Posted September 8, 2007 5:52 pm by with 17 comments

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When Steve Jobs announced the $200 price reduction of the 2-month old iPhone, many of Apple’s early adopters cried foul. Having shown their loyalty to Apple by standing in line for hours–for a chance to be one of the first to buy the revolutionary phone–they now felt betrayed at such a quick and dramatic price drop.

Fortunately, the Apple CEO quickly sensed the swell of bitterness–growing among its loyal customers–and jumped in to offer a $100 Apple credit to those that had previously coughed up $599 for the iPhone. In addition, those that had purchased an iPhone in the past 2 weeks would get a $200 refund.

Jobs’ actions appear to have calmed the reputation storm–although some customers still feel slighted–and demonstrate that not even a company that executes as smoothly as Apple, can avoid a reputation crisis. In fact, no company is ever able to fully predict and avoid a PR crisis–you just never know what customers will rebel against (just ask Facebook)–but how a company reacts is key to keeping your brand in a positive light.

Here’s what Apple did right…

A quick response – Steve Jobs announced the $100 credit within 24 hours, even though Apple hadn’t yet figured out how it would implement the credit.
An authentic message – Apple’s message came from its highest executive and was honest and transparent–Jobs admitted the screw-up while explaining that price reductions happen when buying new gadgets.
A decisive action – Steve Jobs didn’t waste precious time trying to negotiate with Apple’s customers. He listened to their complaints, assessed what their common concerns were, then made a decisive offer to those it had offended.
A reasonable concession – Apple managed to find a fair compromise between giving $200–which is what many customers wanted–and not giving anything at all–which was their original plan.

As a business, you can’t always predict a crisis–although you could argue that Apple should have seen this one coming–but you can prevent a ripple of discontent becoming a tidal wave of consumer revolt.

What do you think? Could Apple have done more? Was Steve Job’s response appropriate?

  • Yeah, it is very illogical of Apple to reduce the price after 2 months only! I don’t know the real reason behind this strange action..

  • I expected the proce to be reduced, but not so quickly or so dramatically. I imagine the reduction was always in the plan, but it left many iPhone customers feeling robbed, even with the $100 credit.

  • Now i might even consider buying one. If you were to have a look at the new nokia (n95 it was?) that had better features for half the price… I guess at the end of the day its the matter of supply and demand.

  • While that is nice of him to offer the 100.00 credit. Personally i think it is the price you pay for being an early adopter…. they didn’t have to pay the opening price.. While i see why they offered the credit, price reductions happen all the time to drive new customer base. To me good for the earlier adopters but i personally think Apple is giving money back when they didn’t need to. People should be CRYING about no 3G support (this kept me from even considering an Iphone)

  • It seems to me this whole iPhone thing has been handled terribly from launch. Tying customers into AT&T was a bad move; the initial ridiculous launch price of the phone itself was a bad move; the sudden price reduction was a ….well, I’m sure you get the picture.

    As for CPA Affiliates point: no 3G ? That’s madness…that means you won’t even be able to use the thing in most of the known world.

  • Now iPhone will try high pressure of its iPod Touch brother. In this case reducing of price was unavoidable.

  • I think that what Steve did is an example to all the companies out there. If they didn’t refund the customer’s cash, they see an impact on the next product’s deploy. Many would just wait a couple of months for a price drop and buy it then.

    It appears they didn’t make the same mistake with the new iPod Touch. 🙂

  • I think Apple’s move is excellent. It shows existing customers (who are really Apple’s life blood) that Apple still cares and ensures that the next time Apple comes up with a new innovative device, they won’t be apprehensive about jumping in.

  • Strikes me that this is pretty effective reputation management. I think the long-term fallout of this will be small for exactly the reasons you list. Jobs handled this well, I think.

    The biggest risk with this particular issue is that they were annoying their very best and most enthusiastic fans. For that same reason, however, I suspect those people won’t stay cross for long. Once you’ve drunk the kool-aid, you’re pretty much onboard, I think.

  • While commendable actions like these are a great way to boost consumer interest and loyalty — I think that they (Apple) have failed in one major way.

    They’re still branding themselves as a computer company, and they’re simply consumer electronics. Aside from the random one percent of the population with a Mac — everyone and their dog has an iPod or two.

  • a bad news for Apple loyal lovers.

  • I think Apple’s quick response will be great for keeping their loyal customers happy. However, I think that it wasn’t necessarily needed. The people who purchased at $599 did so, because they wanted one and chose to pay at that price. It is just basic economics at work here, so I don’t see why they are so up in arms.

  • Thanks guys!

    I agree that a price drop was inevitable. The severity of it is what likely annoyed those who bought first.

  • They had to come to this at some point since there would be competition with better phones.

  • Yes, as I said, this was inevitable, but I think, too fast. But they need to get phone owners quickly, because competition is also inevitable and people wont buy new phones just because a competitor came out with one.

  • @Joeychgo: I don’t agree that it was too fast. If Apple had been thinking about their loyal following, they probably would have announced the deal for existing customers when announcing the new pricing. It’s always a fine balance between being competitive and undercutting yourself …

  • They had to strike an accounting balance.