September 7 2007

Why Steve Jobs was wrong to give a refund

Why Steve Jobs was wrong to give a refund“Boo hoo, I want my mommy to kiss the boo boo and make it all better!”

Steve Jobs gave in to the whining iPhone customers, and I just don’t get it. He issues an open letter explaining that they could have a $100 credit, but he summed it up best in one point:

Second, being in technology for 30+ years I can attest to the fact that the technology road is bumpy. There is always change and improvement, and there is always someone who bought a product before a particular cutoff date and misses the new price or the new operating system or the new whatever. This is life in the technology lane. 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 good news is that if you buy products from companies that support them well, like Apple tries to do, you will receive years of useful and satisfying service from them even as newer models are introduced.

And that’s exactly it. If you are an early adopter of technology, you’re going to have to expect things like that to happen. By giving in he has set a dangerous precedent for all gadget makers that if the customers whine enough, they can get money back.

There’s no denying I think he did the price cut too early, only 66 days in to the product’s life cycle, but that is Apple’s right to do so. To those who whined, get over it and welcome to the gadget game… there’s the door, because believe me, this isn’t the last time it will happen to you.

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  • This isn’t about the whining. That letter has likely been in Steve’s drawer (or more likely, his press people’s) since the iPhone was released. This is about smoothing ruffled feathers in the hopes that future business won’t suffer as a result of this price drop. It’s all about Apple trying to make sure their customers don’t punish them for this next time by sitting on their hands when the next over-priced toy comes out.

    It’s my guess that, if even one status-conscious person with more money than sense hadn’t whined, Steve would have just released a slightly differently-worded letter (blathering about rewarding early adoption and customer loyalty/support) with the same store credit as a “refund”. Companies don’t make decisions like these (price cuts, “refunds) quick enough for this to have been anything but a plan from the start.

  • Shari – Good point. The whining has just driven me up the wall.

  • One has to ask, of course, if Jobs had been planning the $100 rebate since the release of the iPhone, why didn’t they just price the phones $100 less?

    A few possible reasons: Apple wanted to limit demand in the face of production shortages; Apple knew it would cause a fuss and aimed for the publicity; Apple is just playing it by ear.

    If Apple wanted to control demand, then this was an excellent business decision meant less to screw over customers than it was to maintain a good business appearance.

    If Apple wanted to get the controversy and produce buzz, then they are manipulative and unkind. But they also are not as smart as they have been given credit for–I don’t think that Apple’s image has done well here.

    If they are playing it by ear, then they are less smart and more human.

    As for the whining, I don’t have too much sympathy. As Jobs pointed out, that’s the landscape. I bought a Mac Performa 6300 in the 90’s, and 6 months after it was released, the 6400 came out at double the CPU speed and RAM, for a little bit cheaper.

    Yes, 2 months and a 33% price cut is extreme–but the same principle still applies. I would be upset, but more disappointed than angry–like “Oh crap, look what I missed out on… oh well.”

    Even knowing this, I will be buying an iPhone within the first week or two of them being released in Japan. Why? Because maybe they’ll cut the price, and maybe they won’t.

    But here’s the point: you buy what you believe is worth buying. If people thought they were getting a deal at $600, then they should be satisfied with that. These people knew it was overpriced, and they paid–most of them happily.

    In this case, what it comes down to is that people were pissed off because they didn’t like that other people were getting a better deal than they were. They can be disappointed that they weren’t in the luckier crowd, but if they agreed to pay what they paid, then they should either be satisfied or they were uninformed as to how big a profit margin Apple was getting on this.

    In any case, anyone who buys a cell phone that costs over $300 is probably paying a similarly padded price. Shouldn’t everyone paying that much be upset?

    Anything else is not about how much you pay, but rather when you got sucked into paying it.

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