iPhone beta testers get a $100 reward. Well handled.

Well handled. That's my reaction to this announcement from Steve Jobs on the Apple iPhone price reduction fiasco. Well handled. Each person who paid $599 for the iPhone will be receiving a $100 Apple Store credit. Folks that are entitled to a rebate or price match don't get the deal, but they're better off without it.

I don't want to rehash the issue in its entirety here, but I do want to share some last opinions on why this is the right thing to do. Yes, early adopters often pay more for products to get them first. You're preaching to the choir with that argument as I've owned four HDTVs already; the first one purchased in 2001 before I could actually receive any HDTV content. The issue isn't as simple as "paying more" for something. The issue is that there are certain expectations and precedents that were just shattered by the scope and quickness of the iPhone price cut. In the grand scheme of my mobile tech budget, $200 isn't going to break me. However, you have to look at the percentage of the price drop to keep this perspective. That $200 is 33%. When you combine that large relative amount with the fact that the price dropped just 60-odd days in the product lifecycle, something is wrong. People will feel used.

Another way to look at it: the iPhone was announced in January as was the price. It was heralded as a truly innovative and game-changing device, the likes of which we haven't seen before. I'm comfortable in agreeing with that. For six months, interest was building in this innovative device. Two months after introduction, it was tossed around with a large price cut in a device market where the typical lifecycle is around 12 months and contracts last for 24. It's not the iPod market I'm talking about, it's the cellular phone market. 

In the end, I put my consumer beliefs behind and used the dusty ol' Economics degree hanging on my wall to understand why Apple had to drop the price. I mentioned it in my post yesterday with this thought on the iPod Touch: Remember the $599 justification for the iPhone was it's an iPod and a phone. If the iPod features are $299, is the phone part worth $300?

With the introduction of a $299 iPod Touch with 8 GB of memory, the market wouldn't sustain a $599 iPhone with 8 GB of memory. I get that. It's nice to see that Apple gets how their earliest adopters feel after such an announcement. The good news is: my Leopard upgrade should only cost me $29 now... unless they lower the price of that two months later as well. ;) Not likely and I'm just kidding.

Thanks for the heads up, Jose and Trevor!

Comments

[James Kendrick]

Kudos to my hero for doing the right thing. Shame on him for not anticipating (or not caring) that early adopters would be ticked.

[Scotty]

I for one found that it wasn't the "early adopters" that were screaming the loudest. For me the loudest screams have been coming from those whom had to scrape and save to afford the non-subsidized high priced "Jesus Phone" and then discovered if they'd just waited a bit more...

[MathProfJohnson]

LOL... the "Jesus phone" ??? I haven't heard that one. Yea, most of the people who slept outside didn't really care, it is the people who just bought their phones in August that are the most pissed. Imagine missing the 14-day return deadline by 1 or 2 days.

[matias]

Great business strategy. Put the price at $200 more than you will go to charge. Use the great anxiety to get people buy the phone at a overprice. Get fresh money to pay the development and the first round of production. Then when the waters settles down, lower the price, Make a great show around it. Get more people to buy the phone becouse the price drop. Get everybody who bought the phone angry, and a day after that anounce gift of $100 to those that bought thein other thing that will not cost to apple a dime. THAT'S GENIUS!. Steve and troup... you are true geniuses. You get fast money, fast advance in the lifecicle of the product to massification, get a nod becouse you are fast response to an "error", and everything costing you only a lower discount in other products.
Behold a great stategist. CLAP CLAP CLAP!!!

[Patrick]

Well handled apple - you've done enough to appease the fan-boys and early adopters, but its probably made a whole lot of people more wary of buying apple products right away.

BTW, some people were wondering how come you can't use the store credit on itunes: well, based on people's estimates, apple gets hardly any of the itunes revenue, so if they were to give $100 of itunes credit, then they'd be out-of-pocket about $90-95 per iPhone to pay for the royalties due to the record companies. With store credit, they'd only be paying the whole sale equivalent of the product, which is more manageable.

[Patrick]

@matias: But you've gotta admit, Apple is only capable of executing these sales practices because they put out such desirable products. I'm sure most other companies would love to be able to get away with the same practices, but they just don't have the brand loyalty/obsession to warrant it.
To be honest, I think I'm more angry that few companies(if any at all) are carving out a slice of the market in such a aggressive way like Apple - its making this former Apple-hater (yup, that's me) making more frequent visits to the apple stores near my area and drooling at the shiny gadgets.

[MathProfJohnson]

@Patrick- there is nothing stopping someone from buying a 100 gift card for iTunes, right? Can't you buy that from the Apple.com store?

You what I just thought about, isn't this similar to Sony cancelling the UX180 and immediately putting out the UX280 with a bigger HD and double the RAM for the same price?

[Lloyd]

In store credit? Means he gets the money back anyway...now who feels better?

[Lloyd]

"Google search on price matching."

You purchased something using a credit card (such as the American Express Rewards Gold Card and the American Express Starwood Credit Card) that has pricematching capability.

If you find a lower price in print within 60 days, you can file a claim with Amex to get the price difference back. You can find ads with low prices in form of store flyers, or ads in some magazines.

Isn't that cool? You can make lots of similar deals by pricematching. You are covered for up to $250 per covered item, up to $1000 per year.
How to file a claim:

You are covered for up to $250 per item, up to $1000 per year. They will not price match coupons, rebates, sales tax and shipping. So it is best to buy from a source with low shipping and without no sales tax. Here is what you should do to file a claim:

1. Call 800-557-8317 to request a price guarantee (or call it price matching). Write down the claim # that they give you.

2. Have your original invoice, the prints of the lower price.

3. Send them the documents, you can

* Fax the documents to them at 800-858-5971, or
* Mail the documents to: Best Value Guarantee, PO Box 495, Golzen, CO 80402-0495.

4. You are done, just wait for your check to arrive! Just keep a copy of all documents.

[Junk]

Anybody who pays $599 for a cell phone has no business complaining that they were duped. Of course they were duped! They paid $599 for a cell phone!

[Junk]

Anybody who pays $599 for a cell phone has no business complaining that they were duped. Of course they were duped! They paid $599 for a cell phone!

[Tim]

Read about your blog in the NY Times.
http://www.nytimes.com/2007/09/07/technology/07apple.html

How about this for a T-Shirt:

I got pwned by Steve Jobs.

lol.
My condolances.

[Mike Thomas]

It's not called "bleeding edge" for nothing.

If you want to jump in the game at v1.0, you pay the premium. Quit whining, people. You paid extra to have the coolest new toy months earlier than us techno-plebians. Don't whine about the entrance fee not that the luster has faded.

[dan]

Nice write up in the NYTimes Kevin!!!!!

[matias]

@Patrick: What you said is what I mean. Apple is in the position to take advantage of this kind of strategy. And they have such a large rave fans, that they can do it without worring about the kickback of the market. I'm not complaining, absolute the oposite, as an entrepreneur, I wish I could have that vision of business for myself.

[Mikey]

Those early buyers who JUST HAD TO HAVE the latest and greatest the minute it went on the market have no grounds to gripe. No one coerced them to buy the first iPod phone. If they didn't worship at the church of conspicuous consumption, they wouldn't have paid the extra premium. There's no one to blame but themselves. That said, Steve Jobs' magnanimous $100 rebate is a great PR move. He's a genius!