Looks like Jobs is apologizing for the iPhone price drop!

For those saying "what's the big deal" go ahead and name 5 high-dollar tech devices that got a 33-40% price drop 2 months after it hit the stores, and not because they were a huge failure.

What I think happened is Apple saw sales of the iPhone dropping like a stone after those few who could actually afford and actually wanted the iPhone had made their purchase. Apple knew it had to do something drastic to whip people into another buying frenzy. Plus, they need to make room for a higher memory (16GB) version, which will likely be overpriced (probably $200 more compared to Touch's $100 more)

The $100 credit is unprecedented and a smart move on Apple's part. It's a $100 value to the people, but if you consider Apple has an average 50% markup on products, it'll only cost them $50 per credit, not to mention the extra induced purchases that may not have happened otherwise.

Even if this is an extreme circumstance of what typically happens in the technology market, remember Apple is new to this market. It's clear their timing was off. They made a move they felt they had to make to keep iPhone saturating the market. I truly believe this benefits early adopters, not because of the credit, but because further saturation means better future options, accessories, services, etc. They made an investment by being early adopters, an investment in the technology, and this product's success should be important to them. This price drop can only help the product's success. I still think this was blown out of proportion and not some big conspiracy, any more than their other product releases.

Even at 50% markup, they're losing millions in revenue. And I bet anyone willing to pay $500+ for an iphone would've continued to shop at Apple. Clearly, reputation is very important to them.

Mac Break Weekly was talking about this. They mentioned that the iPhone has a 90 return policy. If that's true, this move might stop me, and other $599 iPhone buyers from returning the phone and buying it again.

I wonder if this in one per customer. Remember all those people that bought two, or somehow bought more than two thinking it was the next hot eBay item.

Oh dear. I wonder if all the phones we bought here and sold overseas...oh man. ::goes to check reciepts::

groggy23 said:

Wow I'm suprised yet not suprised. But all in all good news. Mr. Jobs does afterall have a heart.

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Haha, to everyone who says he has a heart... you should rephrase that and say he has a brain. It's more like, "Hey, as Steve Jobs, how do I make even MORE MONEY?" Easy, I'll lower the price of the iPhone, get a TON of new customers, and give everyone who bought it before store credit.

$$$$$

The losses in profit were calculated to just a few cents per phone with the store credit that Apple has to cough up. This store credit is just another way to get even more money out of the customers who had already bought the phone at the $599 price!

Steve Jobs is a business man, not an angel. Let's say you all buy Leopard with your money and pay the extra difference. With the 5 cents that Apple loses in profits to get you this store credit, they are getting another $20-30 dollars for you to buy Leopard! Haha...

diesel828 said:

The losses in profit were calculated to just a few cents per phone with the store credit that Apple has to cough up.

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How exactly was this calculation obtained?

Dimitri said:

How exactly was this calculation obtained?

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I can't remember which news site I found it on, but I'll look it up and post it here.

If you think about it, the profits on the iPhone were more than 100% because Apple was selling them for more than twice the production cost of the phone. Giving a $100 store credit (which I think is BS) is hardly a loss - especially when we can conservatively say that 50% of people are going to use it to buy things where they'll end up paying an extra difference.

What this boils down to is that Apple isn't doing anyone a favor, they are making even MORE money on people who overpaid on the iPhone (people like me.)

Edit: It looks like, if you do some searches, the 4GB iPhone cost $250 to produce and $280 for the 8GB. At $499 and $599, respectively, those iPhones made a ton of profit for Apple. Even the $100 store credit does nothing to hurt Apple. I mean, come on, would they really shoot themselves in the foot? Now, they've turned this act of "benevolence" into more profit raking.

You're still only looking at profit margins, not profit losses. That $100 credit is $100 less than they could've made, regardless.

you also forget distribution costs, advertising costs...etc

diesel828 said:

I can't remember which news site I found it on, but I'll look it up and post it here.

If you think about it, the profits on the iPhone were more than 100%.....

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There is no such thing as 100% profit, unless the cost is Zero.... You are thinking 100% return which is "doubling up".... you buy something for $10, and sell it for $20... THAT's 100% return and 50% profit margin.

I won't get into how silly the idea is that Apple giving up $100 per phone really only equals "pennies"... lol. c'mon now.

When do we get our $100 credit?

As many people said above, if you are willing to pay $x for the price of the iPhone when it first came out, so be it. If the price drops down to $y after a few weeks, tough. Sure, I'd be sad, but it was my own choice to get it when it first came out.

That's my opinion.

Now THAT'S customer service.

Or some pretty sweet marketing.

I'm very happy about the drop. And I don't feel that bad about overpaying if Im going to get some money back. I'm gonna use the money to get that small bluetooth headset. What are you guys going to use it for?

prpandey said:

Or some pretty sweet marketing.

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Good Customer Service ALWAYS = Good Marketing

but

Good Marketing Does not = Good Customer Service

RIDE said:

There is no such thing as 100% profit, unless the cost is Zero.... You are thinking 100% return which is "doubling up".... you buy something for $10, and sell it for $20... THAT's 100% return and 50% profit margin.

I won't get into how silly the idea is that Apple giving up $100 per phone really only equals "pennies"... lol. c'mon now.

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I always knew I should be weary of anyone who was skeptical but says "lol."


The store credits will cost Apple about $60 million in revenue, based on about 600,000 iPhone owners, he said. That would subtract about 2 cents from profit, he said.

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=a_EzlhuaE1Gs&refer=home