Stick in the Eye to iPhone Early Adopters

iphone.jpgSo much for delivering a good user experience. Apple must have forgotten the part about not pissing off your customers. 

Apple has just announced it will be slashing the price of the lower end 8GB model of the iPhone to $399 from $599, and is dropping the 4GB model entirely. Hmm, so 2 months and 6 days after it became available they do a 1/3 price cut? The early adopters who bought the iPhone are certainly used to the fact that technology gets cheaper over time, but this is going to piss a lot of people off (especially those who got hit with multi-thousand dollar phone bills). If the traffic on the Apple support forum (for example) is any indication, this is indeed the case.

A typical comment from jodestroyer4e:

This is an outright crime. We were beta testers at the cost of $200. Not even 9 weeks and its $200 less. How can that be justified. I am so ******. The diehard core apple fans and customers get screwed. We who waited in line for hours, told everyone how great it is and to buy one. Apple really needs to fix this in a big way and fast.

This price cut is clearly not coming from efficiencies of scale as the iPhone hasn’t been on the market long enough yet. It reflects the large margins built into the initial retail price, according to this report from well-known firm iSuppli. If the costs in it are still accurate, Apple is still clearing over $100 at the lower $399 price. Undoubtedly there are other costs on top of the raw component and manufacturing costs that iSuppli tracks, but that’s still a pretty cushy margin.

Obviously Apple are looking to go big for the Christmas season, but in the long term this is a bad move. A lot of people are coming to Apple from the PC platform, and this doesn’t give a warm/fuzzy feeling to them. And the Apple faithful who took a chance on the iPhone early on, at a substantial hit to their pocket books for the initial phone and then frequently unexpectedly high phone bills, are deservedly feeling ripped off. Especially the owners of 4GB iPhones that are now discontinued (“obsolete”) and are stuck in a two year contract. This is particularly galling given how Jobs walked through the “simple math” they used to arrive at the pricing scheme of the iPhone when they announced it, obviously anticipating concern that it was too expensive and looking to justify its high price.

This comes at a sensitive time for Apple where it is gaining good momentum at converting PC users, many of whom still see Apple as a higher cost option (sometimes rightly, sometimes not). Jerking people around on pricedrops like this will only hurt this momentum. 

 Doesn’t exactly make me want to run out and buy one of the new iPods either.