Let’s Get Cynical

Talking with a co-worker yesterday, an interesting theory came about regarding apple's iPhone fubar.

Pretend you're Apple. The iPhone comes out, and is the hottest thing on the market for a few weeks. Then, sales drop. Precipitously. You need to rescue the device's moribund sales.

What do you do?

You slash prices. Dramatically. You know full well this will cause a huge backlash from existing buyers. In fact, you're banking on this. How to get word out about the device's price cut? Let an army of pissed off customers start an online shit storm. Suddenly, it's in all the papers. It's all over the tech news sites.

Now. Wait 24 hours.

Apologize. Offer those upset customers a $100 store credit. Be hailed as “doing the right thing” and becoming the good guy. Get more press about the price cut.

Let's do the math.

Assume they sold one million iPhones. Which they haven't yet. Assume all one million of those iPhone owners redeem that store credit. Which they won't. That's a $100,000,000 viral advertising campaign. But it's $100,000,000 in store credits, that bring 1 million customers back into your store to spend more money. Brilliant. Worth every penny, especially as, in reality, they didn't sell that many phones, and not everyone will actually redeem the store credit. The total cost is much lower.

Is that really all that cynical?

Or am I instead to believe that Apple, who are masters of marketing and shaping public opinion, had no idea that such a dramatic price cut so soon after the product's release would upset people? The same people responsible for turning around a dying company and making it one of the hottest and most respected brands. Those people, they didn't see this coming?

That's not cynical. It's just plain gullible.