Over the last few months, we’ve heard Palm talking about their plans to expand the Treo line of smartphones beyond the Treo 600 and 650.  This expansion will include Windows Mobile 5.0 Treos, Palm OS Treos, and Treos that utilize different cellular radio technologies across different devices.  In this editorial, I want to explore the less glamorous, but equally important topic of price points.

Getting to the point

As early as September of 2005, at what Palm called “Analyst Day”, Palm introduced the first Treo to run Windows Mobile 5.0, the 700w.  Palm also talked about a strategy to introduce new radio technologies and alternate footprints and form factors.   Finally, multiple price points were briefly mentioned.

In the past, Palm has been very mindful of the price tags that are placed on their devices.  In Palm’s traditional handheld business, the entry-level device, currently the Z22, is priced at a very affordable $99.  The mid-range device, the Palm TX, retails for $300.  Again, I believe that this is a reasonable price.  I’m basing this on the features of the TX and it’s intended customers, power user and entry-level businessperson.  And lastly, there is Palm’s high-end non-Treo mobile computer, the LifeDrive Mobile Manager.  This device originally retailed for about $560 last year, however after a second price reduction, a new LifeDrive can be purchased for $400. 

This high-medium-low pricing strategy has served Palm’s traditional handheld business very well.  Until now however, there has only generally been one Treo directly available from Palm and the cellular carriers.  This leaves us with a one price fits all mentality for the Treo business.  I believe, that this era is about to end.

Diversifying the Treo family

Officially, there are only two Treos available today: the Treo 700w and the Treo 650.  Presently, the Treo 700w is only available from Verizon Wireless.  New customers who sign a two-year service can expect to pay $500, while new customers who sign up with a one-year service agreement can pick one up for about $550. Existing customers who are not eligible for trade up promotional pricing can expect to pay nearly $620 for the phone.  The older Treo 650, also available from Verizon Wireless and others including Sprint and Cingular, retails for about $300 with a new two-year service agreement. 

However, there are many people who feel that $500+ dollars, even $300 dollars, is far too expensive for consumers and corporate customers who are faced with cost cutting measures.  In the minds of consumers, $500 is a magic number.  Electronics tend to be more readily adopted when then price tag is less than $500.  That isn’t the case when the price tag is over $500.

I’m not saying that Palm shouldn’t make a profit on their products.  I’m not even arguing that Palm shouldn’t initially charge for building a phone that uses the latest in cellular technology (the 700w has a new EV-DO radio on board).  What I am arguing for is a more diversified product offering and price points that more closely match the traditional handheld PDA business.

The Treo 700w and 700p, which is largely rumored to be launched on the Sprint network later this month, are the new flagship Treo smartphones.  They offer the most robust feature set seen in a Palm Treo to date.  But I feel that Palm needs to have a mid-ranged and low-end Treo to entice more people to trade up from their traditional handheld or feature flip cell phone to the Treo.  There is an interesting debate going on in discussion forums right now about whether or not the price of Treo 700 is worth the added expense among Palm’s current customers.

From the Palm customers that I have talked to and from the posts that I’ve read online, many want to upgrade to the Treo 700 because of the improvements over the Treo 650.  But when faced with a price tag of $500+, many folks look at their current Treo, PDA, and feature phone and decide that the 700 just isn’t worth it.  Palm needs to deal with this situation now rather than later.

I believe that Palm is working to address this issue. Not only because top company officials have mentioned it in presentations at least six times now since the September meeting, but because the bulk of the work is already done.

The middle ground

For the mid-range Treo, I think Palm can continue to sell the popular Palm OS based Treo 650.  In the last four weeks, there seems to be evidence that Palm is getting ready to release a substantial ROM update for the 650.  This upgrade is supposedly more than just the run of the mill bug fixes.  Palm is reportedly planning on releasing software upgrades.  One such upgrade is the replacement of Real Player with the extremely popular Pocket Tunes media player.  So, you can see that with a popular device and continued software updates, Palm can continue to sell the Treo 650 for another two years without having to expend resources to redesign a new phone.

Enriching the entry-level experience

So, where does that leave cost conscience customers who want more than a flip phone and less than the 650?  An analyst report that was released late last year called for a new Treo codenamed “Lowrider.”  I’m not going to get into a discussion if this Treo is real or not, because I don’t think it really matters.  Why, because Palm still has the Treo 600 to use as a model.  The Treo 600 is currently discontinued, but you can still get them from secondary channels.  A redesigned Treo 600 would make the perfect low-cost device.  It would run the Palm OS and the thousands of applications that are already written for that platform.  The cost of the radios that could be used in a new device are now cheaper than the newer high-speed 3G radios that are being used in the 700 series.  Entry-level customers don’t need a hi-res screen.  For them, 160x160 would be adequate.  So why did Palm stop selling the Treo 600?  I’m not sure, but I do have some suggestions for things that would need to be upgraded in a new low-end device.

If Palm is to release a new entry-level Treo, I would suggest to Palm that they change the cable interface from the old Handspring style connector to the newer Palm Athena MultiConnector.  I suggest this for two reasons.  One Palm is already using the new interface on the current crop of smartphones and PDAs.  Secondly, and possibly more importantly, any accessories that a customer buys for their device today can be used on a newer Treo when the customer decided to upgrade to a 650 or 700.

I would also suggest that Palm release an entry-level Treo with NVFS.  People aren’t going to want to reload their phone every time they forget to recharge and NVFS will prevent that from happening.  And lastly, I would suggest that Palm upgrade the PIM suite on an entry-level device to the Palm enhanced PIMs that are now used on all of the current Palm handhelds.  The Z22 has proven that the new PIMs work equally well on low-res screens as they do on hi-res screens.

Bringing it all together

I feel that Palm’s past pricing strategy has worked well.  And for more people to adopt the Treo as their phone of choice, Palm needs to move to the traditionally pricing plans for the growing Treo family.  A $99 - $150 entry-level Treo would mean that more people would be willing to trade up to the Treo so they can take advantage of it’s advanced contact, calendaring, multimedia, and messaging features that a traditional camera flip phone just can’t compete with.  Let the data addiction begin!