Did Apple Blow it with the iPhone Price Drop?

Here we are maybe a couple of months or so after the introduction of the revolutionary iPhone and Apple drops the low-end model and dramatically reduces the price for the high-end iPhone. Apple reduced the cost by $200 from $600 to $400. That’s even $100 less than the low-end model used to cost.

Based on the Apple blogs and various investment groups, this was an unprecedented move. Apple normally reduces pricing long after the introduction or maintains the price add adds more features. This is essentially part of their branding strategy to keep the quality image high in consumers’ minds.

Most conclude that this move will undoubtedly increase sales substantially. But at what cost?

Apparently, the investment community agrees that the move will reduce Apple’s profitability. The stock dropped by about $7/share after the price reduction announcement.

Many who bought the units early on will really be annoyed by this decision. Consumers may think twice about buying future Mac products during their first three to six months of introduction. This purchase delay syndrome could work against future Apple innovations according to some.

Surely Apple understood these risks. And they probably figure that with higher sales volumes that they can make up the profits through both greater sales volume combined with a reduction in production costs. Or perhaps they were concerned about the one million iPhones sales by the end of September pronouncement to keep their commitment to shareholders?

By now, you know what I think about putting more emphasis on shareholders and less on customers. Always keep your eye firmly on the customer while keeping your field of view on all stakeholders by 360 degrees.

What do you think this decision will do to Apple long term? What can direct marketers learn from this unfolding event? Does increasing profits and sales volume ALWAYS achieve the desired results for the company?

Posted on September 6, 2007 and filed under Branding.