Apple Tries To Ease iPhone Customer Anger With $100 Credit

A firestorm of hate mail expressing frustration at the price cut prompts an apology by Steve Jobs as well as a lesson in consumer electronics retail.

Antone Gonsalves, Contributor

September 6, 2007

5 Min Read

One day after dropping the price of the iPhone by $200, Steve Jobs apologized to early adopters of Apple's smartphone, many of whom showered the chief executive with a firestorm of hate mail expressing frustration at the price cut.

In an open letter to the community, Jobs regretted disappointing his iPhone customers and offered a $100 credit toward any Apple product if they hadn't already received a rebate.

"We want to do the right thing for our valued iPhone customers," Jobs said. "We apologize for disappointing some of you, and we are doing our best to live up to your high expectations."

In unveiling a revamped iPod line on Wednesday in San Francisco, Jobs surprised Apple observers and customers by cutting the price of the 8-Gbyte iPhone to $399, and dumping the 4-Gbyte version of the combination mobile phone and media player. The latter will sell for $299 until supplies are depleted.

The move triggered an avalanche of angry messages on the Web by some Apple fans who stood in line June 30 to be the first to pay as much as $599 for the mega-hyped device. Two months ago, they said they felt cool. On Thursday, they said they felt like suckers.

"I feel like a looser. [sic] No more Apple for me, ever!" iPhone buyer Shane said in an e-mail posted to an InformationWeek discussion board.

In trying to make amends, Jobs said in an open letter posted on Apple's Web site that the company decided "to do the right thing," albeit with a warning about the tribulations of consumer electronics.

"This is life in the technology lane," Jobs said. "If you always wait for the next price cut or to buy the new improved model, you'll never buy any technology product because there is always something better and less expensive on the horizon."

The credit is applied to an iPhone bought directly from Apple, or through its exclusive wireless service provider AT&T. As a matter of policy, Apple said it provides rebates on price cuts within 14 days of any purchase. The latest offer does not apply to people who have already received a rebate or "any other consideration," Jobs said.

Jim Kane, customer loyalty expert and partner at consulting firm Brookeside, said Apple got it at least half right in offering the store credit. In responding positively to its customers' complaints, Apple is treating them like people and not numbers.

However, offering to give back only half of what was taken away may not be enough for many customers. "It may sound like a good thing, but the feeling of being ripped off isn't going to go away," Kane said. "You get something, but you're not getting the $200."

Only time will tell whether iPhone customers classify Apple's gesture as generous or as cheapskate. But before the credit announcement, many were happy to share their anger. "I feel ripped off, I feel cheated, and I've learned NEVER [sic] to buy an Apple product again as soon as it rolls off the line -- if I ever buy one again period," Jayhuck said on the InformationWeek discussion board.

Others, however, took the price cut in stride, and would probably be happy with the credit. "No one twisted your arm to buy the iPhone in the first place," Ryan said. "You knew the price, just like I did. It wasn't like they snuck the price in on us. I decided the price was worth the product so I bought it."

Some non-iPhone owners were unsympathetic; calling the complainers "moaners and whiners."

"So you spent an extra $200 premium on a technology product that everyone knows is going to be obsolete almost immediately," a poster by the name of Charlie said. "Looking for someone to blame -- look in the mirror at your greedy consumerist self that had to have something shiny and new the moment it came out."

Beyond the impact it had on customers, the price cut tainted Apple's integrity, Kane said. As a company, it has usually charged a premium for products, promising in return something of higher value than anything else in the market. By making such a dramatic price cut, Apple appears to be agreeing with detractors who said the gadget wasn't worth $599, even with the innovative touch screen.

"This is the first time they've said that our product doesn't live up to the value that it should have," Kane said. "What they've done here is basically commoditize (the iPhone). They're saying it's not worth as much."

Of course, Apple has a different rationale for lowering the price. In his open letter, Jobs said the company is embracing an opportunity to "go for it" this holiday season. "iPhone is so far ahead of the competition, and now it will be affordable by even more customers," he said. "It benefits both Apple and every iPhone user to get as many new customers as possible in the iPhone tent."

Nevertheless, the Apple chief acknowledged that the company stumbled, and said it's trying to make amends. "We need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price," Jobs said. "Our early customers trusted us, and we must live up to that trust with our actions in moments like these."

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