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iPhone May Have Been A Victim Of It's Own Marketing

Many people are saying that the iPhone price reduction was a mistake. A lot of them think that the price reduction will cause people to question any purchase of future Apple products upon release because of a possible price reduction shortly after release. There was also speculation that the iPod Touch would steal sales from the iPhone.

I think that they may be correct but not for any of the reasons that were offered. I believe that the iPhone price reduction was a big issue for several reasons:

The hype surrounding the product made it so desirable that people feel shafted for being an early adopter.

This is pure human nature. One of the hazards of being an early adopter is that you will pay more for the privilege of being first. This is no different than buying a new car and taking a huge depreciation hit when you drive it off the lot. The fact that this was an unprecedented reduction in terms of price and time from launch does not in any way predict that Apple will do this in the future.

The fact that you paid full price and were still required to sign a 2 year agreement with AT&T made it really unpalatable to swallow the price reduction.

If you had gotten a price reduction for bundling it with the service agreement you would not have been so upset because this happens all the time and no one seems to notice. This has happened over and over again with Treo's, Razor's, KRAZR's, etc.. and there has never been a huge amount of hype from the media before. I believe that this is incredibly important because it is something we have to get use to going forward as phone companies shift business models. In the future you will pay full price for all phones and be able to take them to any carrier you wish. The fact that Apple is the first company to do this, and the fact that it's their first phone, makes it noteworthy and I think people have not adjusted to the new model yet.

Once the legal issues surrounding the unlocking of iPhones is cleared up, this price point is more acceptable if you want to purchase the phone and take it to another carrier. If you live in the US this means T-Mobile because it is the only other GSM carrier. This will also cause many Europeans to buy the phone, although I'm not certain it supports their GSM frequencies, either online or while vacationing in the US.

The day of the launch I was listening to the Marketing Over Coffee podcast and Christopher Penn speculated that if wifi was added to the iPod it would take sales from the iPhone. I think that this is flawed logic for one big reason. Many people will not switch carriers because they don't want to pay a high contract termination fee.

For instance, I bought a Treo 700p from Sprint in December of 2006. The phone was $500 and I got a $200 instant rebate and $100 mail in rebate(It was actually two $50 rebates and I only received one) for signing a 2-year agreement. This brings the price down to $200. If I were to cancel my contract to go over to AT&T I would have to pay $250 cancellation charge whether there was one day or one year left on my contract. This is a huge pill to swallow and unacceptable for most people when the phone was $599. At $399 I think it's still pretty unreasonable.

The iPod Touch allows you to buy an iPhone without the phone and fall in love with the design, the interface, the browser(because of the inclusion of wifi), and when your cell phone contract is up you can't imagine buying anything other than an iPhone. It also makes sense for someone like me who has business applications that only work with the Palm OS and simply can't switch phones, unless I want to carry two phones and pay two cell phone bills. (NO THANK YOU!)

Christopher M. Johnston
http://www.techchris.com

posted by pinky19476 @ 8:48 PM