When Lowering Your Price Makes Customers Mad

We're all happy when prices drop, right? Well, not quite all of us. Apple caused quite a backlash last week when they decided to cut the price of the iPhone by $200. You'd think that would be a good thing but it made a lot of customers mad - specifically, those who who had already bought a phone at the higher price.

According to a story in the Washington Post at least one iPhone owner who felt gypped by the price cut proclaimed that he would never buy another of the company's products.

I can understand their frustration. If I had shelled out $599 for something and a few weeks later, it was selling for $399, I'd be annoyed. In fact, I have been annoyed when that's happened to me on several occasions. But I accepted a long time ago that when it comes to the technology market, you can pretty much count on the fact that the price you pay today for most electronics and computer equipment will be lower if you wait a while.

The iPhone folks are acting as if they're the only ones who've ever been caught in this kind of situation. Yet when I got my Samsung i730 Windows Mobile phone from Verizon a couple of years ago, it was $600. Last spring, Verizon was offering the same phone for $299. It never occurred to me to swear off Verizon and Samsung forever. I just figured that $300 difference was the price I paid to have the device when it was brand new.

And it's not like they weren't warned. A number of industry insiders speculated that the price would come down fairly soon and advised those who didn't just absolutely have to be on the cutting edge to wait a few months before buying. I even wrote an article for Tech Republic titled "Ten Reasons Not to Buy an iPhone (at least, not yet)." One of those reasons was the high opening price. I opined that the next version of the phone, which was rumored to be coming out as soon as this December, would cost less and (I hope) address some of the problems with the current version, such as the non-user replaceable battery.

Besides, I thought Apple fans had plenty of money to throw around. Otherwise, why would they pay so much more for computers with specs so much lower than what they could get in a PC for the same price? Seriously, though, anyone who's been around the computer world for any length of time (and phones like the iPhone and the i730 are computers) knows that drastic price drops are the order of business over both the long and short term.

It's that "short term" part that seems to be rubbing so many people the wrong way. They aren't complaining so much about the fact that prices went down as the fact that they went down only ten weeks after the phone's release. And I admit that most of us didn't see it coming quite that quickly.

Apparently Apple didn't see all these angry responses coming, either. Steve Jobs himself found himself apologizing for the price cut, and Apple is offering a $100 credit at the Apple store to customers who bought the phone at the higher price. Whether that will appease the angry mob is yet to be seen. Meanwhile, Wall Street reacted to the price cut with a corresponding drop in Apple's share prices.

What about all those people who didn't rush out to stand in line and buy an iPhone on the first go-round? Will this price cut motivate them to buy one now? Or will they think twice and wait, hoping it will go even lower? Personally, I'd need to see more changes than just a lower price before I'd buy one. A removable/replaceable battery is non-negotiable for me, and the limited support for Exchange server is another deal breaker with the current model.

I'm a Windows kind of person, and will most likely go with a Windows Mobile 6 device when I replace the venerable i730 - but I'll never say never. Apple does make gorgeous products, and if iPhone 2.0 offered full Exchange support, a user- friendly battery, and worked on Verizon's EV-DO network, I would be mightily tempted.

What about you? Did you buy an iPhone when they came out at the end of June? If so, are you angry about the price cut? How angry? If not, will the price cut motivate you to buy one now, or is $399 still too much to pay for a cell phone? Are you waiting for a new version with better features? What features would Apple need to add for you to want one of their phones? Or do you think the whole concept is silly? Are Apple customers justified in feeling cheated, or are price cuts always a good thing, even if some people get burned? Would you get angry if Microsoft announced they were dropping the price of Vista?