Apple's iPhone quick price drop was a bad decision and their refund methodology compounded the error.

Implications: iPhones were too expensive: Apple did not get the pricing correct at the beginning. Apple made a bad decision limiting the service to one carrier - A T and T. Apple is making poor marketing decisions which may not only cost the company sales in the short term but may have a negative impact on the good faith image of the organization.

Analysis: I love my iPhone. It's pretty and I feel like a lovely uber nerd for having one. Unfortunately, I have never turned it on because I do not have AT and T. It was a gift from a well meaning friend who knows I love to play with the latest gadgets. Yes, I am the person they laughed at: I was the first to get an ipod, and most fun, new, creative, electronic and tech oriented anything. Part of my job is to evaluate new technology for my clients : That's my story and I am sticking to it.

Recently, Apple had a dramatic price drop on their iPhones. It was very dramatic, two hundred dollars on a 600 dollar item. Many feel it was a last ditch, yet uncreative, effort to move more iPhones. It has created bad will among new apple users and old apple lovers alike.

We all know that if you wait a year, the price will eventually go down on any new technology. I am not bitter that my ipod cost 499 for a bland screen, 20GB, and a battery thats not changeable and loses charge in 2 hours. I realize, that as a follower of innovation, I am paying the price for future innovation. Someone has to be first. I feel it should be me if at all possible. However, there is a certain finesse, a certain methodology, a certain mindset, to working with pricing and marketing new technology. You have to wait for the people who purchased it to get a little wary. You have to wait until it is old in the minds of the original users. In technology, for items that one may use several times a day, I would say 6 to 12 months. That is around a year after wide release. That is the average life time for a well used cell phone. Now, I realize some may keep their cell phones for 5 years, I am speaking of the averages among the users I work with.

What is even worse than a dramatic price drop in my mind? Apologizing for it? Why should you? It makes it seems like you did something wrong in the first place. There is no "spin". Why not say something like " our manufacturers in China are charging us less now and we are passing the savings along to our cherished consumers? " Doesn't that sound better than "oops we didn't realize that there were not 10 million folks willing to shell out 600 for a cool phone. We need to unload 10 million in the next two years or as soon as possible before someone copies us and we also put our foot in our mouths when we met with investors and stock holders promising that this will be the hottest thing since...well, since the ipod?" I don't know the real reason why they did it, but I feel that it was a bad idea.

Apparently, Wozniak, co-founder of Apple, agrees. He agrees enough to put it in an interview. Does he want his billion dollars in Apple stock to go down? Apple is a technology innovator but they need help on PR and marketing, Woz should have kept hush.

Many feel that in a culture where many regular cell phone users are used to getting cell phones free or cheap with their service, the iPhone was over priced in the beginning. Then to make matters worse, it was limited to AT and T. This eliminated millions of potential customers. If the price drop was necessary to get in more customers and the 100 dollar refund was a good faith effort, I can accept that. The last problem was the biggest. How customers get the refund; if they get the refund. I can get the refund on a phone I did not purchase, but only if I sign up with AT and T. My clients usually purchase the phones in a co-op/corporate setting and it would very difficult to navigate the paperwork for the refunds. For people who use AT and T, and get the refund, its still feels odd. Many carriers have you buy the phone and do a mail in rebate. We are used to that. We get a cute little check in the mail and cash it. A store credit means we will end up buying more Apple products. The whole thing will blow over eventually. Hopefully Apple will not lose the new customers it won with the iPhone. If they are smart, the next move will be to unlock them so everyone can use them. Why limit your consumer base? Why make yourself look bad?

Apple will eventually do well with the iPhone but I feel they lost a lot of money. They have to go for the big bucks for shareholder value but they have to think of what will  help products move for the first 6 months and the next three years. Apple innovation needs to be coupled with good market research, pricing based on consumer research and trends, and a healthy dose of forward based "big picture" thinking.