Early Dirt on Palm Pre Pricing Shows Sprint Still Clueless

palmprewebos.jpgAlthough Sprint seems to be correcting a number of faults and is perhaps poised for a big boost from the release of the Palm Pre, early reports on its pricing, if true, show that Sprint (and other carriers as well) still don’t place much value on building customer loyalty.   Word is filtering out that new customers can pick up a subsidized Palm Pre for $199. But if you’re an existing customer still on a contract you’ll have to pay $299 to get the latest and greatest.

This kind of marketing has been going on for so long that most just shrug and deal with it and of course that’s what Sprint and others count on.   To my way of thinking this approach only leads to customer discontent in the long run. It is no wonder that companies who follow these practices have to have Customer Retention Specialists.

There’s also word that the Pre will have some sort of limited roll out on June 7 and while I can understand that on some levels there is a hint of bizarreness there.

18 Comments

  1. Steve 'Chippy' Paine

    05/04/2009 at 8:43 am

    Not sure i’m with you here.
    If you sign up for a contract, you get a discount on a new phone based on the term/type of the contract.
    If you want to break that contract early and get a new phone upgrade, do you expect to still get the full discount?

    Or is there an early termination fee on top of the extra new phone charge?

    Steve

    Reply

  2. Steve

    05/04/2009 at 8:43 am

    At $200, I’ll probably bite. At $300, it may be time to surrender to destiny and join the AppleBorg…or at least see what they have in store at WWDC.

    Reply

  3. glamajamma

    05/04/2009 at 8:57 am

  4. Warner Crocker

    05/04/2009 at 9:05 am

    Chippy,

    I buy your argument on the subsidization to a point. That point stops hard on the edge when you have customers who get so frustrated with a fee structure, etc.. that they would rather pay the ETF and switch. Sprint used to (and may still) charge a fee for changing phones even after a contract had expired. Again, not a way to ensure loyalty much less build it.

    And has to the pricing itself. I think we’ve read that it costs under $200 to build the phone. So, basically we are subsidizing the marketing, admin overhead, Customer Retention departments, etc.. and not the hardware.

    Reply

  5. Sumocat

    05/04/2009 at 9:16 am

    I’m with Chippy. If you got a subsidy on your two-year contract, you shouldn’t get another subsidy until your contract is up. And actually, they are subsidizing the Pre for existing contract customers, just not as much.

    Besides, it’s not like anyone needs to get the newest phone as soon as it’s released. Nothing wrong with getting the latest and greatest every *other* year (assuming Palm adopts an annual release schedule as Apple appears to be doing). Patience is still a virtue.

    Reply

  6. Warner Crocker

    05/04/2009 at 9:30 am

    Sumocat,

    That thinking, while admirable to an extent, is part of the larger problem that Sprint ran into that caused such huge defections in my opinion. They’d be better off to tie the contract to a customer and not a phone, charge a reasonable fee for switching phones, and quit playing the games they do now.

    I think the legal beagles are starting to see this and that’s why we’ve seen new laws passed to change the ETF structure.

    Reply

  7. Steve 'Chippy' Paine

    05/04/2009 at 9:50 am

    I think the answer is that if you want transparency, buy the phone unlocked. Easier said than done in the U.S. I know. One of the problems that really should be sorted out over the next 10 years to free up the market.

    Do carriers offer phones without contract at all? In Europe, it’s easy to see the no-strings price and buy outright, unlocked. E.g. Iphone 8G is the equivalent of 773 dollars today.

    Steve

    Reply

  8. Sumocat

    05/04/2009 at 10:00 am

    I personally believe Sprint’s problems stem largely from their botched merger with Nextel with a domino effect from there, but that’s a whole other debate.

    Regardless, I don’t think a $100 fee for switching phones before your contract expires is unreasonable when you consider the subsidy is at least $200. The math works in the customer’s favor if they have a year or more left on their contract. If not, then what’s the problem with waiting less than a year? The Pre will still be awesome then and should have most of the bugs worked out.

    BTW, hardware breakdown does not factor in software development. Pretty sure that costs money for a mobile OS this advanced.

    Reply

  9. Sumocat

    05/04/2009 at 10:02 am

    Separate thought: Regarding the limited roll-out, taking into account reports that the Pre is more costly than the iPhone, I think they could launch with a low initial price followed by a slightly higher standard price. Would be a good way to reel in users early and get the phone out there for others to see. Depends on how they want to approach things.

    Reply

  10. Oliver

    05/04/2009 at 1:48 pm

    Get a clue, man: Just because you don’t agree with a company policy doesn’t automatically mean *they* are clueless. Maybe you could explain how you’d run a phone carrier and deal with device subsidies.

    Reply

  11. Warner Crocker

    05/04/2009 at 1:57 pm

    Oliver,

    I think I did offer my thoughts in an earlier comment. Do I disagree with Sprint’s policies. Yep. I do. And I think that is why they are hemorrhaging users. The current economics depend on contracts and terms that are under legal and legislative scrutiny and don’t begin to value the customer as an asset to retain. Until the user threatens to walk, and then they have an entire department to try and mollify those users. That is the beginning of a death spiral for any company.

    Don’t get me wrong. I’d love to see Sprint (and the other carriers) all survive and prosper. I think their problems are of their own making and believe that certainly their are enough folks employed with more smarts than you or I who could figure out a better way.

    Reply

  12. Genjinaro

    05/04/2009 at 2:12 pm

    “Word is filtering out that new customers can pick up a subsidized Palm Pre for $199. But if you’re an existing customer still on a contract you’ll have to pay $299 to get the latest and greatest.”

    The one thing I don’t like about Sprint, the only thing really (I still feel they’re the best in the U.S.) but yeah, as far as new phones go for exsisting customers, we are given the short stick ALL of the time. Just once I’d like to at least have a window of opportunity to buy a new phone at the “new customer price” and not only the 2 year upgrade price or end of contract as my only options.

    I fully agree with you here.

    Reply

  13. bluespapa

    05/04/2009 at 3:43 pm

    I can deal with $100 difference. If it’s $400, and or I find the same phone I just bought at Verizon for $400 less, I’m upset.

    That won’t happen with the Pre anytime soon. If they’d ever release it. The first half of 2009 is soon to be history.

    Reply

  14. james

    05/04/2009 at 3:48 pm

    Genjinaro, people who are up for replacement are given the same price as new customers. Those under contract who are not up for upgrade eligiblity pay a bit more. Why should your phone carrier pay for you to get a new phone everytime one comes out that you want?

    Reply

  15. Dovid Leonard

    05/04/2009 at 7:50 pm

    What an idiot. You comment on a rumor as if is fact.

    You are the clueless one.

    Reply

  16. Shawn

    05/04/2009 at 9:37 pm

    Not sure what people are griping about… Sprint sells you a phone for about half the price the actual cost of the phone, they pick up the tab on the other half. Every 2 years they let you buy another phone at the new customer price ($150 off). After 12 months they will let you buy a new phone with a $75 dollar discount, for those who want to upgrade every year.

    While I think it would be great if they would let me buy a new phone every month and I could get it at half price, reality is that they would go out of business in a heartbeat. No other (american) company does this.

    I think it’s awesome they are letting people who are still in a contract upgrade for $299. Go check and see what AT&T would charge you to upgrade to the new iphone if you’re only a year into your contract…

    Reply

  17. John

    05/05/2009 at 4:51 am

    And what does the iPhone go for without a contract?

    BB Storm?

    G1?

    They’re all more than $300.

    Reply

  18. Robert

    05/12/2009 at 5:21 pm

    I am an existing sprint customer who went out of contract in February. Since I’m now a free-agent as it were, I’m shopping for something to replace the Moto Razr v3m that’s been amazingly reliable up until last month when both batteries I have die after about 12 hours. It’s just old and I want something fresh.
    I’d be willing to extend my contract and get a new phone, but come on! I got the Razr when it just came out and it was free w/ 2yr contract….I cannot justify paying more than $99 for a new phone, it’s just not worth it.
    I want a Pre, I like it’s features, but if I (as a existing customer for nearly 6yrs now) can’t get a loyalty break on it, say down into the $99 range, I will switch. If they won’t subsidize loyalty, I won’t bestow it.

    I can get an iPhone 3g 8gb through work with new 2/yr At&t contract for $99….and my monthly service bill would be about $15 less than i pay for voice only with sprint.
    It’s turning into a no-brainer. I like sprint’s service, it’s a very good network, but I, as in business, watch the bottom line.

    Reply

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