Posted by: Olga Kharif on September 5, 2007
Apple made several surprising announcements relating to the iPhone today. The company said it will cut the price on the 8 Gigabyte device by $200, to $399. At the same time, it announced it will phase out the lower-memory, 4 Gigabyte model costing $499.
It’s surprising to see Apple cutting the iPhone’s price just two months since the phone’s introduction — particularly since the device has been selling so well. According to consultancy iSuppli, the iPhone was the best-selling smartphone in the U.S. in July. In fact, Apple’s two iPhone models had sold as many units that month as the best-selling LG Chocoloate. That’s amazing, considering that Verizon Wireless has been promoting Chocolate in TV ads and in stores for a year.
What I don’t understand is, If the iPhone is selling so well, why the price cut? Apple says it simply wants to ramp up sales, but I don’t buy that, as the phone is selling very well as it is.
I don’t understand why Apple chose to cut the 8 Gigabyte iPhone’s price now, instead of, say, waiting a few months and slashing the price when it introduces a new iPhone model. Most manufacturers discount older models when they introduce new ones. That way, users understand why prices have dropped (The way Apple did it, it seems to me that a lot of Apple fans who’ve just purchased the 8 Gigabyte model for full price will be miffed, and rightly so.).
Another reason for waiting to cut prices until manufacturers introduce new models: Manufacturers get to keep their place in the high-end of the market while also moving down stream a little bit.
What I am also puzzled by is Apple’s decision to discontinue the lower-memory model instead of discounting it as well. By today’s standards, 4 Gigabytes of memory is still far more than what most phones offer (most new phones come with a slot accepting a 2 Gigabyte memory card). If Apple is afraid to cheapen its brand, it shouldn’t be: To my mind, a $299 phone would still have been a pretty expensive phone. I can get a BlackBerry for less than that from AT&T.
How do you explain Apple’s moves?