Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic Marketing: A Global−Managerial Approach, 14/e

Product Management
and New−Product
Development

Text © The McGraw−Hill Companies, 2002

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Customers around the world bought 13 million PDAs in five years, and 75 percent of them were Palms. Business customers were not very

price-sensitive, so without much competition Palm also enjoyed great profit margins. Palm’s marketing plan for

its new m500 series (www.palm.com) was to improve graphics and power and add modular features like a digital camera and digital

notepad for handwritten e-mail. While these were not big changes for the PDA market, they probably looked revolutionary to the marketing

managers for DayTimer’s pen- and-paper organizers, Timex’s

DataLink watches, HP’s pro- grammable calculators, IBM’s Thinkpad laptops, and Motorola’s digital pagers. The

marketing managers for these products may not have seen the changes to the new m500 or the original PDA as a com- petitor. Yet when a firm finds a

better way to meet customer needs, it disrupts old ways of doing things. And PDAs were taking business from other categories, even digital

cameras. But Palm wasn’t immune to the forces of competition either. Its profits, and the growth of the PDA market,

attracted rivals. Casio, IBM, Sharp, Psion, HP, and others

jumped into the fray. For example, just as Palm was hoping to get growth from sales to students and other

price-sensitive consumers, Handspring made big inroads with colorful, low-priced models. Similarly, Compaq’s iPaq and other brands

chipped away at the high end of the market with units using Microsoft’s new Pocket PC operating system. Many users who wanted feature-

packed PDAs with more power and better screens thought the Pocket PC had benefits that Palm’s system missed. As a weak economy

eroded demand, price competition on high-end PDAs

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