Palm Pre Shortage

June 6^th has come and gone and as a Sprint customer with an expired contract I am still without a Palm Pre. Don’t get me wrong, if circumstances were different this blog’s title would read “My First Impressions of the Palm Pre.” Instead I’m writing about the shortage. Wait…isn’t this the Digital Home Blog? Indeed it is, but rather than focus on the device itself I figured I would write a bit on the implications of these shortages.

 

There are many “schools” of thought on shortages. From an operational standpoint shortages are usually bad – it could imply poor planning, forecasting, inefficiencies, poor QC etc. From a pricing position it might mean you’ve priced the device too low, allowing demand to outstrip supply and in the process losing that vaunted consumer surplus. So can shortages ever help a brand? The short answer is sometimes yes.

 

Nintendo is an ideal example. For those who can recall the days of the NES you only need point to the Super Mario game cartridges as an example where shortages helped perpetuate anticipation and demand. With each installment shortages were always expected at release, emphasis on the word expected. Not necessarily from the company (but they probably had at the very least an inkling) but expected from the consumer base and true to form obtaining that coveted copy of the next Super Mario game proved a difficult task early in the release window. But this fueled demand for the game as it almost became a quest, or a game in of itself. With the time between installments one would imagine demand estimates should have improved, but shortages were reoccurring. Skip a few generations and in steps the Nintendo Wii. 

 

The rampant shortages, coupled with the now pervasive media element (e.g. the Internet) fueled demand for this device beyond the core demographics, AKA casual gamers. Some of my friends even attempted to buy a Wii, despite never owning a game console or even knowing full well what the Wii did. Shortages, whether artificial or real can have a positive impact, although this is a slippery slope as it were – noting that in most cases we never really know if a shortage is genuine or not, because no company will outright say, “yes we purposefully limited supply to create a particular demand structure…” well unless your company makes exotic cars or other goods wedded to exclusivity.

 

In the case of Sprint and Palm a strategy that includes artificial shortages seems a bit peculiar, although more so for Sprint than Palm. The target consumers for the initial Pre launch were likely customers much like me, that is, existing Sprint clients some with expired contracts. But in this case not getting a Pre isn’t fueling my drive to get one, in fact the contrary is more true – and not necessarily in terms of the Pre but my considerations as a Sprint customer in general.

 

As more of my friends and family have left Sprint to competitors, the switching costs for me have likewise dwindled – in fact one could argue the value to switch grows with each defector. So as I said earlier, the shortages are likely more detrimental to Sprint than Palm – recalling that Palm will sell the Pre through other operators post 2009. Despite the risk, shortages were rumored well in advance of the launch even intimated by retailers and Dan Hesse himself. Which begs the question, if a shortage was anticipated due to manufacturing issues then why not delay the launch date? Was living up to the rumored launch date of “sometime in the 1H of 2009” better than shortages? Or if this was an artificial supply issue, then was it worth the calculated risk? I would venture a negative answer to both questions, especially in light of just how important this device is to the two companies, not to mention whatever news is forthcoming from Apple.  It is also worth noting that once Sprint mentioned “shortage” it likely became an inevitable outcome, because meeting demand at that point would indicate far fewer sales than expected – so it is possible the shortage might be short lived (at least it had better be less than 6 months). In the end, I imagine there were more disappointed customers like myself, than those with a heightened drive to get their hands on a Pre following this shortage and with so many substitutes, you have to wonder why.