We all saw it in the news last June; swarms of notoriously loyal Apple customers lined up around street corners to get their paws on the first-ever iPhone. As if waiting in line for hours or even days was not enough, the customers lucky enough to get one had to shell out $600 for the pleasure.
But so goes the technology wave: we have seen the same thing with game consoles and other devices. Some people just want the newest and the best as soon as possible, and they don't flinch at the long waits or steep price tag. Fast forward two months: Last Wednesday, Steve Jobs, CEO of Apple, announced a huge price cut on the iPhone. The $499, 4GB model was dropped altogether and the $599, 8GB model was slashed by a third to $399. Suddenly, the same people who had so vehemently demanded Apple's newest toy were crying foul on the company to which they were so loyal. They voiced their displeasure to Jobs in e-mails and on unofficial Apple blogs.
Quick to react, Jobs released a letter to his loyal customers just 24 hours after the price cut, offering each person who bought an iPhone at full price a $100 store credit. In the letter, Jobs said, "even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, we need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers trusted us, and we must live up to that trust with our actions in moments like these."
Reports indicate that the reaction of the iPhone customers to this rebate has been positive. While many say they initially felt used, the rebate seems to have restored their faith in the company and in Jobs.
That being said, Jobs' decision to lower the price by $200 was a P.R. disaster from the start. Jobs had to be expecting the worst, since he responded with the plan for a rebate so quickly. But for a company with extremely loyal core customers, initiating such a steep price drop so shortly after the release was a lose-lose situation.
Even if demand was sagging (and it is safe to assume it was), Jobs should have spread the price decreases out more. Maybe start off with a $50 or $100 cut or rebate, then over the next few months as holiday season approaches, gradually drop the price more. A strategy like this would have prevented such a public outburst, and it would have saved Apple some money.
This brings us back to Jobs' decision to offer the store credit. While some may think it was necessary to maintain his relationship with his core customers, those same customers have no one to blame but themselves. Jobs was simply being kind to people who chose to spend their hard-earned money on the iPhone, so they could be the first to have it. Do you hear Playstation 3 consumers complaining about the $100 price cut the console had last month? Or what about those early Motorola RAZR owners who purchased their toy for $499 when it first came out, only to see the price drop to $199 just six months later?
Absolutely not. Just as Jobs dictated in his letter, the technology market is quickly evolving, and the hottest products today will quickly become older and cheaper tomorrow. It is just how the market progresses.
And Apple customers, the majority of whom are younger, Generation Y, technology buffs, should understand this. And maybe even learn from it.
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