Crisis Communications 2.0 – Apple and the iPhone Price Bomb

One week following the aftermath, it’s worth another look to dissect and analyze what went right and what went horribly wrong in order for PR people to understand how to prevent crises and also know how to react when they inevitably arise.

Gasp. Is it true? Can apple actually “do” wrong?

Yes indeed, but before you can call em on it, Steve Jobs swoops in and saves the day, again.

Yes, we all know by now that Apple reduced the price of the Apple 8GB iPhone by $200 and killed off the 4GB model after only two months of being on the market. However, this post is part of my Crisis Communications 2.0 series which analyzes how companies react in crises.

Let’s remember that this was a press event to launch the new iPod line. So in that regard, the price cut practically eclipsed this important news and demonstrated that Social Media is a powerful force that can work for or against you, whether or not you try to control the conversation and the message.

There are two camps on this. One side says that Steve Jobs and the Apple PR team screwed the pooch, while others believe that Steve’s honesty might have actually positioned the company for aggressive growth across the desktop and portable PC, media and cell phone markets. And by growth, I mean stealing market share away from existing anchors in each segment.

After much thought, I can say that I have been a visitor of both camps and now reside comfortably in the church of Apple. I’ll explain more in a bit.

So what went wrong?

First, the new iPods did not get their due spotlight even though this was the stage for an amazing set of individual stars.

Second, the only people talking to the community were upset customers and the media and bloggers that cast the spotlight on them.

Let’s dig a little deeper though as to why a price drop would be an issue in the face of the eagerly awaited new iPods…

The iPhone is considered to be one of the most successful consumer product launches in history and combining this caliber of news from two different, but beloved product lines was a recipe for disaster..

As many have said, the iPhone launch was the moon landing for geeks. Many camped out, albeit unnecessarily, for the opportunity to purchase the sacred device. And, while many have said that if the iPhone was worth $600 to you and you happily paid it then, why would you be upset that the price went down.

Hey, it’s tech right? The price always inevitably goes down.

But this is no ordinary customer base. This is the church of Apple. And, in this case, church goers are early adopters – people who support all new products from Apple without the care or benefit of peer-to-peer influence or regard for price. So a price drop after only two months doesn’t come with evolution, it arrives with the stinging and the embarrassment of an unexpected bitch slap.

As you could imagine, the army of iPhone zealots, myself included, were a little upset at the news of the massive and sudden price drop. And most of us shared our stories, creating a tsunami of memes that washed out all other news and topics for several days.

It’s hard to believe that Apple communications didn’t see this coming. It’s unclear as to the role PR specifically played in preparing Steve or the press for an “expected” negative reaction. It’s also unclear as to PR’s involvement in helping to broker the information between the company and the people – or whether they jumped, at all, into conversations with customers directly.

What we do know, is that this news was embraced with nothing short of anger, bewilderment, and intensity. The fallout could only be described as a revolution that spilled into the global streets of Social Media and only grew stronger with every new post, link, tweet, video, podcast, livestream, and comment.

You couldn’t go anywhere online without seeing the discussion of Apple’s iPhone fiasco.

But where was Apple PR?

Where were the community evangelists? And I’m not talking about iJustine here – who has my vote for Guy Kawasaki 2.0 by the way. I’m talking about Apple representatives engaging in the conversations. This is inevitably what every company will have to do anyway.

The only people talking (and shouting) were customers, press and bloggers, and I can assure you that none of them heard a peep from Apple marketing.

But it’s not just marketing. It’s investor relations. The stock took a hit.

At this point, there really was only one choice and the ultimate evangelist himself, Steve Jobs stepped up to make things right.

Jobs responded with a remarkable open letter to iPhone customers.

Jobs wrote, “I have received hundreds of emails from iPhone customers who are upset about Apple dropping the price of iPhone by $200 two months after it went on sale. After reading every one of these emails, I have some observations and conclusions…Therefore, we have decided to offer every iPhone customer who purchased an iPhone from either Apple or AT&T;, and who is not receiving a rebate or any other consideration, a $100 store credit towards the purchase of any product at an Apple Retail Store or the Apple Online Store.”

He continued, “We want to do the right thing for our valued iPhone customers. We apologize for disappointing some of you, and we are doing our best to live up to your high expectations of Apple.”

From a crisis communications, customer service, PR, and investor relations perspective Jobs, did exa
ctly the right thing here.
He acknowledged the mistake with an apology for disappointing “us” and extended an olive branch.

Almost immediately, the blogosphere, Web, and search engines lit up with links to the letter and discussions about its content.

But it was much more than a tactic to silence the angry mob, it was a peek into a new Apple, Inc. – and it still has people talking.

It’s the opening of his letter that is the most revealing , “First, I am sure that we are making the correct decision to lower the price of the 8GB iPhone from $599 to $399, and that now is the right time to do it. iPhone is a breakthrough product, and we have the chance to ‘go for it’ this holiday season. iPhone is so far ahead of the competition, and now it will be affordable by even more customers. 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.”

That’s right…”go for it this holiday season.” In fact, it’s mentioned twice in just one paragraph.

Welcome to Apple 2.0. Not only is Steve trying to calm the anarchy, but he’s steering the conversation, and the company, towards the discussion about how it plans to reach the mainstream – and it just might work. Think about how brilliant this is. He turned a negative into a business and vision discussion about how the iPhone is going to capture significant market share. And we’re still talking about it, just like we’re all still talking about Britney Spears – regardless of how disastrous her performance was.

Since the price cut, only one week ago, Apple strategically timed, or simply lucked out, with news that it sold its 1 millionth iPhone.

From Apple 2.0, “Piper Jaffray’s Gene Munster, whose 50-hour survey of Apple (NADAQ:AAPL) stores produced the most definitive estimate of iPhone sales to date, has combined his data with yesterday’s report that Apple sold its 1 millionth iPhone on Sunday to calculate the effect of last week’s 33% price cut.”

Jobs responded, “One million iPhones in 74 days — it took almost two years to achieve this milestone with iPod. We can’t wait to get this revolutionary product into the hands of even more customers this holiday season.”

Everyone loves the underdog.

And then there’s also the news that the iPhone has been successfully unlocked, freeing it from the stranglehold of AT&T; – without worry of penalty or loss of features. It’s almost perfectly timed to help the iPhone quickly consume market share.

According to engadget, “We’ve confirmed the hack! Yes, it’s fully restore-resistant, too, which is great news.”

And, also within one week, Apple’s stock has regained $6 per share just $10 shy of its 52 week high.

But how does Apple’s recent rollercoaster apply to the rest of us?

Well, first of all, all but a precious few have a iconic CEO such as Steve Jobs running their company. And secondly, it’s about running through a series of responses and predictions and lining up the direct and indirect strategies to deploy in such cases.

Aside from strategic PR and investor relations, companies also need a Guy Kawasaki-like community evangelist to engage in conversations and participate in all important forms of social media. It’s these discussions that remind us that people hold a company’s brand within the confines of their conversations and will incubate and grow wildly out of control if not pruned by proactive, and sincere, conversationalists. Note, we’re not talking about marketers, nor are we talking about speaking at our “audiences” with “messages.” We’re talking about hearing and talking to people and coming back to them with something of value.

Crisis Communications 2.0 will have a plan, ready to go, that combines traditional and social activity that each place people at the center of the discussion – the rest are just the tools to execute. But nothing can go live without first listening to the conversations taking place.

I think at some point though, Jobs is going to realize that he can not control every conversation – or is he the exception to the rule?

UPDATE: Apple Activates $100 Offer For Early iPhone Customers

UPDATE #2: Guy Kawasaki responds on Twitter,


guykawasaki
@briansolis My pleasure. Thanx for the mentions. No one is asking, Does a company lower prices on stuff that’s selling well? I say no.

Connect on Twitter, Jaiku, Pownce or Facebook.

Related stories:

For a fun story, read BBspot’s, “Jobs Offers Apple Lisa Early Adopters Store Credit”

The gutsy marketing and strategy behind Apple’s iPhone price cut – BlackFriar’s Marketing,What people don’t get is that Apple is waging a marketing war to reshape the value chain for the mobile phone industry…Apple is going to use its iPod playbook all over again

Crisis Communications 2.0 Series:

The Skype is Falling

Microsoft PR Sparks a Blogstorm with Acer Ferrari’s and Vista

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  • Todd Defren

    Great analysis, Brian. I think that Apple has, to-date, been an exception to the rule. To my knowledge they do not actively participate in the blogosphere, despite (or maybe because of) its panting adulation.

    Maybe we can see this quick response by Jobs as a sign that Apple is starting to recognize the power and speed and influence of the blogosphere… and who knows where that could lead?

  • ssmirnov

    Really interesting post. Am intrigued by the transparency in Jobs’ “going for it” remark, and am amazed that it would convince any consumers — even the most devoted iFanatics — that the price drop is great for all iPhone users. Great for Apple, of course, great for the shopper who picks it up at the new price — but how is it good for the first wave of purchasers? That said, shrewd move if your primary objective is to mollify and impress shareholders, the Street and business media. But for a consumer message track? Yikes. Then again, why bother attempting to media train Jobs? It would be grabbing the tiger by the proverbial tail for the hardiest of PR pros or — depending on your feelings about Jobs — as absurd a notion as offering Einstein after-school physics tutoring.

  • SurroundedbyIdiots

    What planet do you live on? If you can rationalize Apple’s price-gouging, I’d hate to hear thoughts on the war in Iraq.

  • Marcos El Malo

    Good insights. I can almost believe that the whole thing was planned out, except for the fact (as you pointed out) that the iPod thunder was subdued by the backlash.

    I think fiasco is a bit of an overstatement, however. Yes, there were hundreds of thousands of potentially irate customers (and how many of them were really angry? I think it’s the disgruntled that make the noise. Those that are happily gruntled are not so loud.) The biggest noise was coming from the press and the pundits. Now that Apple has regained it’s mojo, a lot of people want to take it down a peg for a variety of reasons (page hits or day trading, for example).

    However, your overall point is well taken, whether or not Apple had a back up plan already in place. Expect PR crises and prepare for them. I think for smaller firms it might be wise to have a PR Crisis Consultant on retainer (and up to speed on the companies inner workings and management).

  • Michael

    When faced with an impending crisis communication problem, I plan and analyze it to death. I think out what ifs and what mights. I can’t imagine that Apple didn’t see this coming. Sure, you could say they just dropped the price and thought, everyone will buy it. But that would be unreasonable to assume from a company that measures and markets itself flawlessly. I imagine this is the result of good PR advice; they saw the potential problems and planned accordingly. Certainly, the timing seems off, but these things are hard to predict once the ball is rolling. Jobs’ letter announcing the rebate seems like a measured response, already in the can. This is a great example, and as usual, Brian you have done an excellent job of providing insight.

  • Linda

    My opinion is that there will be a long term damage that will not be that easy to overcome and that is from that first wave of purchasers, myself included, that were stung by the sudden price drop. I had my iPhone less than 2 weeks before the price drop and I know that I will not be so quick to purchase another Apple/MAC product. I will ride out the hysteria that accompanies the new product line and wait for that inevitable cut in price. There will be many like me, who do not want to be suckered again. The joy of the new toy has been tarnished.

  • Gregory

    So, you discovered a Corporation that only care about making money and not about the costumers, congratulations. Why are you crying? If you go to buy any electronic device, after a time, there is going to be a better one and the one you have is going to cost less. Would you feel better if this happen after a year and no after two months? Are you blaming Apple because they want to sell as much iPhones as they can this holiday season? The true is that you are upset because you feel you are an idiot. So, next time a new device is going to be on the market do not make a line the first day to buy it and wait until the price go down. Sorry if you are not special as you think you are because you go your iPhone as soon as it got to the market.

  • Marcos El Malo

    Another good point by Brian is that Jobs was candid in his open letter regarding the whys and wherefores of Apple’s strategy. He was honest about why they were throwing the early adopters to the wolves (if you don’t mind my hyperbole).

    In short, he was treating his customers as adults, which is rare among CEOs. I’ve had the “pleasure” of meeting and talking to Jobs, and he is an unbridled asshole, as widely reported. But he’s no dummy, and he deserves some credit for not treating his customers as dummies.

  • Anonymous

    I have already read this analysis so many times a few days ago, nothing new. Please try not to waste readers’ time.

  • Brian Solis

    Thanks Todd, appreciate it – especially coming from you. I agree. I think having a Guy Kawasaki in the era of social media would be an important strategy for Apple to consider as it moves to acquire market share across the product lines.

    Ssmirnov, well said. I was surprised that the market responded as it did, however, they’re back on track. Lol about Einstein.

    Surroundedbyidios, I’m from the planet that seems to be where Apple customers happily pay a premium to user products that deliver a more incredible, creative and productive experience than most companies care to offer customers. If you read my previous post, 48 hours with an iPhone, you’d see that I didn’t support their pricing or their deal with AT&T because it was the first time that the gouging was painfully obvious. However, money aside, the iPhone is simply incredible and by this time next year, we will truly see the impact it has made on the mobile phone and consumer electronics markets.

    Marcos, it was planned ;) And, yes, you’re right…it’s the disgruntled, those who are threatened, and the shocked/surprised, who made the most noise. By fiasco however, I was referring to just how loud those voices got…I don’t think anyone could have predicted the global extent of the negative reaction as it accumulated through the networks of social media. And remember, as ma always said, always keep a backup!

    Michael, thank you. I agree!

    Linda, I agree to an extent. If you had your iPhone less than two weeks, you can get a full refund of the difference. If you look at Macbooks, iPods, iMacs, and Cinema displays, Apple has done a very good job over the years of keeping prices steady. I think they saw a unique market opportunity with the price drop, the iPhone unlock, and the approaching the holiday season to make an impact with a phone, that at the end of the day, is going to revolutionize the industry. It deserves a shot…

    Gregory, I don’t even know how to respond to your comment. Obviously you didn’t read the post.

    Marcos, thank you for that comment (again). That’s a great summary of this post. You’re exactly right.

  • Anonymous

    this article misses the whole picture.

    I wanted to wait for iphone feedback from market before plunging in, but now i want to wait some more for the next round of price cut ;) Also i will never be amongst the first one to jump onto apple bandwagon.

    Also, whats up with phone being locked for AT&T?? I guess we need to wait some more for an unlocked version to be launched elsewhere…

  • Anonymous

    Does Apple offer a crisis communications 2.0 case study?

    Brian Solis of FutureWorks PR has written an article for Internet Financial News entitled, “Crisis Communications 2.0 – Apple And The…” It is a must-read for anyone involved in online public relations, consumer generated media, or universal seasrch. Solis takes a second look at the recent “iPhone Price Bomb” and analyzes what went right and what went horribly wrong. I strongly endorse his advice, which is: “Crisis Communications 2.0 will have a plan, ready to go, that combines traditional and social activity that each place people at the center of the discussion – the rest are just the tools to execute. But nothing can go live without first listening to the conversations taking place.”

    http://blog.searchenginewatch.com/blog/070915-110624

  • Anonymous

    It was refreshing to see Steve Jobs react so quickly to the cries of discontent over the price drop. If only he would react to the similar cries of discontent over the screen quality drop in the new aluminum iMac as quickly . . . . Still, this is an indication that there might be hope that Apple is the kind of company that still listens to its customers.

  • Anonymous

    I was told that if you purchased your iPhone after August 22nd your Apple Store credit would be 200.00 an item not in Job’s letter . But confirmed at the local Apple Store

  • Anonymous

    While Job’s clearly didn’t appreciate the potential reaction to such a large price drop, I think he was reacting to the size of AT&T’s monthly payments due to customer usage patterns. Then, the Christmas season loomed, tantalizingly. Of course a price drop would insure more European interest in a non 3G phone. Finally, if you’re planned 3G phone’s progress to market is going well, you’ll need the price target room above the original and it’s introduction couldn’t be made with a simultaneous price drop on the original. You can imagine the outcry should that have happened.

  • Daniel Riveong

    Brian,

    Great article, but I think we can afford to also take a peak at a larger framework.

    What if Jobs and his PR team knew of the risk, but may have both under estimated the fallout and also thought it was worth it (to sell more iPhones).

    I know of several people who bought the iPhone only after the price drop. They were not the early adopters, but rather on the fence.

    Was pissing off the Apple Loyalist worth getting my iPhone users? In the short-term? Long Term?

    I think the iPhone case is a case where the PR and Business Strategy & Sales intersect.

  • Anonymous

    It’s a freakin’ toy!

  • Anonymous

    You might wanna correct this oversight in your article:

    Steve Jobs: “We apologize for disappointing some of you, and we are doing our best to live up to your high expectations of Apple.”

    Your take: “He acknowledged the mistake without apology and extended an olive branch.”

    Uh, I believe the words “We apologize” nullify your “without apology” interpretation.

  • Anonymous

    I’m not seeing what you’re seeing – this was a way of getting more money off early adopters, then settling the stream when the buzz started to thin. Now it’s promoted as being “ready” for the rest of us. Loyal apple fans SHOULD be pissed, regardless of their $100.00 coupon for 70% marked up apple items. How could this not be planned from the beginning? They knew they’d be riding this ploy on the back of social networks! This was poised to be bigger than iPods, so they’re fully ready to exploit. Sorry, you were made as suckers. It is a badass technology, though. But why rush into their hands?

  • Anonymous

    Honestly, it wasn’t much off here as what happened to the eMac, back in 2002.

    History has it Apple released a single public model around the 1st of June, 2002. By August there was not only a price drop but the upcoming Mac OS 10.2. Apple then upgraded all eMac models by dropping CDRW model for eMac Combo and +200 for a SuperDrive Model.

    To tell what happened to me is I lost even the discount of 10.2 of which I was expected to pay the full $129. Then the upgraded eMac line included a Combo Drive for $200 off the previous release of the CDRW model. So my losses amounted to $329 for a non-DVD model.

  • sensible

    it isn’t suprising to find ths comments section for this page reveals that it’s nothing more than a blog. the only people i’ve heard complaining about the apple iPhone price drop have been bloggers and “journalists” (who, if you scratch the surface, are badly paid nerds who were bloggers a few weeks ago or will be in a few weeks down the road).

    all the actual iPhone owners i know… and i know more than a few… have no problem with their phone or it’s price or the rebate in store credit.

    great phone. great price (now greater). great deal.

    when you own one… your complaints will be based on something.

  • Anonymous

    Exactly how many time has Microsoft or any other technology company credited anybody. Have we forgotten that the RAZR phone was $499 at one point and ZOOMED down to a mere $59? As to the person who had the phone a mere 2 weeks…well, they qualify for the $200 refund. Me…I knew I was going to get screwed and I did. How much was your first HD tv? This is a complete non-event and the media is beating the drums like it means anything.

  • Anonymous

    Me, I’ve found it MUCH easier to be sympathetic and even admiring of Apple with the pugnacious and perennially overreaching Guy Kawasaki out of the picture.

    It was always my perception that people like Kawasaki might be good at rousing the faithful — but it was his evangelism that alientated people like me.

  • tiptonww

    great article – comments sent to my son follow:Steve has really blown it. A $100 back is nice but he missed the issue. It is tangible vs intangible. In fact Apple’s great leadership has come from how they nurture the intangible. The $100 solved the tangible. But he did not solve Mom chiding me for buying the Iphone early, nor the ribbing I’m getting from my golfing buddy’s who didn’t buy an Iphone. Steve needs to give the early birds some kind of advance down load free of software that will other wise cost money – could be a free down load of the up coming GPS software that will be sold as a an Itunes download (my opinion). Then he needs to nurture the early birds with a direct mail program – forming us into a “renewed loyal” Apple “disciple Club.” In effect give us back our “cutting edge ‘braggn’ rights.”
    Love Dad

  • Anonymous

    Steve Jobs was interviewed by USAToday (Sept. 5, 2007): http://www.usatoday.com/tech/products/2007-09-05-jobs-qanda_N.htm .

    “What do you say to customers who just bought a new iPhone for $599? Sorry?”
    A: “That’s technology. If they bought it this morning, they should go back to where they bought it and talk to them. If they bought it a month ago, well, that’s what happens in technology. “

    Twenty four hours later and a ton of bad publicity, the apology letter…

    So nobody at Apple thought the price cut would be an issue or did Jobs simply dismissed any PR concerns and got burned?

ABOUT ME

Brian Solis is principal at Altimeter Group, a research firm focused on disruptive technology. A digital analyst, anthropologist, and futurist, Solis has studied and influenced the effects of emerging technology on business, marketing, and culture. Solis is also globally recognized as one of the most prominent thought leaders and published authors in new media. His new book, What's the Future of Business (WTF), explores the landscape of connected consumerism and how business and customer relationships unfold and flourish in four distinct moments of truth. His previous book, The End of Business as Usual, explores the emergence of Generation-C, a new generation of customers and employees and how businesses must adapt to reach them. Prior to End of Business, Solis released Engage, which is regarded as the industry reference guide for businesses to market, sell and service in the social web.

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