I was somewhat annoyed by the price drop announcement because the price drop was uncharacteristically large, and happened uncharacteristically soon. A 1/3 price drop should normally take about 9-10 months in this industry, based on the usual factor of two every 14 months. To have it happen in two was, to say the least, surprising.

There are ways to communicate that you are charging a premium – only providing the version of the product with a ‘bundle’ is popular. Customers who paid extra for a PS3 are well aware of that, and aware that they are paying above MSRP. They takes their chances. Classically, though, Apple does not adjust prices this much and this fast, so customers did not see it the same as someone who lined up for a PS3 and paid a premium.

Large, rapid price drops discourage early adopters for all your products. Had Apple not acted, the people who bought early would wait just a bit longer, and these are people with serious pennies to drop.

Sending early adopters a store credit makes us more likely to adopt early again, because many of us will feel well treated. I do. (I had suggested a $200 ITMS credit, on the grounds that it would cost Apple less than a cash rebate, but straight credit is cool.)

I am quite happy with my iPhone, but I do act rationally. If Apple protects customers, then those customers are more likely to purchase if they are on the balance. If Apple does not protect customers, then the customers are more likely to wait. Apple acted wisely to protect that brand loyalty.

Scott

WTF does loyalty have to do with any of this? To all you “loyal customers”: If you were truly loyal, you’d toss Apple the extra $200. So cut the loyalty crap. You buy what you decide to buy. Apple sells what it decides to sell.

Loyalty does NOT mean buying products that you think are worth the price, even if you buy many products from the same manufacturer. That’s not loyalty, that’s preference. Loyalty means buying for irrational reasons, like, say, an item is priced about $200 above where it should be and the price will soon come down.

So … the very people who are complaining about being “mistreated loyal customers” are actually not loyal (not that loyalty should have anything to do with this in the first place).

If being burned occasionally is the price you’re willing to pay for instant gratification, fine. We’ve all made mistakes. But if you whine about it and pretend it’s someone else’s fault, you are a whiny crybaby.

Anyone who hasn’t been asleep for the past two decades knows that the price of technology tends to drop like a stone. Early adoptors ALWAYS foot the bill for research and development, while the folks who can wait get the benefit of economies of scale. Apple is now enjoying those economies (from using the same iPhone technology to produce the iPod Touch) and passing them on to the customer. Not an evil plot – basic economics. Now Apple is in a position to really stick it to its competitors for the holidays – what are they going to say now that they can’t argue price?

I ran out and bought the first Intel iMac. Three months later Apple upgraded the processor and added stuff I had paid extra for, and left the price the same! This was effectively a price increase for me. Was I pissed off? Only a little disappointed that I didn’t wait. But I realize had I waited, I’d have been disappointed again six months later when they did the same thing over again. To quote Mr. Jobs, “this is life in the technology lane.” Every person who bought an iPhone that first month could easily have said, “I’ll wait for the price to come down,” with every expectation and confidence that the price WOULD soon come down. But you chose to dip into the kid’s college fund, and this is what you got. That $200 dollars was not any more useful to you on September 5th than it was on June 29th. I belive those folks who say this doesn’t have something to do with a perceived loss of exclusivity are lying to themselves. I also believe that rational adults should give themselves a little more credit. Instead of acting like the world is tossing you about like a rag doll, acknowledge that you made a decision to purchase a piece of technology at first release and live with that decision and all its attendant consequences.

If Apple sent a message to its customers with the steep price drop — “Don’t be an early adopter” — look at the message we’re sending them: “Don’t reduce prices too quickly or we will be angry!”

Personally, I am glad to have the $100 rebate, but wouldn’t have lost any sleep if I didn’t get it. I had already determined that the iPhone would pay for its own hardware cost in reduced monthly payments over two years. Also, a one-third price drop for a cell phone is not quite enough to get me upset. If they started giving the phones away, I would certainly be asking, WTF?

I’d be very interested in seeing similar precedents for this kind of price drop in the cell phone industry. Ken@18, the link you gave doesn’t work — can you fix it?

Frankly, compared to the G4 speed dump, this is nothing. Heck, I still remember the $3000 Mac IIvx coming out, and four months afterwards, the much better Centris 650 at the same price. No credits or gift cards then!

And the price drop? It’s awesome. Now all my poor friends can have one, too!

Thus, for the last ten years or so, PC analysts and followers have treated the industry the same as any commodity market. This mindset leaves them unable to understand Apple or its products. The iPhone in particular throws them for a loop — “how is it that Apple can charge $600 for an iPhone when its component parts cost only $248 (or whatever) according to iSuppli?” The obviousness of the answer — it’s the design, stupid, and it has value — not only does not occur to them, but they seem incapable of imagining that a device can be worth more than the sum of its parts.

It’s obvious to anyone that early adopters are the ones who have paid a premium for the design. A sad problem is that quite a few don’t recognize that, and now that the iPhone’s price is closer (but still much higher than) the sum of its parts, they complain about being ripped off.

For my part, the iPhone was worth more than $600 to me from the day it was released, which is why I bought one. Nothing in the last two months has made me think otherwise. So now I’m especially happy to get an unexpected hundred from Apple.

I would like to quote FRANK who posted at 12:26 (post 35) rank Says: September 6th, 2007 at 12:26 pm Basic concept of supply and demand. There was limited supply and high demand, therefore the price was high. Now that demand has diminished some and supply has increased, the prices drop. In order to maintain volume, Apple dropped the price. Apple is not the only company to do this, its quite common. Most people just don’t understand this basic economic concept. By the way, gas prices work the same way.

Quit your bitching, you paid the price that Apple was asking.

http://www.apple.com/hotnews/openiphoneletter/

That said, I’m very satisfied with the $100 credit that Apple is offering. It’s just too bad they didn’t say that from the start. It’s like they didn’t know what the reaction to the drop would be.

Or, uh, because they wanted to control demand.

Remember how the iPhone was pretty hard to get for the first month or so? Sure, it wasn’t impossible like the Wii still is, but you still had to check online and get to the store early. How much worse would that have been if it was $399 instead of $599?

Economic theory tells us that one of the main effects of increasing a product’s price is to reduce the quantity of the product demanded. By selling at an inflated price to begin with, Apple controlled demand so that it would stay at a reasonable level. Maybe if more products were sold this way, product launches wouldn’t be the uncontrolled frenzies they so often are today.

Demand was astronomically high at launch. So the price was, yes, artificially increased to compensate. So pretty much everybody that really wanted an iPhone was able to get one. No major shortages.

For an example of what happens when price isn’t adjusted to match demand, look at the Wii. They’re still extremely difficult to find without very careful planning. At least where I live.

What we’re most likely seeing are case studies of what happens when one company overestimates demand and then compensates, and when another company underestimates demand and doesn’t.

But seriously, is this not the most basic application of economic theory?

Whenever you buy new technology, you are put at risk that it will be replaced by something better in a couple of weeks or that the price will drop. Apple continually updates its hardware lines with machines that are often superior and, spec-for-spec, cheaper than that it immediately replaced, and it does so without warning. Are you “screwed” because you bought a iMac in July 2007 while the August 2007 iMac is actually cheaper for more bang? Nobody who bought an iPhone at its launch has lost anything. They made an investment for a superior product that they felt was well worth the asking price. They’re getting a better deal on data than just about anybody else gets.

I live in Canada, where there is no iPhone yet. The very day it is available, I am buying one. I have held off upgrading my aged 2003 iPod and my crummy cell phone for just that reason. I don’t know whether Rogers (the presumtive carrier of the iPhone when it comes) will offer anything like the deal on voice and wireless that AT&T does. Canadians pay through the nose for their wireless services. The final subscription cost may not be the $300.00 a month that some have calculated, but I wouldn’t be the least bit surprised if I paid more for the same service than could be had in the USA. There’s also the fact that Apple products are generally more expensive in Canada even despite the current exchange rate. For comparison, an iPod touch in the USA is $299. The Canadian version is $329 even though the cost for a US iPod Touch in Canadian dollars is approximately $315.00. I’d be paying a premium and I will probably pay a larger premium for the iPhone when it comes.

But will I be anything but delighted with an amazing product that combines all my data needs into one superior phone? Will I say I got screwed? Nope. I will decide what it is worth to me and I will pay that amount if I feel that the price is worth the performance. I’ll also weigh in whether it’s worth it to me to have an iPhone right away at the asking price or wait for it to drop.

Heck, by the time I get to own my iPhone, it will probably be the second generation version, which like so many other products will probably offer more bang for less bucks than the first generation. I hope there will be no outrage over that.

Consumers haggle over price by using time and patience. If we don’t haggle with those tools, we’re either truly busy (and the value of our time merits the initial higher cost), or we’re treating ourselves to something sweet.

Some of us shouldn’t indulge in such treats.

Quit your bitching, you paid the price that Apple was asking.

BUT… I did not want an iPhone for $600, and it was obvious that the price would drop, just as it did with the RAZR and every other desirable tech item. ever. introduced. I set the price that I would pay, for the features I want: 16, or preferably 20 GB, and at least v. 1.2 of the software. That means that I’ll probably get my phone in about 6 months. That’s about 6 months sooner than I’d expected, and I’m cool with that.

You set a different price/value point for yourselves: $600 for an 8 GB, v. 1.0 iPhone. And that is precisely what Apple delivered. In fact, no other company could have delivered that product at that price on that date. They controlled the supply, you provided the demand on what can only be described as a discretionary luxury item. And now, after the fact, you have the temerity to whine about it? Get a life, dumbasses.

I don’t feel ripped off. I don’t need words put in my mouth. And I don’t need salt poured into non-existing wounds.