Fixing PalmOne’s Product Line

Posted on February 7, 2005

Because I’m such a nice guy, I’ll take a moment and do the exercise I recommended for PalmOne earlier of simplifying their bloated product line.

Let’s start by thinking about who PalmOne’s customers are. As I see it, you can basically slice them a couple of ways. One way is by use environment — people who use their PalmOS device primarily in the office vs. people who use it primarily on their personal time. Another way is by use scenario — people who need an integrated phone (smartphone), and people who don’t (PDA).

Any other features (camera, WiFi, etc.) are nice but are non-strategic.

Putting these together yields the following list of roles that need filling:

• Business PDA
• Business Smartphone
• Personal PDA
• Personal Smartphone

Many of these roles could be filled with existing PalmOne hardware.

• Business PDA: Tungsten T5, $399
• Business Smartphone: Treo 650, $449
• Personal PDA: Zire 21, $99
• Personal Smartphone: doesn’t currently exist

However, this is not really ideal, for a few reasons. One is that it leaves that “Personal Smartphone” segment unfilled (and my gut tells me that’s probably the segment with the largest growth potential). Another is that the price gap between the “Personal” and “Business” segments is very wide; probably too wide. So to make it really work, we’d have to do some serious surgery to the Palm product line.

SLICING AND DICING

What kind of surgery? For one thing, it’d probably make sense to compress the Tungsten line into a single device. Right now there are a whopping four Tungstens on sale; that’s waaaay too many. What do the Tungsten E and the Tungsten T5 have in common besides a shiny metal case? Not much. So let’s drop them all and replace them with a single device to fill the Business PDA segment — and let’s just call it the Tungsten, to keep things simple.

The ideal price point for this device is hard to pinpoint. The Tungsten E has become a huge success by combining a limited feature set with a low price; the Tungsten T3 and T5 ladle on more features at a higher price point. For our purposes, let’s pin the Tungsten at the current T3 price point of $349.

The Business Smartphone is easy — just keep churning out shiny new high-end Treos, this segment will pay whatever you ask for them. The Treo 650 starts at $449 with a contract, which seems fair. Let’s just compress all Treos into a single “Treo” model, and make Treo the business smartphone.

The Personal PDA is the PDA for folks who aren’t buying on someone’s expense account. Let’s do the same thing with this that we did with the Tungstens and compress all the Zire models into one. I chose the Zire 21 as the Personal PDA target for one reason only — at $99, it squeaks in under the magic $100 price point. I’d be curious to see the sales figures for the 21 versus the 31, though — if the 31 has been selling well, I’d lean towards bumping the Personal PDA target to $149 or so, so that you can provide some nice-to-haves like a color screen.

The Personal Smartphone is currently completely AWOL from the PalmOne lineup. What do you do if you are enamored with the Treo, but you can’t shell out $500 for a cellphone? Right now, you go give your business to someone else, which doesn’t do PalmOne any good. So a cut-down Treo would be quite important. For discussion, let’s call this hypothetical device “Duo”, and let’s tag its price at $299 with service contract, which would require some serious paring down but which should still be achievable.

SIMPLE IS BEAUTIFUL

So now our lineup is considerably simpler:

• Business PDA: Tungsten, $349
• Business Smartphone: Treo, $449
• Personal PDA: Zire, $99/$149
• Personal Smartphone: Duo, $299

This makes it much easier to determine what you need from PalmOne. It does leave some obvious questions open, but I think they are easily dealt with. When it comes to features like WiFi, we’ll make them optional add-ons across all units, or bundle them in with all units. None of this “buy the WiFi Palm” nonsense — remember, sell by use scenario, not by features!

The only downside to this approach is that it orphans two rather nice (and successful) devices: the Zire 72 and the Tungsten E. The Zire 72 is the high-end home user device, which includes a digital camera along with some other geegaws, and which costs $299. The Tungsten E goes the opposite direction, providing business users with an inexpensive, useful option; the E only costs $199.

I think we can safely abandon the Zire 72; it’s a nice device but the confusion it causes in the sales story is substantial (“are the Zires the cheap Palms? Why is there a $300 Zire?”). If we make the unified Zire the Zire 31, with its color screen, I think it can absorb most of the demand for the 72.

The Tungsten E is another story. It’s a very, very successful device; clearly it has hit a sweet spot in the market. It would be a shame to lose that business just for theoretical elegance in the sales story. So one could imagine a slight expansion of the product line to accommodate the type of buyer who wants the E:

• Business PDA, Basic: Tungsten Essential, $199
• Business PDA, Premium: Tungsten, $349
• Business Smartphone: Treo, $449
• Personal PDA: Zire, $99/$149
• Personal Smartphone: Duo, $299

… where the “Tungsten Essential” fills the Tungsten E role — an inexpensive, businesslike PDA. You could split the Personal PDA role into Basic and Premium devices as well, but frankly I’m not sure that it’s worth it on that end.

So that’s a PalmOne lineup of five devices, down from nine. Ideally they would manage this product line the way Apple manages its products — rather than replacing “Zire 72″s with “Zire 75″s with “Zire 81″s and on and on, just define a product at a price point — “Zire”, $149 — and periodically refresh the bundle of features you get for that price.

OK, there’s my $0.02 on rethinking PalmOne’s product line. So the question I have now is: if I, a schmuck with a blog, can do this exercise, why can’t PalmOne?