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iRate: Apple mistreats its customers yet again

As was reported last week, Apple cut the price of its 8 GB iPhone from $599 to $399, just 10 weeks after the phone was first introduced amid a sea of hype and countless television commercials. The move left many of the hundreds of thousands of early adopters feeling not only bamboozled, but angry as well.

The reasons for the price cut are not entirely clear. Some speculate that the units were selling well, but that Steve Jobs was simply looking to outperform the original date projected for the sale of the millionth iPhone. Others believe that sales had begun to slow, and that the price cut was necessary to make up ground.

Regardless of the reason, this situation provides yet another example of Apple putting the screws to its loyal customers. As I detailed in an earlier post, Apple has a history of focusing on new customer acquisition and ignoring its current (and fiercely loyal) customers. Perhaps knowing this history, iPhone early adopters last week were extremely vocal in their criticism of Apple, which ultimately resulted in a semi-apology from Steve Jobs on the Apple website and the offer of a $100 Apple store credit as compensation for the experience.

So, how many times can Apple continue to take advantage of its customers without paying the price? It’s hard to say, but the bill may be coming soon. While the price cut may have helped Apple reach the one million iPhone milestone more quickly, it may eventually hurt the launch of its next big consumer product. Having been burned, past early adopters may take a wait-and-see approach for the next product, cognizant of the fact that a price cut may be just weeks away. If such a scenario materializes, it has the potential to start a vicious cycle in which Apple is forced to continually cut post-launch prices to reach projections, effectively validating the wisdom of the wait-and-see approach for Apple products. Or, more colloquially, “Fool me once, shame on you. Fool me twice, shame on me.”

As any marketer can tell you, it is far less expensive to keep a satisfied customer than to acquire a new one. Apple seems to forget this maxim with frightening regularity, and is once again opening the door for the competition. Unlike the iPod, Apple does not hold a monopoly on the wireless phone/PDA market with the iPhone, so its margin for error is considerably smaller. Apple must re-embrace a customer-first approach, or it will soon find itself on the outside looking in.

Update: I just came across this really interesting post by Future Now’s Bryan Eisenberg that examines the price drop and subsequent apology/refund I described above — along with several other recent Apple actions — as it relates to the overall erosion of the Apple brand. I’ve been a big fan of Bryan, Jeffrey and GrokDotCom for years, and this post is definitely worth a read…