three of these companies, with far more apps than the Palm phones, fail, the Palm phones don’t have much of a future. No amount of advertising, nor increased sales training, can make up today for a lack of applications. If it is determined to spend its money in what looks like a losing cause, Palm would be far better off buying applications rather than spending money on marketing and sales. Today’s smart-phone is sold by one user showing another all the cool things that the smart-phone can do. That is a much bigger sales force than Palm or even Verizon can afford.

Posted 3/11/10

Update:

The Palm Pre launched with Sprint exclusivity in June 2009.  This new phone had a few Function advantages but failed to develop a following among the main handset Function innovators, the web developers. The handset also had quality problems. It never sold well. In 2010 HP bought Palm and took over the company’s hardware and software divisions. HP failed with the Palm hardware and disbanded the hardware unit in 2011, killing all its products.

The Pre was too late to the market. HERE is a video describing a way to evaluate the potential market for your new products and services.

9/22

Update:

Apple’s global market share is below 17%. The overwhelming leaders in the market are the Android phone producers, especially Samsung. The picture is different in the US market where Apple leads with nearly 50% of the market. This US leadership is the result of superior apps and, surprisingly, similar or lower prices compared to Samsung phones.  Android’s global leadership is the result of a far greater number of total apps and phones at many more price points than those offered by Apple. It is likely that Apple’s high US market share results in part from Samsung’s high pricing policy.

Apple retained its position as the second-largest smartphone vendor globally in 2021. However, despite its massive sales figures, the company faces countless Android manufacturers combined. According to Gartner, Apple shipped 235.70 million iPhones in 2021, while Android manufacturers shipped over 1 billion units.

In 2022, Apple dominated the US market with about a 50% market share. While it has fewer apps available than does the Android family, Apple has far more downloads and app revenue than does the Android system.  The Google app store has more than 3.5 million apps available for Android users.  The Apple Store lists 2.2 million apps.  However, in the third quarter of 2021, Apple’s app store generated $21.5 billion in global sales compared to Google Play’s $12.1 billion.

There is a common myth that Android phones are cheaper than are Apple phones. That certainly is a myth. In fact, Android’s top-of-the-line Samsung Galaxy line of phones are priced slightly higher than Apple’s equivalent phone.  The myth may be due to the fact that there are far more phones at lower price points in the Android world.

While Samsung is a distant follower to Apple in the US market, its pricing policy of pricing the same as, or at a slight premium to, Apple has certainly helped Apple maintain its high US market share. Samsung has chosen not to exploit its potential superior economies of scale in this decidedly nonhostile market. Samsung has opted for profits from high prices in the US instead. See HERE and HERE for further perspective.

***