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Why Apple has a split personality when it comes to keeping iPhone owners happy


After shelling out top dollar, the customers felt betrayed and angry. The shine on the company's new flagship product was tarnished. The remedy wasn't cheap... and the CEO stepped up and spoke to those irate early adopters. "We want to do the right thing for our valued customers. We apologize for disappointing some of you, and we are doing our best to live up to your high expectations of us," he said, responding quickly after the first complaints came in. Within a few weeks, the PR hiccup was calmed, and the new product went on to glory and success.

Looking back on that experience is illuminating. With the rapid response, the willingness to pay for customer happiness, and the frank handling of the situation, it's a bit surprising to be in the midst of the current stressfest and see how things have deteriorated. Where's the corporate responsibility and the can-do attitude of 2007 when we need it? Let's take a look at how the two scenarios diverge, and why Apple didn't -- or couldn't -- step up to the plate now like it did then.

The one way in which these situations are similar are pretty obvious: both feature frustrated iPhone customers in the starring role. The differences, however, are equally interesting:

  • Scale. The iPhone was a hit product when it was introduced, but it wasn't the raging behemoth it has since become. 600,000 phones on one domestic network in two months is a pretty nice run rate; now let's look at iPhone 4, which racked up preorder and launch sales of 1.7 million devices in three days. Estimates vary for iPhone sales since the close of Apple's third quarter on 6/27, but even the conservative analyst forecasts are over seven million. That's a lot more customers to walk back off their respective ledges. Still, if there are 10 million iPhone 4 owners and you spend $10 on each of them (to manufacture and ship a Bumper on request) that's $100 million -- not much more than the $60M exposure on the price cut credits.

  • Ubiquity makes it easier. In the case of the price cut, the universe of iPhone owners was completely homogenous; every single person with an iPhone paid more for it before the change than the people who bought afterward. This uniformity meant that they were all suffering equally (despite the fact that they all had the use of their iPhones for two months, and they continued to work exactly the same while new buyers were paying less); it made it easier to work with them as a class, and offer a solution to everyone at once. With the reception issues and proximity sensor problems, it's not uniform -- most iPhone 4 owners appear to be completely happy with their phones, and only a minority are having problems. How big a minority, we don't know; chances are, neither does Apple. Offering an extended warranty swap period or free cases entails some unknown risks when the affected population isn't well defined.

  • It wasn't broke, no need to fix it. As mentioned above, the original iPhone worked just as well on September 6th of '07 as it did the day before. The price cut wasn't a flaw or a performance problem, it was a public relations and marketing problem -- there was nothing inherently wrong about a $599 iPhone unless you were trying to resell it on eBay and saw your bid count dry up precipitously. By admitting that Apple had kinda sorta shafted the early adopters, Apple gave up nothing in terms of legal responsibility or practical concerns; there is no "poor form" penalty except the one that potential buyers impose on the company. Old customers were loyal by definition (and more likely to take advantage of the $100 credit), and the customers-to-be were happy about the cheaper iPhone. By contrast, even if Apple knew for a certainty that there were engineering problems with the iPhone 4's antenna and proximity sensor, and even if they were definitely affecting a percentage of customers, admitting it up front would be a big, big risk. Any acknowledgement of a manufacturing flaw or a poor design decision would almost certainly trigger more lawsuits, a flood of product returns and a big black eye for the company long known as a leader in effective design and quality products. Nobody would have been able to mount a credible case against Apple for dropping the price of a product, but that didn't stop a few "Don Quixote, Attorneys at Law" from giving it a try; in the iPhone 4 scenario, plenty of gritty legal action would be inevitable.

Those are all solid, rational reasons why Apple may have chosen to handle the 2010 crisis du jour with less grace and clarity than the 2007 customer uprising -- but that's not an excuse for obfuscation or misdirection. Nor is it a substitute for the direct and enthusiastic embrace of the "we want to do the right thing for our valued customers" ethos that characterizes Apple at its best. Those millions of iPhone 4 owners deserve a straight answer regarding their issues, and not more static.

I don't know what Apple is going to do tomorrow with an audience of hurriedly-gathered journalists and eagerly page-refreshing web surfers. I hope, however, that it's more in line with 2007 than with the last few weeks of 2010.

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