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Mac faithful up in arms about iPhone price cut
Jobs eats humble pie - and offers $100 store credit...

By Tom Krazit

Published: Friday 07 September 2007

After protests over its decision to cut the price of the iPhone by $200, Apple will give iPhone users a $100 store credit.

The company posted an open letter from CEO Steve Jobs on its website defending the decision to cut the price of the 8GB iPhone from $599 to $399 but acknowledging that Apple shouldn't have treated its early adopters in such a fashion. Jobs had announced the price cut just a day earlier at a San Francisco event at which the company unveiled a refresh of its iPod line, including the new iPod Touch.

Jobs wrote: "Even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, 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." Details on how to obtain the $100 store credit will be posted on Apple's website next week, he said.

An Apple representative said the $100 store credit will not apply to the iTunes Store. The store credit also does not apply to customers who are eligible for a rebate because they bought a $599 iPhone either 10 or 14 calendar days before Wednesday (10 days for online sales, 14 days for retail sales).

In the letter, Jobs echoed comments he made to reporters earlier this week that Apple wants to attract new customers this holiday season with more aggressive pricing. "It benefits both Apple and every iPhone user to get as many new customers as possible in the iPhone 'tent'. We strongly believe the $399 price will help us do just that this holiday season," he wrote.

He also pointed out that this can be the way of life in the technology business. "If you always wait for the next price cut or to buy the new improved model, you'll never buy any technology product because there is always something better and less expensive on the horizon," Jobs wrote.

Apple doesn't often admit mistakes, and the letter was a forthright admission that the company didn't handle the price move correctly. "We apologise for disappointing some of you, and we are doing our best to live up to your high expectations of Apple," Jobs wrote.

Some Mac bloggers and users seemed satisfied with Apple's response to the iPhone flap. John Gruber wrote on his blog, Daring Fireball: "I think it's clear that Apple was taken by surprise by the magnitude of the backlash regarding the price cut. They've responded quickly, humbly, and well, to avoid letting this issue spoil the good news from their impressive product releases yesterday."

Others noted that Apple, so dependent on a core group of loyalists to help create buzz for its products, had little choice. Poster TBaggins wrote on AppleInsider's forums: "You just don't screw over your most ardent fans... always a bad plan. You may not pay for it initially but you will long-term."

Samir Bhavnani, an analyst with CurrentAnalysisWest, saw a savvy business move in offering a store credit instead of a refund. "They'll get new traffic to the site and stores, and almost everything costs more than $100 in any case, so customers will be spending even more of their dollars with Apple," he wrote in an email.

Some iPhone customers are reporting that they have received at least partial refunds from their local Apple stores. And some AT&T customers have said the same thing.

Jobs pointedly did not address in the letter whether iPhone sales were living up to expectations, although during Apple's iPod event he said the company remains on track to hit its stated goal of shipping one million iPhones by the end of September.

Tom Krazit writes for CNET News.com