Apple shrewdly grabs tons more free publicity for Apple iPhone while making it much more affordable

Apple StoreApple’s initial iPhone prices signaled the constrained production that the highly-buzzed-about device would naturally face at launch and during ramp up. Now that greater supply and lower manufacturing costs have developed, Apple has cut prices for the holidays, Carl Howe explains for Blackfriars’ Marketing.

Howe explains that Apple also “needed to rationalize its pricing of the iPhone against the iPod touch launch price. The iPhone couldn’t carry a $200 premium over an iPod touch; too many people would have just said, ‘I already have a phone’ and bought [an iPod touch]. But by bringing the iPhone price into line with the iPod touch, Apple ensured that consumers could choose whichever device met their needs best without pricing playing a major factor.”

“We know based upon Jobs’ statements yesterday that Apple is on track to sell its millionth phone this month. So for safety’s sake, let’s say that 900,000 are already sold at the higher price. Of those, maybe 150,000 will get some sort of rebate or refund through their credit cards or price protection (I don’t think it will be nearly that high, but let’s just accept it for argument). That leaves 750,000 phones that earned an extra $200 premium over the targeted $399 selling price. Do the math, and you discover that Apple pulled in an extra $150 million for its trouble. Not a bad business decision at all, given that that $150 million is largely profit. And that’s a nice profit cushion for the iPhone business unit to have while Apple ramps up its carrier subscription revenue numbers,” Howe writes.

“People in the technology and investing press need to realize that Apple is in the high-touch consumer products business. Even at its high price, an 8 GByte iPhone was still less than your average Fendi or Louis Vuitton handbag, and no one writes outraged articles when those go on sale every year. With a clever pricing strategy, Apple both garnered a $150 million premium to its normal sales, generated significant PR buzz with almost no advertising or other marketing, and now is getting even more attention from its new lower price,” Howe writes.

More in the full article here.

[Thanks to MacDailyNews Reader “Linux Guy And Mac Prodigal Son” for the heads up.]

iPhone early adopters (we are in that group) who paid launch prices for Apple iPhones, divorce yourselves from the feeling the price cut might engender and take a dispassionate look at what’s happening. We’re not excusing it, just explaining it. The news is now filled with iPhone stories that to anyone without an iPhone (which is the vast majority of the buying public, for example: just 0.33% of the U.S. population owned an iPhone before yesterday) all scream the same thing: iPhone costs $200 less! Just $399!

Apple is running another masterful free advertising campaign. The value of this free publicity could be well north of $100 million if Apple were to pay traditional advertising rates to get the word out about iPhone, it’s new price, etc. to such high market penetration.

The news is only negative to some portion of just 0.33% of the U.S. population. And the ones who are upset now tend to be the most faithful to Apple. In other words, “This too shall pass.” To the rest of the world this is only a positive: $200 off a remarkable product they’ve heard so much about, maybe even seen fleetingly in person, and probably wanted.

Apple is going to sell a ton of iPhones on the back of this new round of massive, free publicity.

47 Comments

  1. Early Adopters,
    While I feel your pain and the $200 price drop is truly remarkable for Apple, you have to accept that things like this may happen when you live on the bleeding edge of technology.

    I’d like to hear more people applaud Apple for their 14 day price drop policy. That is certainly in line with many other businesses (tech and non-tech) and is not something that they are compelled to do. Anyone who bought their iPhone more than two weeks ago and gets anything out of Apple should consider themselves extremely lucky!

    In other words, stop your bitchin’!

  2. Good for Apple! Now that they’re gonna be selling so many phones and making so much money, they can afford to give back the $200 that they’ve fleeced from us loyal customers.

    I’ve learned my lesson, and I’ve been a sucker. I’ll take responsibility for my actions.

    But NEVER AGAIN will I purchase an Apple product on day one.

    As a life-long Apple/Mac user and loyal customer, my brand loyalty has been tarnished.

  3. I’m an early adopter. At first, I felt a tweak of pain with the announcement, almost like a spurned lover. But then I realized this past summer with my iPhone has been awesome. Met a lot of ladies with this phone! I guess soon it won’t be quite as much of a status symbol, and that is good. I’m glad that more people are gonna be able to afford it. It’s really amazing, and I’m sure this will be even more of a switcher device than the iPod could ever hope to be.

  4. This price cut is a clear symptom that the new Apple is not the old Apple. In Scully’s, Spindler’s, (et al) day, they would have milked the fat profit margins for years on the iPhone. Now, they are going for the jugular of the competition (and probably still making some pretty good margins.)

    I honestly don’t see anything that the competition can hope to get to market in the next year that will come close to Apple’s iPods and iPhones. I mean, look at the Zune now. A week ago, it looked passé. Now it looks downright retarded, like someone wearing a three-piece, polyester leisure suit to a tropical luau.

    Nokia, Motorola, Sony, Creative, MS, Real, etc. are gonna have a lot of coal in their stockings this Christmas.

  5. The greatest thing with the iPod Touch is…

    ..you don\’t have \”Big Brother\” cohorts AT&T;and Cisco tracking you and tapping into your sensitive iPhone data info via cell.

    Eventually a device/service will enable VOIP on the iPod Touch, allowing one to make and recieve calls via numerous free WiFi locations. Turn it on, turn it off. Your safe.

    Heck even over Bluetooth on your cell.

    Check this out..

    http://www.hardmac.com/articles/73/

  6. I asked myself a question earlier. If I knew ahead of time Apple would do a 200 dollars price drop 2 months after launch date, would I have been able to stop myself from buying the phone for 599 on day one? Probably not, that is how much I wanted this phone. While most people may not feel that way, but I’m sure theres plenty of people on this site who may feel the same way.

  7. The whiners just don’t get it, but who cares about them and all their loyalty? They’re the first to pee in their pants when Apple does something that they don’t like. You see, there’s a difference between fanaticism and support. Apple needs more supporters and fewer fanatics, especially considering how vocal the fanatics are and how much attention they get in proportion to the validity of their statements.

    Wah, wah, wah! Go on and complain about how much it sucks that the iPhone can be bought by more people! A few weeks ago you were complaining about how much it cost. Just do us all a favor and take your “I’ve been an Apple guy since..” self-promoting martyr complexes somewhere else. No-one cares nor wants to hear your whingefests about jilted computer love, ok?

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