Lost in the Land of the IPhone.

Posted by: Bruce Nussbaum on September 7, 2007

Average corporate managers look at Apple and only seek success in being in touch with consumers and bringing out products they love, but the recent iPhone flap shows that the history of Apple is strewn with big mistakes. The difference between Apple and other companies is that it has learned how to deal with mistakes—quickly.

Steve Jobs moved instantly to recognize that Apple really angered its core constituency—early adapters—by cutting prices on its new iPhones by up to a third, leaving many consumers feeling like chumps. Jobs did it right—he apologized, gave an explanation and provided recourse ($200 cash refund for people who bought the $599 eight gig iPhone within two weeks of Wednesday’s announced price cut, full refund for the $499 model bought in that time and $100 store credit for the rest). Linguistically speaking, this is what people want in an apology and they got it.

But Jobs and Apple do have a serious business model problem. Cutting prices so quickly after the launch of the iPhone has Wall Street wondering about demand for the product. The cell phone space is very different from the computer/ipod space in terms of price point and demand and until Apple releases figues on sales, analysts will wonder about price and profits.

More importantly, Apple is enmeshed with Cingular in this product and that is proving problematic to the consumer experience. At least my consumer experience. I’ve been lusting after an iPhone since I had one in my hands months before the launch but couldn’t buy one because my company won’t support it. So I’m staying with my trusty TREO. OK, so I thought I’d get an iPhone for a family member who’s on my Cingular plan. Hmmm… Very hard, if not impossible to do. I just want to switch one old cell phone for the iPhone, but no. I have to set up new Cingular accounts for both myself and the other family member. That means much higher cell phone costs. Not good. So I haven’t done it and don’t have that iPhone.

Well, at least I avoided the pain of being an early adapter (and yes, the fun too).

Reader Comments

Sean Scott

September 7, 2007 2:06 PM

Bruce,

I look at the recent changes to the iPhone pricing as a great example of an agile enterprise making the necessary tough decisions to reach their stated goals (SJ said one million phones by next september).

I also find it hard to feel bad for folks who can afford to shell out $500 to $600 for a phone, especially being an early adopter. That comes with the territory.

Scott

September 7, 2007 2:58 PM

It's more likely that Apple has planned all along to price the iPhone at $399. However, if they had done so in June, demand would have outstripped supply during the first weekend and lots of potential purchasers would have been very dissapointed and probably angry as well.

Now that the manufacturing process is fully ramped up, Apple can charge $399 and can meet the demand.

Personally, the crybaby earlier adopters need to grow up. No one forced them to pay $599--they CHOSE to do so, in part, to BE an early adopter and to show their friends their cool, new iPhone.

Guess what--that's what capitalism and freedom are all about.

Rob

September 11, 2007 3:56 PM

Bruce,
I am not able to find anything but the 100 dollar rebate verified. Where did you read about the $200 refund for recent adapters and the full refund for the 4gig customers?

Bruce Nussbaum

September 11, 2007 6:43 PM

Rob,
I read it in the Wall Street Journal. Hmmm... Hope it was true.
Bruce

Rob

September 13, 2007 3:53 PM

Hmmm. WSJ should be pretty accurate. The open letter to iPhone customers on apple's site only states that there will be a $100 refund. That being said, people are getting money back from credit cards with price protection and maybe AT&T is doing something for folks too.

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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