Apple’s $100 Olive Branch, and the New and Immediate Internet-Facilitated Power of the Consumer

Implications: Jobs duped the early adopter of the iPhone, and he needed to provide reparation for this breach in trust.  Likely he considered it prior to the price cut announcement but wanted to minimize the cost to Apple, which he did.  Most of all, this shows the immediate and forceful power to the wired consumer.

Analysis:

In case you haven’t been watching, consumers are having a profound and new effect on brands these days.  The Internet is putting more power into the hands of consumers, especially the early adopting public that purchased iPhones.  People like me, who also felt duped and surprised by Apple’s $200 price cut on the iPhone, even though we truly love this product.  This group not only has a distinct and loud point-of-view, not only has access to the best tools, be they blogs or social networks or news aggregation sources (Digg.com), but this group is also very adept at amassing the crowd to share in their opinion and outrage.

Yes, it was surprising to me that Jobs didn’t see this coming, since he does generally have his finger on the pulse of his consumers.  In a somewhat radical viewpoint, perhaps he did anticipate a response like this, and just figured that the $100 store credit, reduced even further by the margin on goods sold and the incremental products purchased, would be a good fall back option.  Perhaps he is just a phenomenal negotiator, seeking to offer a weak consumer subsidy, or nothing, to consumers, so he could minimize the cost to the organization by having to up his offer after the crowd became irate.

But I don’t really believe that.  I think that Jobs believed that early consumers of the iPhone would be so happy with the product and the time we’ve used it and the pride in being first that we would understand the price cut.  And we are.  I wouldn’t trade my couple months with the product for $200.  It is that good, and Apple acolytes want to be the first on the block.

I also fully understand the rationale for the price cut, even one from strength a la the Motorola RAZR, as I will describe in another post, but it was certainly much quicker than I thought it would be.  iPhone users will freely tell everyone that the product is worth the price.

The problem is that Jobs violated the trust of the iPhone user, and he had to pay the user back for that loss of trust.  We assumed that Apple would try to hold onto the price, no matter what AT&T wanted to do, because they have held onto price for a significant amount of time with the iPod.  He duped us all, and he needed to give something to quell anger, to hold onto brand loyalty, and to get over that feeling of being duped.

Most of all, though, he had to stop iPhone users from venting their frustration on the Net.  It was a small price to pay.