Rebates Suck: The Palm Pre's Real Price

The Palm Pre is officially $199 after a $100 mail-in rebate. Meaning it's really $299 for a lot of people. Here's the deal:

The $100 mail-in rebate scheme is clever, if slightly devious—it'd apparently cost more than Sprint wants to spend to subsidize every single Pre down to $199, and this way, they're only doing it for the customers who care so much about the price that they actually follow through with tedious rebate process. Which is likely about half. University of Toronto Marketing Professor Sridhar Moorthy says a 50 percent redemption rate is "the maximum figure I've seen." A $100 mail-in TiVo rebate in 2004 saw slightly worse better numbers.

So Sprint's likely charging half of the people who buy the Pre $299—the people willing to pay that much, or at least not so unwilling that they make the effort to send off the rebate with all t's crossed and i's dotted. Those people, in effect, are subsidizing the phones for people only willing to pay $199. And Sprint still gets to say it's $199, since saying anything higher would be suicide.

I want to be madder about it—Sprint is effectively leaning on its customers' natural human propensity for failure to complete a super annoying, time-consuming task in order to prop up something of a lie—but a company who just lost $594 million doesn't have AT&T-style cash to provide the kind of bankroll they'd have to drop if the Pre is the hit they're praying it will be.

Update As a point of comparison, a Sprint rep told Giz reader Dustin that the unsubsidized price of the Pre is $549 (which jibes with this fine print on the Pre's value). The unsubsidized price of the 8GB iPhone 3G is $599. If you figure that the rebate redemption rate is going to be 50 percent, that puts Sprint's average take per phone at around $249, so they're aiming for a $300 subsidy per phone, while AT&T's shelling out $400 per phone.

Judging by AT&T's average $95-per-iPhone monthly revenue—1.6x the amount of cash an average customer forks over monthly—the Pre will be very good to Sprint's coffers over the long term if it's successful, since most customers will likely opt for Sprint's Simply Everything Plan, which is $100 a month. But saving that $100 on every other phone can't hurt.

The Pre is far from the only phone where mail-in rebates are a part of the gambit. But it's still kinda lousy. On the other hand, this opens Sprint up to protests from Rush Limbaugh that they're practicing socialist re-distribution by letting their wealthier Pre customers pay for their less fortunate customers, so maybe this isn't the worst thing in the world. Just remember your damn rebates people. [Hat Tip AllThingsD]