You've probably heard about Apple’s big marketing stumble last week. When they cut the price of an iPhone by $200, they alienated millions of loyal customer/fans who had already dutifully anted up $599 to be “early adopters.”
In an open letter to all Apple customers, founder and CEO Steve Jobs admitted Apple made a mistake: “We need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers trusted us, and we must live up to that trust with our actions in moments like these.”
He then announced Apple would give previous iPhone buyers a $100 credit for future purchases at Apple retail and online stores.
Most folks saw that move as smart customer service – and a savvy move for Apple, since it brings customers back to its stores. But could Apple have done even better?
In his blog, marketing guru Seth Godin disagrees with Jobs’ solution. “My guess is that his $100 store credit and personal note helped a great deal, but it also cost about $20 million in profit.” Godin believes Apple could have saved that money by offering those estranged customers something different. A premium that reflected their importance to Apple, yet wouldn't have cost the company and its investors so much cash.
* Free exclusive ringtones, commissioned from Bob Dylan and U2, only available to the people who already had an iPhone. (“This is my favorite,” said Godin, “because it announces to your friends--every time the phone rings--that you got in early.”)
* Free pass to get to the head of the line next time a new hot product comes out.
* Ability to buy a specially colored iPod, or an iPod with limited edition music that no one else can buy.
“The key,” writes Godin, “is to not give price protection to early buyers (that's unsustainable as a business model) but to make them feel more exclusive, not less.”
I think Godin is on to something. When you really know what makes your customers buy, as Apple does, you have lots of opportunity to delight and reward them. And money is rarely the most important element in that equation.
How could you take advantage of this insight to recognize and reward your customers – without incurring significant costs?
Yes, they could have done better! They could have not used their customers to test products, they could have gotten their act together knowing full well of when and what products they want to launch instead of making customers suffer.
No word on credits for those who bought the Lisa.
Somewhere in the middle is the answer. $100 for those that can afford the iPhone and it's rate plan is probably not much. However the gesture of the $100 is probably worth a lot more. The idea of the exclusive RingTones is neat - but who's going to recognize them outside of other first adapters? and on and on.
I won't pretend to know the solution and I still predict the iPhone to be the downfall of Apple. ;-)
When SO SOON after launching a product, such a unique product; you drop the price this dramatically -- YES you should make sure that your first buyers are happy enough with you to be first buyers again later on.
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