NEW YORK (AdAge.com) -- Last year, Palm had the hottest handset not named iPhone. The Pre was the company's long-awaited Hail Mary -- or at least its best shot to revive the once-storied brand and reclaim a bit of the hand-held market Palm created.
Today, the Pre is not selling and nor is its cheaper, lower-end model, the Pixi. The company's stock plunged 30% on a fateful day last month as two analysts cut their price targets to zero and Morgan Joseph & Co. analyst Ilya Grozovsky called Palm "essentially in an accelerating death spiral."
It's a spiral many blame on poor positioning and mystifying brand advertising -- which the company is now peeling back to focus on pushing the products at the point of sale. No one expected Palm to dominate the smartphone market overnight. But with a little shy of 1 million handsets shipped in the third quarter and more than half of that product still sitting on shelves, its "iPhone-killing" Pre and the cheaper Pixi are anything but, hobbled by supply problems, stiff competition, poor timing and marketing missteps. The advertising was flawed in that it didn't create an overall image for Palm, nor did it hammer home the products' features.
"Palm asked the marketing to do too much," said one ad executive familiar with the account. "You need to pick one of two battles: launching a new handset, or something bigger, like [showing] how mobile can be used in your life."
The first campaign for Pre -- which CNet called "the most anticipated handset of the year" -- was produced by Modernista for the June 2009 launch. The now-infamous "Flow" campaign featured Chinese dancers and a central female character largely described in the blogosphere as creepy. What it didn't do was demonstrate the powerful capabilities of the device like, say, Apple's "Meet iPad" ads did this spring.
By August, after "Flow" had been panned by press and bloggers, Palm fired advertising lead Scott Hancock and tapped an Apple alum to head marketing. Jeff Zwerner, who was an art director and creative director for packaging at Apple and then head of his firm, Factor Design, joined Jon Rubinstein, former head of Apple's iPod division, who in June 2009 was appointed Palm's chairman-CEO after serving on its board for two years.
Distribution and timing (Apple announced its iPhone 3GS within a week of Pre's launch) contributed to the woes as well. Palm opted to release exclusively on Sprint, a bid to be the No. 3 carrier's first smartphone in exchange for investment in marketing. Sprint and its agency Goodby, Silverstein & Partners, however, created a Now Network spot for the Pre that was more focused on the carrier's branding than the phone features. And Palm's Sprint pact came at a cost: Getting Pre and Pixi on No. 1 carrier Verizon would have to wait until January. By then, many of the network's smartphone-seeking subscribers had already loaded up on Motorola's Droid, which Verizon trumpeted in a $100 million holiday marketing blitz.
Palm followed the Verizon launch with a Modernista-created spot to introduce Pixi, a handset targeting women and unabashed in its use of floral imagery. This spot focused more on the handset than Pre's Flow spots, but in its attempt to build brand image for Palm, was short on product description and ran the risk of alienating men. By the time Verizon ran spots from McCann, New York, that cast Palm phones as gifts for retro moms leading up to Valentines Day, it had become identified as a phone for women, narrowing its potential buyer base.
To right its course, Mr. Rubinstein said Palm will focus on point-of-sale marketing by training Verizon and Sprint -- and, potentially, AT&T when the phones arrive on the carrier soon -- salespeople to be ambassadors for the brand, with Pre phones at their hips. As Palm Chief Financial Officer Doug Jeffries said in the call, "We are finding the investment we are making in marketing that affects sell-through is having a lot higher return for us than some of the other market initiatives that are actually more expensive -- specifically, brand advertising."
That means Palm is betting consumers' minds are not made up by the time they walk into a retailer for a phone. But in a market flooded with "App-for-That" ads, Droid-size marketing budgets and, presumably more iPad spots, not everyone agrees. One wonders if Mr. Rubinstein's early iPods would have flown off shelves like they did without those iconic silhouette ads launched in 2003.
"In the market, there's plenty of Apple advertising, so the end result is that Apple has mindshare," said Ramon Llamas, senior research analyst, IDC. "People who knew about Pre were tech heads, but what about everybody else?"
Meanwhile, Verizon is promoting buy-one-get-one-free Palm deals on its website. Pre prices have been slashed to $49.99 from $250 at launch, and $29.99 to $150 for Pixi. As the ad exec familiar with the account said, "You can't be a revolution in wireless if you're giving it away already."
It remains to be seen if Mr. Rubinstein's disenchantment with advertising will trickle down to Modernista, which recently lost its largest account, Cadillac, and closed its Amsterdam office. Both Palm and Modernista declined to comment.
Verizon changed its McCann messaging with a new spot called "Features" that shows off what the phone and OS actually do. And Modernista's recent Palm work, "Don't Miss a Thing," also shows off the user interface, though it hangs on to the female targeting that some critics have found unnecessary.
But at this point, even an Apple-scale media campaign or the recent distribution deal with AT&T may not be able to save Palm from damage already done. Growing market share for Android phones such as Droid, plus Apple's standing dominance, means more app development not happening on Palm, and more consumers skipping over the manufacturer for devices with an app base. To date, Palm's app catalog numbers 2,000, vs. Apple's 140,000 and Android's 20,000.