Opinion - I have been wondering about this question pretty much ever since I listened to my first Steve Jobs keynote almost ten years ago. It is fascinating to watch Jobs and listen how he turns a product you normally wouldn't pay attention to into something you believe you can't live without. Often, Jobs has to walk on thin ice and take chances, like yesterday and today. How far do you think he can go?
Apple is an interesting company at any level, if you look at it. Much of the company's success came within the last ten years or so - the rise of the company began with the iMac, which was amplified through some smaller hits and especially the iPod. Without meaning to simplify the various reasons for the success of the company, which I have a lot of respect for, I believe that the actual products most likely are the least important reasons for Apple's market position today.
Take the iPod, for example. You really can't call the device and the family around the core product as being especially innovative. No matter at which iPod you look, they all have always responded to an existing market need or they corrected mistakes others had made before. The first iPod was one bulky device, but it came in a design you wouldn't feel ashamed of showing to your friends; the most recent and most important introduction, the iPod Touch is simply a logical move following the iPhone and it exploits the two major weaknesses of the Microsoft Zune – the Touch shows Microsoft how Wi-Fi is done right and it makes the Zune look embarrassingly ugly. In that sense, the iPod product team has executed with perfection, but can you call the Touch innovative? Not really.
Go through the history of Apple announcements und you will find many similar scenarios, I won't go into too much detail here, you get the point.
So, if it isn't the product alone, what makes Apple so successful? Well, we all know that Apple is the example for excellent marketing and one component of that marketing strategy is Steve Jobs. Yesterday's presentation was yet another example how well that Jobs-portion of the marketing machine works.
Personally, my opinion is that we are talking here just about a range of updates and a new iPod that were expected anyway – nothing earth-shattering. A smaller iPod Nano? We knew that was coming and it even fell a bit short of my expectations: I believe the family would have deserved a 16 GB model. Colors for the Shuffle? Great. A thinner iPod Classic? A result of smaller hard drives with more capacity - next? The Touch. I covered that already.
Still, the world gets crazy over these portable media players. My personal favorites were the posts on TMZ.com and PerezHilton.com, which are apparently bookmarked by anyone interested in Hollywood gossip. Between those posts digging up the latest dirt about Britney Spears and Lance Bass, we read "say hello to your next must-have purchase!" Must have???
You probably are already well informed about what was announced – how could you avoid the flood of articles and TV reports anyway? I originally wanted to pick on the ringtones offer, which is pretty outrageous by itself. Ok, you will have to pay between $2 and $3 from other services to get a few seconds from a song as a ringtone, but jeez, if I have bought the song already, why charge me again to use it as a ringtone? Haven't I purchased the song and shouldn't it be my decision what I want to do with it? Is it Apple's or anyone else's business, if I listen to the whole song or use it as a ringtone?
This whole music business is getting really annoying. Common sense is left behind and the industry just tries if consumers are dumb enough to pay twice for the same content. We have seen the same strategy in the music and video download market. Time will tell if we will make the same mistake again and if it will sink in over time that we really own such a music track and that we should be able to listen to it anywhere and anytime we want to.
No question, they planted this ringtone-thing on Jobs to sell during his keynote. His remark that it is "just" another 99 cents made the expensive ringtone offer look cheap – in a way a press release never could have accomplished. For a moment, you could almost see every consumer as a part of Steve Job's billionaire league and not as a part of the tough reality where 99 cents for a ringtone translates into a luxury purchase for a lot of people in this country.
Yes, I may be a bit harsh on this one, but I strongly believe that if I have purchased that song, I own it and I should be able to listen to it wherever I am, be it as a regular music track or as a ringtone. Charging twice is simply not right.
The task to deliver this message may not have been as tricky as having to convince the Apple community that x86 processors from the once-hated Intel will be built into Mac boxes. Still, it was still a difficult message to convey, a message that had the potential to swing both ways. But Jobs delivered; I didn't really see anyone complaining that much.
The complaints came someplace else: I did not expect people to complain about the iPhone price drop. And I did not expect Apple to react to those complaints with a decision that is, in my opinion, a slap in the face of its customers. It will be another stage in the game of how much Apple and Steve Jobs can test the patience and dedication of their customers.
So, what exactly happened?
The price of the 8 GB iPhone was announced to drop from $599 to $399. Jobs justified the move by saying that he wants to see the iPhone in many stockings this Christmas. Yes, this statement can get you thinking. Perhaps the iPhone does not sell as well as Apple anticipated. Maybe surveys found that the iPhone is perceived to be too expensive? Or Apple got a better deal on the components of the phone and is just nice enough to pass the savings on its customers?
My opinion: It doesn't matter what it was. The price is set by the market and if customers are willing to spend $599 on a cellphone, then Apple would be stupid not to be charging $599. And apparently, the first batch sold out, primarily due to the crazy hype around the device. We all knew that Apple makes a killing on each iPhone (a profit of more than $200 on each phone) and we still purchased it. If you are complaining now that you paid $599 instead of $399, you have to be honest to yourself and admit that you can't afford the phone anyway. Those $200 are a drop in the bucket considering the $2000+ you will spend on the service for the phone. Complain over at AT&T.
What is interesting is that Apple is now giving in to those complaints. The company offers a $100 store credit to all original iPhone buyers, which basically means that the company admits to unfairly overcharging its customers. But I don't get those $100 in cash, I am getting apparently a store credit … oh, wait a second: If I understand this right, I am entitled to a $100 credit on a product for which I was overcharged in the first place, but I only get this credit if I buy another product on which Apple is very likely to make a profit of more than $100? Now, you have to admit, that is brilliant.
There aren't many products which cost $100 or less in Apple's product portfolio and the majority of Apple products bring a profit of well more than $100. So, if you aren't exactly interested in a basic iPod Nano, an iPod Shuffle, mice and keyboards or software, this offer really isn't that great, right? In fact, if you aren't a Mac user and your spouse already has an iPod, then this offer is useless. Well, ok, I guess you always could get your children another iPod.
Imagine Microsoft and especially Bill Gates making such an offer. Besides my belief that it is very unlikely that something like this would come out of Redmond, the resulting media frenzy would be uncontrollable. Bill Gates or Steve Ballmer simply couldn't get away with this.
But Apple can, because Steve Jobs can. Which brings me back to my original thought: How far can Jobs go? If he can tell you that he overcharged you and that he only will give you some of the overcharged amount back if you buy something else from him, the sky is the limit, apparently.
So, what if I was Steve Jobs? What would I have done (and what would I do)?
Well, if it makes sense to drop the price, then I would have dropped it as well. Sure. That's just business. Admitting to the overcharge with a $100 store credit was unnecessary and in my opinion a mistake. As an iPhone buyer, I feel I just got slapped twice. It would have been nicer, if Jobs had convinced AT&T to offer more reasonable service plans (in the end AT&T executives are the ones who should apologize) or hand users a free upgrade to a better battery.
More importantly, what I would do if I were Steve Jobs? Easy: I'd be spending my time on finding an apprentice. The best out there, ideally a Steve Jobs look-alike. It is scary to see how tightly Steve Jobs is connected to Apple and the message it is delivering every day. Once Jobs retires, there better be another Jobs: Without a similarly charismatic person in front, Apple will endanger most of the success it enjoys today.
What do you think? Was it the right decision for Apple to drop the iPhone price? Was it the right decision to offer a $100 store credit? What if you were Steve Jobs? What would you have done? I am looking forward to your comments below.