Saturday, September 08, 2007

Steve Jobs Is Either A Dunderhead Or A Genius

Was the decision to slash $200 off the iPhone the right one?

Let me begin by saying I am an absolute Apple Macintosh nut! I always have been since I was first introduced to them in my freshman year of college at the University of Tennessee back in 1989. My English class that year was at a desk with a Mac and it blew me away how a computer like that could do so much.

The more things change, the more they stay the same.

It's nearly two decades later now and Macs are still cool to me. In fact, I just got the new iMac and the much-heralded iPhone about six weeks ago and LOVE 'em better than I ever expected. Both have been business expenses well worth the price paid to stay in touch and get the job done well.

With that said, I have to express my slight dissatisfaction and disappointment with Apple CEO Steve Jobs right now. His quick-handed decision to slash the price of the 8GB iPhone by $200 to $399 seemed a bit desperate to me. After just a little more than two months on the market, you feel the need to drop the price?

I suppose the new iPod touch product had something to do with this decision. It's an 8GB iPhone without the phone and allows users to use it as an iPod, surf the Internet, watch YouTube, download from iTunes, and more. The cost? $299!

This would have cannibalized iPhone sales which Jobs could not allow to happen. It made good business sense dropping the price, but most people expected it to happen around late November when Christmas shopping season hit. Looks like Apple is wanting to kickstart that trend three months early.

That's all well and good, but what about those poor people who bought the 4GB iPhone at $499? Now they have something that's half as good and cost them $100 MORE than what the 8GB iPhone costs now. Will they be allowed to switch to an 8GB at no charge as a goodwill gesture, Mr. Jobs? Not as it currently stands.

And those poor AT&T store workers! They found out about the price cut in a text message and e-mail just minutes before the announcement. How tasteless is that? Apple should have given at least a week's notice to AT&T to prepare their frontline workers for the onslaught of both angry old and anxious new customers. Bad business, Mr. Jobs!

Although I wasn't one of the people who purchased the iPhone when it immediately came out (waiting in line for days for a phone just ain't normal), I did get mine in late July for a trip to Indiana when I wouldn't have Internet access. It was awesome being able to keep up with my e-mails, check my blog and forum, and keep in touch with the world while away. Overall, it's been well worth the cost I paid several times over and it has continued to be a business lifesaver for me.

Nevertheless, it still stinks that the price dropped so much, so fast--a $3 a day depreciation that doesn't make for good business if you ask me. Even after Jobs wrote this apology letter promising a $100 Apple store credit to iPhone customers who paid $599 for the phone, it merely left this Apple fan a bit disgusted about it.

Is that the best you can do, Mr. Jobs? Sure, $100 credit is better than zippo, but how about a $200 Apple credit, hmmm? At least there would be the perception that you seriously wanted to make amends to your loyal base of customers who love your company (and I'm one of them!). Plus, you should have announced this BEFORE the price cut rather than as a knee-jerk reaction based on the e-mails you received. You had every intention of sticking it to your best customers now, didn't you?

In actuality, this $100 Apple credit Jobs announced will cost the company about half that much money, so it's not really that great a deal after all IMHO. I'll probably buy a car charger for the iPhone and any other accessories adding up to $100, but I will need to order them online since I don't have an Apple store near me.

Why not give the credit in the iTunes store, Mr. Jobs? We have this cool phone that plays music and videos, so wouldn't it make sense to extend that $100 to iTunes since you own it, too? Can you do that? Please consider this as an option with the credit offer details you are going to announce next week.

Incidentally, if you purchased your iPhone within the past 14 days, then you are entitled to a FULL REFUND as per the Apple Sales and Refund Policy. If you paid $599 for your iPhone, then this may be a great way to get your $200 back in cash when you purchase your new iPhone at $399. It's too late for me, but maybe not for many of YOU. GOOD LUCK!

Am I mad about this? Just a little. But I will admit that owning an iPhone has been the best business expense I've ever made. Now there will be plenty of others who will get to enjoy it just as much as I have. It really is the most amazing technological advancement I have seen in my lifetime and I HIGHLY recommend it.

Is Steve Jobs a dunderhead or a genius? Time will tell. What do YOU think?

9-9-07 UPDATE: Here was an excellent comment from one reader that mirrors much of my own feelings about the iPhone price cut:

I have to say I'm not that terribly upset about the iPhone price drop. It was a tad galling to have the price cut be so large so soon. On the other hand, I got to use a great device for a couple of months before the price cut. In my judgement it was worth the price when I bought it.

I traveled around several states on business and used the iPhone for getting maps, checking email, keeping up on news via Safari and watching videos on the airplane. If I was a savvy shopper I could have waited a while and waited for a price cut. To me the utility of the device was worth the few extra dollars so I don't regret it.

On a more philosophical level, it is curious why the price cut comes now. Sales seemed to be OK. Why not wait until November to cut prices? That would still capture the Christmas buying surge. My private guess is that Apple's competitive research turned up something causing them to accelerate the price cut. Apple is conservatively run. They would normally keep the price high. Even if they did cut the price a more typical approach would have been to drop the 4GB model and reduce the price of the 8GB model to $499. I suspect they knew of a competitor entering the market and wanted to be sure to lock up as many sales as possible before that happened.

Hmmmm, could an iPhone competitor be on the way before Christmas? It's got some pretty big shoes to fill because Apple has raised the bar VERY high!

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Blogger pottedmeat said...

Your emotion usually helps your writing. But in this case, even though I know you're not, it makes you seem petty.

The Times have a couple of articles that "explain" the tech economy. This article has a quote worth reading:

"Mobile phones tend to be more prone to price declines because the pace of product introductions is faster than for televisions or DVD players. Motorola, for instance, introduced the ultrathin Razr phone for $499 with a two-year service contract in early 2005. Six months later, Motorola realized it had a hit on its hands and dropped the price to $199 in an effort to aim at more mainstream buyers. By the end of 2005, the price was $99."

9/08/2007 4:55 PM  
Anonymous Anonymous said...

Apple always drops the price of the next higher model when they discontinue the lower-end one. The 4GB model iPhone was dropped, therefor the 8GB mdel got a price reduction. That is as consistant as it gets.

I've got no sympathy for those who bought first. That's what you get to be an early adopter with technology. That couple hundred dollar is the price you chose to pay for the cachet of having it first. Prices always go down, quickly. With phones, it's doubly so. Phones that were $600 a year ago are now free with a 3 yr plan. That's just how that industry goes, and that's why most people wait a few months before buying a new phone model, because the price WILL come down, a lot, soon.

9/08/2007 5:40 PM  
Blogger Kris The Grumpy said...

I've heard a lot of explanations on this one. FWIW, I'm an Apple fangirl. I can understand completely why people might be honked off.
I actually don't believe this sequence of events was intentional, I think the iPhone was due a lot earlier and this price drop (pre-holidays) couldn't be moved forward even though the release date was.
For non-US readers, the keynote represented very good news! You can get your sticky hands on a Phoneless iPhone in a few weeks time. And I will.

9/08/2007 6:13 PM  
Blogger Kelly said...

Jimmy - you are not alone in feeling a bit peeved about the $200 drop in price. Even though everyone knows that tech stuff goes down in price, the $200 jump was a bit shocking. Was he right? Well, my husband and his business partner were shopping for new phones, and didn't even consider the iphone until the price drop. Now they are both getting them. Maybe that price point is the right place, but feeling a bit ripped off also seems natural. I hope the $100 credit eases your pain! :)

9/08/2007 7:05 PM  
Blogger Jimmy Moore said...

I'm still a BIG FAN of Apple, but just needed to say my peace. I hope Jobs takes me up on the iTunes store suggestion, though. :)

9/08/2007 8:21 PM  
Blogger The Bunnell Farm said...

My, (The changing Digital Products Marketing World) 'hit' came in the form of Steve's announcement of changing to Intel shortly after I bought my water cooled - Power Mac Dual 2.5 G5 in 2005. I'm still reeling and trying to catch up. Hang in there!

9/09/2007 9:00 AM  
Blogger pottedmeat said...

Some more perspective:

"Then Larry tells me that if we're really going to stick with this rebate on iPhone, we ought to make up for it by announcing a retroactive price hike on the Mac Mini, and everyone who bought one of the new models that we introduced a few weeks ago is going to get their credit card billed for an extra hundred bucks because it turns out we priced the product too low and we just figured that out and sorry but it's something we have to do. He's like, Brilliant, right? "

9/09/2007 11:24 PM  
Blogger Pot Kettle Black said...

I think another commenter noted it, but the pace of product development in mobile phones is very fast indeed. A lot faster than Apple's historic product releases. I think the drop is a preemptive competitive move to head off Nokia, Sony-Ericsson, Samsung, Motorola, and the 800 Chinese companies that can reverse engineer an iPhone, change the patented technologies just enough, equip it with a removable battery, quad band 4G, and toolless removable SIM card so you can travel with it and not be married to AT&T. Oh, and expect Nokia's to have a better camera with a Karl Zeiss lens and at least 3.2Mpix and available for Christmas, and probably <$200 by February with a 2 year contract.

It's a much more brutal market than mobile mp3 players was, or even cult based operating systems.

FWIW: I played with one while my wife waited for her Mac Genius to not really help much. It's a cool tool. $600+service cool? Not for me.

9/11/2007 10:50 AM  

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