The iPhone Strategy

By now if someone doesn’t own the iPhone, they at least know what it is (and probably want one too). When it first came out in early June, the early adopters flocked to Apple and AT&T stores. Mac worshipers and technology enthusiasts created plans of attack in order to be one of the first purchasers of the phone. Exclusivity came at a price though. Customers shelled out $599 for an eight Gigabyte phone and $499 for a four Gigabyte. Those of us who couldn’t afford the phone or the hassle of switching to AT&T for our phone service felt a pang of envy when we saw someone playing with their iPhone.

Luckily, just less than three months after the release of the phone, Apple decided to cut the price by $200 for the eight GB phone and eliminate the four GB version altogether. Those who were on the fence about purchasing the phone because of its high price were now motivated to go out and buy it, leading Apple to sell its one millionth iPhone in just 75 days.

Unfortunately, those who paid full price for the phone expressed their anger in as many ways as they could. Not only did they pay more for the phone, but they no longer were the elite few who owned it. Apple soon posted an open letter on their website, recognizing the anger that their customers were feeling, but making it clear that their decision was one based on business. However, the company also realized that it would not be wise to alienate one of their most important niche audiences, the early adopters. So, they offered $100 towards the purchase of any product at an Apple Retail Store or Apple Online Store for those who bought the phone prior to the price cut. Apple was not apologetic about the price cut, but they offered a compromise.

Many people wondered why Apple committed such a mistake. Did they not anticipate consumer backlash from the price cut? I think it was nothing but a strategic decision on Apple’s part. The price cut allowed them to expand their audience in time for the holiday season. Their marketing first targeted the early adopters, and the price cut moved on to their next target, the persuadables. Apple is a smart company with a smart, strategic plan. The only question left is, what will they do with the iPhone next?