John Paczkowski

Recent Posts by John Paczkowski

Thank You Sir, May I Have Another?

jobs_icon.jpgWith its offer of a $100 store credit to iPhone owners galled by its surprise one-third price cut, Apple seems to have quelled its burgeoning fanboi rebellion.

And today, many observers are describing the $100 credit as an admission by the company of a rare marketing misstep. Buried in a firestorm of hate mail from betrayed loyalists who stood in line June 29 to be the first to pay as much as $599 for the viciously hyped device and fearing that Apple had tainted its integrity, CEO Steve Jobs blinked.

Or did he?

Because let’s face it, Apple’s $100 mea culpa and the events that preceded it conjured up untold millions of dollars in publicity. The company, its products and the emotional investment some consumers have in them have been in the headlines all week. Think people would get this worked up over a Razr price cut? … And Apple isn’t exactly going to suffer from those $100 credits that probably cost it half that sum to issue and will drive consumers back into its stores. Think about the iPhone price cut that way, and the “fiasco” begins to look more like an ingeniously scripted marketing stunt.

“So why did [Jobs] do it,” asks PBS columnist Robert Cringely. “Why did he cut the price? I have no inside information here, but it seems pretty obvious to me: Apple introduced the iPhone at $599 to milk the early adopters and somewhat limit demand, then dropped the price to $399 (the REAL price) to stimulate demand now that the product is a critical success and relatively bug-free. At least 500,000 iPhones went out at the old price, which means Apple made $100 million in extra profit.

“Had nobody complained, Apple would have left it at that. But Jobs expected complaints and had an answer waiting–the $100 Apple store credit. This was no knee-jerk reaction, either. It was already there just waiting if needed. Apple keeps an undeserved $50 million and customers get $50 million back. Or do they? Some customers will never use their store credit. Those who do use it will nearly all buy something that costs more than $100. And, most importantly, those who bought their iPhones at an AT&T store will have to make what might be their first of many visits to an Apple Store. That is alone worth the $50 per customer this escapade will eventually cost Apple, taking into account unused credits and Apple Store wholesale costs.”


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