Maybe I’m drinking the kool-aid because I was at the event yesterday, but as an early iPhone adopter I just can’t force myself to feel ripped off. Steve’s body language said that he was thrilled about everything he announced except for the iPod classic which he seemed only moderately pleased with (I’m sure he wishes he could put enough flash memory into the iPod touch so as to obsolete the classic sooner than later), but he seemed downright embarrassed when it came to announcing the iPhone’s price cut. So for all those out there claiming conspiracy or a cold-blooded attempt to milk the early adopters, who was it that said never expect conspiracy when incompetence will do?
I believe Apple learned two things in the iPhone’s first two months:
1) Those who are willing to pay $500 for a featurephone like the iPhone are just as willing to pay $600 for a higher-capacity iPhone.
2) The above group isn’t all that large in the first place.
A few years ago Apple learned the hard way with the iPod photo (which didn’t sell all that well) that once you go north of $399 there just aren’t that many consumers who are willing to plunk down for a handheld gadget, whether it’s worth the price or not. For whatever reason Apple thought they could get away with it here with the iPhone, perhaps thinking that the public would view it as more of a computer than a gadget, but apparently they thought wrong. As someone who follows the iPhone for a living, I was stunned to find out yesterday that Apple apparently has yet to sell its millionth iPhone. For a product that well-hyped and well-received, that’s just not good.
So I figure Apple realized that it had made a pricing mistake early enough to correct before it screwed up holiday sales, but not early enough to avoid pissing people off. Apple had to know the major PR hit it would take yesterday, and had to know that it’ll hurt early adopter sales when it comes to their next great product, and so I just can’t swallow the idea that this was the plan all along. Not that Apple wouldn’t be so dastardly, but that Apple would have put together a better plan if there in fact was a plan. If anything, this was Plan B.
My question is this: once Apple realized their mistake, would you rather have seen them merely cut the price to $499, even knowing that it would result in fewer holiday sales than $399, just to make you feel less ripped off?
For what it’s worth, in the (very) brief conversation I had with Steve yesterday (about nothing substantial, I didn’t have the nerve to ask him what happened to the Beatles!), and in observing him hanging out with KT Tunstall and the Starbucks guy right in the middle of the product demo area along with us humble press types, Steve seemed maybe the most relaxed I’ve ever seen him; he was almost giddy while showing KT the new nano. So despite the iPhone price kerfluffle, I think Steve was very pleased overall with what he was able to announce yesterday. For that matter, so was I.
Update: Steve Jobs announced this morning that Apple will offer $100 store credit to everyone who bought an iPhone at the $499 or $599 price point. Have fun shopping!
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