Some thoughts after the price drop bomb was dropped
When Apple announced last week that they were dropping the price of the iPhone by $200 (that’s 33%), I admit I was kind of miffed. The iPhone was the kind of device I’ve always wanted and although I knew the price was a little high, it was also a very unique device and was willing to pay for it.
After the event, USA Today asked Steve Jobs about how he thinks people feel about the price cut. “That’s technology” he says. Steve might be able to fool people into believing that because he’s been in the business for 30 years, but I’ve been a consumer in it for 25 years, and I’ve never, ever seen a price cut of this size in as short of a period of time. Does anyone believe that those of us that bought an iPhone the day it launched would have paid that much for it if we knew a price drop was coming in two months? We may be fans of Apple and/or technology, but we’re not stupid enough to throw our money away like that. I could have lived with my Sony Ericsson for two more months had I known this in advance.
When you’re an early adopter, you know you’re paying for the privilege of being the first to have something; to be able to walk into work the next day and say “I got it”. At the same time, you know the price on what you just bought will eventually drop, but that period of time is usually at least 5 months. It’s not difficult at all to swallow a $200 price drop after 5 months, but after 60 days, it’s a bitter pill. I was wondering that if they were able to drop the price $200 and have the same “Apple tax”, what were their margins before?
At the same time, I became very wary of buying the new 160 GB iPod which will finally hold all the music and movies I need. I actually had second thoughts because I thought Apple may in fact be starting some kind of new trend where they slash prices after a short period of time. I hesitated and decided then that I wasn’t going to get the 160 GB iPod. I lost faith in Apple right then and there.
And where’s the 33% price cut across the board with devices that have some of the same parts the iPhone uses? What part of the iPhone warranted such a price drop? Flash RAM? The screen? And if this really is how technology works, then why hasn’t the prices of other similar items dropped as much? I don’t see it.
But then Apple did the unthinkable: Steve offered $100 gift vouchers to the Apple Store for people that bought the iPhones early. Unbelievable! I’m sure it didn’t sit well with Steve after saying “That’s technology”, but Apple did the right thing and showed their loyal customers that Apple is looking out for them.
Apple sold their millionth iPhone on time, as predicted. Was it because of the price drop or just a coincidence? It’s too early to tell now. My faith in Apple has been restored, mostly. I’m still going to be a little gunshy about new products for a while, though.
I did buy a 160 GB iPod on Sunday. I felt that Apple learned their lesson and they wouldn’t do something as arrogant for a long while.
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While it’s $100 in value to the iPhone owners, it’s not costing Apple $100. I don’t know what the markup is on a the 160GB classic you bought, but if it was marked up $100, then it didn’t cost Apple anything. So, while a good gesture, it is still calculated in Apple’s favor.