Palm Pre Faces Uphill Battle Against BlackBerry, iPhone
In a Web conference on Tuesday, research firm ChangeWave Research discussed the results of its consumer smartphone survey, which gauged 4,292 cell phone owners to determine their opinions and preferences for smartphones. The survey ran from March 17 to March 23.
Paul Carton, ChangeWave research director, said the overall consumer smartphone market is strong, with RIM leading the pack with 41 percent of market share, Apple holding 24 percent and Palm with 8 percent. Over the next 90 days, Carton said, 11.2 percent of respondents said they would buy smartphones.
But with the Palm Pre, Palm's latest handheld and the first to run its new webOS operating system, expected to hit the market by the end of June, Palm faces several obstacles as it attempts to outshine the other touch-screen titans: the BlackBerry Storm and the Apple iPhone 3G.
According to Carton, Palm is generating increased consumer interest with the Pre, which is a vast improvement for the Sunnyvale, Calif.-based smartphone maker. But despite the early interest in the Pre, Palm has to meet consumer expectations to turn that interest into actual sales and steal market share away from RIM and Apple. Palm is turning to the Pre for salvation amid slumping sales and continued dramatic quarterly losses.
For the next 90 days, Carton said, 4 percent of consumers said they're likely to buy Palm devices, an increase of three percentage points over the previous survey and only the second time since October 2006 that consumer interest in Palm has increased.
"The public anticipation generated by the recent Pre announcement is driving the Palm uptick," he said.
Despite increased interest, Palm has a long road before the Pre is released to be successful, beyond just releasing a high-performance smartphone.
"Above and beyond the Pre's performance, Palm itself will have to outperform mightily going forward to become competitive in this race," Carton wrote. "Not only are they up against two industry giants along with a slew of lesser competitors, but they'll have to overcome widespread negative perceptions about their recent product lines and major concerns about their exclusive Pre telephone service provider -- Sprint."
Carton said Sprint's exclusivity with Palm could hurt the Pre. According to ChangeWave's findings, 17 percent of consumers polled said they aren't considering buying the Palm Pre because they don't like the requirement that they have to use Sprint. Additionally, Sprint lags in carrier market share with just 10 percent, compared to AT&T and Verizon, which have 31 percent and 30 percent of the market share, respectively. Meanwhile, only one percent of consumers who said they are likely to change their cellular service provider in the next six months said they would switch to Sprint, while 33 percent said they would switch to AT&T, the Apple iPhone's exclusive carrier, and 24 percent said they would switch to Verizon Wireless, which has exclusive rights to the BlackBerry Storm.
"Considering Sprint's weakness, the Sprint exclusivity deal appears to be another obstacle Palm will have to overcome as part of its Pre launch," Carton said.
Another sticking point for Palm and the Pre is Palm's poor customer satisfaction rating compared to its chief rivals. When it comes to customer satisfaction, 79 percent of iPhone owners reported they are very satisfied with their iPhones. RIM ranked second, with 50 percent of BlackBerry users saying they're very satisfied. Palm, however, received only a 31 percent rating, ranking seventh among device manufacturers.
To overcome those obstacles, Carton said, the Palm Pre will have to outperform the competition on multiple levels. Carton said the Pre will not only have to outperform its competition, but will also require a strong marketing campaign and a giant advertising budget to rebuild the Palm brand to compete in the high-end smartphone market.
"Palm is going to have to have a marketing mechanism powerful enough to overcome these additional problems," Carton said. "They've got their work cut out for them."
Along with highlighting some of the challenges Palm faces with the Pre, ChangeWave also dissected consumers' iPhone habits, most notably how the iPhone OS 3.0 operating system update and how consumer perception around the possible departure of Steve Jobs as Apple's CEO would affect sales.
ChangeWave found that 21 percent of respondents are likely to buy an Apple iPhone 3G in the future. Additionally, 20 percent of smartphone consumers said they are either somewhat likely or significantly likely to buy an iPhone when software version 3.0 is released.
Meanwhile, Carton said, the "Steve Jobs effect" is waning, with only 9 percent of consumers saying they're less likely to buy an iPhone if Jobs retires. That's an improvement over the June 2008 and September 2008 surveys, when 14 percent and 18 percent of consumers, respectively, said they would be less likely to buy an iPhone if Jobs stepped down.
