Cheese with your Whine?

There is much wailing and gnashing of teeth among the early adopter who bought iPhones and now feel cheated because Steve Jobs dropped the price by $200, and then offered a $100 gift certificate for Apple merchandise.

I feel little sympathy. Early adopters pay top dollar for the newest, coolest, bleeding edge toys. The price premium you spend on that is as much a status sysmbol as the phone is. You're just pissed that the people who can't drop $600 on a whim, are suddenly looking at a more affordable iPhone that the riff raff can afford. Apple lives for their exclusivity and creative elite aura. No one made you buy the first generation, most expensive new gadget out there. It was worth $600 yesterday.

Plus, Steve Jobs doing something arrogant and high handed. Who could possibly have seen that coming?

Jeff Jarvis talks about Steve Jobs responding quickly:

So I find it interesting that when he dissed his most loyal customers, the fools who stood in line for that beautiful iPhone, by lowering his price for the masses (a good move, by the way), he wasted no time apologizing and giving them a $100 store-credit rebate

I disagree. The $100 gift certificate was almost certainly planned before the announcement. I think he had to charge the expensive price up front so that the new price seems that much cheaper. In this era of free phones, a $400 phone is still expensive. Now, it seems slightly more reasonable. Plus, more sales of $100+ items from the Apple store.

Cringely gets it right:

So why did he do it? Why did he cut the price? I have no inside information here, but it seems pretty obvious to me: Apple introduced the iPhone at $599 to milk the early adopters and somewhat limit demand then dropped the price to $399 (the REAL price) to stimulate demand now that the product is a critical success and relatively bug-free. At least 500,000 iPhones went out at the old price, which means Apple made $100 million in extra profit.

Had nobody complained, Apple would have left it at that. But Jobs expected complaints and had an answer waiting — the $100 Apple store credit. This was no knee-jerk reaction, either. It was already there just waiting if needed. Apple keeps an undeserved $50 million and customers get $50 million back. Or do they? Some customers will never use their store credit. Those who do use it will nearly all buy something that costs more than $100. And, most importantly, those who bought their iPhones at an AT&T store will have to make what might be their first of many visits to an Apple Store. That is alone worth the $50 per customer this escapade will eventually cost Apple, taking into account unused credits and Apple Store wholesale costs.

So Apple still comes out $75 million ahead, which is important to Steve Jobs.

I'm not getting an iPhone, I'm happy with my existing phone, but I am going to get an iPod Touch. I'm going to save my money and spend it happily. If the price drops, so what. No one is twisting my arm to spend money.