iRonic
Price cut leaves some feeling devalued
Price cut leaves some feeling devalued

By Jim Stafford

Published: September 8, 2007

Apple Inc.'s $200 price reduction this week of the popular iPhone is less of a price cut and more of a "bragging tax” for early adopters, an iPhone owner said Friday.

Jon Holzer of Norman bought one of the $600 iPhones in late June, the week it made its debut. He's been mostly satisfied with the high-tech device — it combines a wireless telephone, music player and WiFi Internet browser — but was dismayed that the investment he made only two months ago has been devalued so much by its manufacturer.

"I jumped on it, but if I had just waited two months I could have saved $200,” said Holzer, a 28-year-old software programmer. "It's a $200 bragging tax, and I don't know if it's worth it.”

Although Apple co-founder and chief executive officer Steve Jobs quickly apologized to iPhone buyers and offered $100 in store credit, the Apple brand image has been tarnished, said Kelly O'Keefe, a brand expert and professor at Virginia Commonwealth University.

"This is a really big issue for them,” O'Keefe said. "They are usually very calculating about their brand and they manage it well. They didn't this time.”

The fallout from the unexpected price cut hits Apple in three areas, said O'Keefe, who owns an iPhone bought in Edmond on a visit to Oklahoma this summer.

First, the price cut alienated the most loyal of Apple's customers, those who rushed out to buy the phone when it debuted. Second, Apple customers will most likely hold off making a purchase when Apple launches a new product in the future.

Third, the price cut may signal to consumers that there are problems with the product.

"I don't think that is correct, but it didn't look that way,” he said.

So, why would the maker of Macintosh computers and the popular iPod music player risk its reputation to slash the price of a product that it launched only months before?

"Clearly they wanted to move a lot of them over the holidays,” O'Keefe said. "They saw that sales were brisk and they were taking enough market share from BlackBerry and Palm folks that they thought they would capitalize on that and really ratchet it up. But a $100 price cut would have been more natural.”

Another brand expert, Michael Gartenberg of Jupiter Research, said the issue won't affect Apple in the long run. In fact, Apple's apology and $100 store credit wasn't even needed to salve the wounds, Gartenberg said.

"This is a case where Apple went beyond what they had to do to keep the customers happy,” Gartenberg said. "Those consumers who weren't upset got a real nice bonus. Well, those who were upset got something that customers almost never get, a company that responded very, very quickly and tangibly to their issues and made a significant gesture.”

Oklahoma iPhone owners such as Holzer and Amanda Norman of Oklahoma City may not be so forgiving, even with the apology and $100 credit offer.

Norman said she waited for nearly two months before buying a phone for herself and her husband on his advice that the price might come down because it always does for new technology.

However, the price was cut soon after she bought the phones, so she returned to the AT&T retail store where she purchased them to see what could be done. She promptly was given a $200 refund on each phone.

"They were amazing,” she said "It was no ‘Sorry, you are out of luck.' The problem was taken care of without any issues.”

As for the iPhone itself, both Norman and Holzer declare it to be the best wireless telephone available, although Holzer has some issues with certain "missing” features such as a Flash video player and inability to send photos via text messaging.

"There is nothing that compares with the iPhone,” Norman said.

Comments