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Blog Entry 3 of 3 The Trusting Soul

Ron Clary is a lawyer with a practice in Canoga Park. He writes trusts--hence the title. His blog is easier to read than his professional work product.

Blog Url: http://valleynews.com/~cplaw

Apple Con-Jobs

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Contributed by: Ronald Clary on 9/7/2007

Steve Jobs just reduced the price of the Apple I-phone by $200, from $599 to $399. The device has been available for only two months.

In making this decision, Jobs said he wanted the phone to be filling a lot of Christmas stockings, and this was Apple's way of making that happen.

Of course, people who waited in line to pay the higher price weren't happy. Apple got buried with e-mails, phone calls, and customer returns.

At first, Apple wouldn't do anything to make up the difference. Then, when the deluge didn't stop, they offered a one hundred dollar cash credit on Apple products at Apple Stores, provided that the product was worth more than the credit. Seems like small comfort.

Jobs vowed to live up to the trust of the initial buyers, but made it clear that people who paid more for the phone just a short time ago should be happy that they were the first with the technology: "If you always wait for the next price cut or to buy the new, improved model, you'll never buy any technology product because there is always something better and less expensive on the horizon."

The problem here is that the horizon was just a little too close. After intentionally staging a massive P.R. unveiling which found thousands of people staying in lines overnight for store openings for the opportunity to download their cash into the Apple treasury, Jobs couldn't wait longer than 60 days to go for the big pay day. In doing so, he insulted the group known as the "early adopters".

"Early adopters", pay extra money for the privilege of pulling out their new device and watching the people (usually men) around them drool.

Jobs pulled the plug on the drooling far too early. For an extra $200, you should get drooled at for six months, at least.

He said he wanted to get the device into more hands, faster. Translation: the thing wasn't selling as well as he hoped. The initial capital costs of the product launch were high, and all the early adopters had been flushed out. Now, the phone had to sell for a price that truly reflected what it is worth. In a world where you can get a cell phone free with a two year contract, what he had left was the value of the balance of the product: An 8 gigabit video iPod with wireless internet and a nice interface. That was worth $399.. And no one was going to pay more.

So Jobs pulled the pin on the price, hoping that nobody would notice. A very bad call.

Everyone noticed. And it is unlikely that any of the early adopters who got hurt here will ever trust Apple again. They'll wait for the price to drop the next time Apple releases something cool.

Jobs is revered in the tech world for his control of the market. In this case he made a major mistake, and Apple will be feeling the effect with each new product launch.

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