Matter/Anti-Matter

The NYT’s Bits Blog spells out how the pricing for the iPhone basically turns it into a subscription, at least for people who want to upgrade their phone regularly. With the new prices and GS model announced Monday, there are now three tiers, as described by Bits:

• The $199-every-two-years plan. That gives you the base model of the most current phone hardware every two years. You have to suffer a year of jealousy when others have the newest phone and you don’t. There is a similar $299-every-two-years plan for the higher capacity phone.
• The $399-every-year plan (with an introductory rate of $199 the first year only). For four times the effective annual cost, you get the base model as soon as it comes out. Premium users may gravitate to the $499-a-year plan ($299 to start out) to be sure of having the very best model.
• The new $99-every-two-years plan, if you want to have last year’s model and keep it for two years. As I wrote Monday, this may go down to a $0-every-two-years plan next year.

Given that the average consumer gets a new cellphone every 18 months, this isn’t really different from what’s been going on for years, it’s just that the price-point is far higher. But it’s not out of line for other smartphones, and if anything Apple has been pushing prices down in the category — for launch prices at least. BlackBerry and Palm both had to launch the Storm and Pre, respectively, at the $200 pricepoint, or they wouldn’t stand a chance against the iPhone.

The difference is that in the past launch prices quickly dropped, sometimes to free, whereas Apple keeps them consistent throughout the life of a product generation. So while it puts pressure on competitors for their launch prices, it also opens the door for them to drop their prices over time, perhaps significantly undercutting the iPhone.

And for the record, I sympathize with a commenter on the Bits Blog post that it’s unfortunate that so many see resource-intensive products like cellphones as disposable on such a frequent basis. Granted, they get beat up a lot being handheld and portable, but upgrading is by far the most common reason. I have to plead guilty as charged here too, though I generally hang on to a phone for more like 3 years (my Sony Ericsson has a cracked screen, but otherwise I still use it).]

(Credit: Palm)

A few weeks ago I wrote an article about the new Palm Treo Pro, and I was fairly critical of the new smartphone. Why? Basically because I felt that it was good, but good isn't good enough in today's dynamic smartphone market. To delve a bit more deeply into this I thought it might be interesting to use the Kano model to examine this further.

The model, named after its inventor, Professor Noriaki Kano, provides a simple way to think about how products meet or exceed customer needs, and differentiate themselves against the competition.

The model consists of two axes. On the vertical axis is degree of customer satisfaction. On the horizontal axis is how well the feature or capability was executed, from poorly/not at all, to very well done.

Onto this we can plot three different types of needs -- Excitement, Performance and Basic:

Performance needs: These are primarily quantitative things about technical performance (mpg, 0-60, hold-time on a customer service call), and are often easily articulated by customers and are top-of-mind. For the sake of simplicity this is averaged out to a 45 degree angle - in other words product performance and execution matches customer expectations in a linear manner in a chicken-egg cycle.

Basic needs: Expected features which customers take as a given (and are therefore usually unstated). Having them does not improve your position, but leaving them off results in harsh assesments. Even the best execution on basic needs leaves a "neutral" assessment by a customer. So basic needs have diminishing returns over time, and always stay at or below the horizontal axis.

Excitement needs: These are the "wow" factors that differentiate from the competition by achieving something that customers had never even thought of but which have obvious benefit. Presence of exciters is a big differentiator, but lack of them is not a disappointment as they are not expected. By definition, excitement needs start above the middle point.

It's such a fine line between stupid and clever

I wrote a post a couple of years ago riffing off the classic line from This is Spinal Tap - basically the idea being the it's not always easy to tell when an idea is good or bad, and often the timing of it makes all the difference.

Kano posits the same thing: needs change over time - exciting becomes performance becomes basic.

When telephones first came out, people were ecstatic that they could talk with friends without leaving the house. It didn't bother them that the phone was attached to the wall and they couldn't stray more than a couple of feet from it. It just wasn't necessary to have a cordless handset with a built-in answering machine. These things came along later as the technology matured. But if you tried to introduce a tethered handset now (outside of an office setting), forget it. (Though I have to admit we recently bought one for our house, for $9 from Radio Shack, because we wanted an emergency phone for earthquakes...)

In the case of the Treo Pro, my take is that it is delivering well on the Basic and Performance Needs. In other words, it checks all the right boxes for what a smartphone needs to do at this point in time. But what it lacks (except for perhaps current Treo users, who are happy it exists at all) are "wow" factors like the iPhone's touchscreen and gorgeous UI, or Android's promise of endless developers, or the much lower price of some other smartphones. It's not bad on anything, it's just not outstanding. And because this is its position on day of release, the market context will just get worse for it over time. The smartphone market is at an inflection point right now of shifting from niche to mainstream, and lots of competitors are going to start piling on. This will result in a quickening pace of exciters shifting to performance and basic. It happened quickly in the cellphone market (just as Motorola how much luck it had keeping up after the initial success of Razr), and will happen at least as quickly in smartphones.

So the Treo Pro is a good phone for right now. But Palm needs to get its skates on, because the clock is ticking.

(Credit: Palm)

Underwhelming--that's the word that comes to mind when I look at the new Palm Treo Pro.

Yes, nicer looking for sure, with a strong influence from the lower-cost Centro model (and looking rather like the upcoming BlackBerry Bold). It also has 3G and Wi-Fi, which is great, the newest version of Windows Mobile, and GPS, though these can also be found on existing competitors. So it's got a decent package of features, but what's so compelling about it that isn't offered elsewhere?

In this day and age, offering a screen that takes up less than 50 percent of the device, especially with as big borders around it as the Pro has, just doesn't cut it. I'm not suggesting touchscreen only here, as I definitely prefer typing on a physical keyboard to tapping on a virtual one, but really, even a business-oriented device like this one is going to be used to show off photos, look at Web pages, etc., which all benefit from a large screen. The 320x320 screen has been the Palm standard for years now. Heck, even the Palm Tungsten T3 I had four years ago had a 50 percent bigger screen, albeit without a physical keyboard. The Pro's screen already looks small, and will look even more diminutive over its product lifecycle given how slowly Palm brings out new models.

Size-wise the Pro is almost identical to a BlackBerry, though longer. It's fatter than the iPhone. So there's no real advantage in pocketability or bragging rights there.

The talk time and battery life are good, but the 2-megapixel camera is ho-hum.

In this video Palm talks about how the Windows interface is great because it mimics what people are used to on their desktops. Ironically, as Rob Haitani, the software architect for Palm back in the day, used to say: the whole philosophy of the original Palm OS was that you should not try to mimic a big-screen mouse/screen environment, because it was not optimized for small-screen direct touch interactions. Transferring desktop interaction patterns onto a handheld was just not efficient, and that's why the early versions of Windows Mobile were slow to use. Now that it has adopted the Windows platform exclusively, Palm has to sing the opposite song.

Palm got a lot right in its earliest models, but it has struggled to stay innovative and focused in the last few years.

In the video, Palm also talks about how it wanted to take care of all the little details. It looks like the company has done that. But by focusing on the small things Palm's come up with a device that treads water in the market. There are no big things that really push the boat out further compared with other smartphones. There are no marquee features that really stand out in an increasingly large and diverse crowd. With the current state of the smartphone market, that's just not good enough to move the needle on Palm's dwindling market share and attract new customers to the Palm brand.