Tarnished Apple Bounces
For those who don’t know, Apple launched its much anticipated iPhone to great fanfare, rave reviews and a hefty USD 600 price tag in July. People around the US queued and happily handed over the money for the must-have device that they claimed was worth every cent.
Then two months later, Apple shaved a third off the price claiming it was the right thing to do and a fact of technology pricing. Apple’s devotees didn’t see it the same way and broke ranks to loudly complain in blogs, e-mails and phone calls.
Apple responded with a public letter from CEO Steve Jobs and a USD 100 refund to all who had paid the original price. “Our early customers trusted us, and we must live up to that trust with our actions in moments like these,” Jobs wrote.
So where did Apple go wrong?
They seem to have forgotten that price is more than the amount of cash that is exchanged for a product and service. It is a complex transaction that embodies the relationship between the brand and the consumer.
Consumers accept that brands like Apple exist to make a profit and that the rarer an item the more it will cost. But by paying a premium they trust the brand will make them look and feel good. That their possession of something relatively unique will underline their own status.
And, yes, overtime the price will come down and better generations of the product will come along. And again price will be the mechanism whereby consumers can decide whether to acquire the updated version and reaffirm their elite and/or cool status.
But by dropping the price soon, suddenly and dramatically, Apple robbed them of their elite status changing them into naive consumers who were suckered into paying out USD 200 too much. Instead of being cool champions of the brand they were exploited chumps.
“I just felt so used as a consumer,” iPhone customer Kevin Tofel told The New York Times. “They hyped up the iPhone for six months and built up our expectations, and then they grabbed our extra $200 and ran.”
So where did Apple go right?
Apple bounced back, well part of the way, by offering an explanation (even if it was less than convincing with Jobs claiming the price cut was life in the technology lane ) and a USD 100 rebate. It showed they were listening and realized they had messed up
Many consumer companies don’t realize that and fail to react to a growing crisis.
“I’ll forget about the unexpected credit long before I forget Jobs’s letter, which I found thoughtful in both senses of the word,” Lou Hawthorne, an early iPhone buyer told The New York Times. “Gestures like this remind me that Apple’s success is not an accident.”
What should they have done?
Being transparent about the price cut: explaining the reason (Jobs says it is to dramatically grow sales in the holiday season thereby benefitting all iPhone users by having a larger customer base for the phone and its unique offerings) and immediately offering a rebate to early buyers (and probably for the full price reduction).
At the end of the day, Apple messed up and recovered ground quickly. But the iPhone, hailed as a the future of mobile phones, is looking a lot more like a commodity.
— This post originally appeared in the Brand Architect