Leadership: Steve Jobs’s Non-Apology

In the wake of the unprecedented response to last week’s post about Michael Vick’s apology, I thought I’d continue that line of thought with a look at another recent apology by someone on a bit of a different plane – Steve Jobs.

As most readers no doubt know by now, Apple reduced the price of its highly touted, long-awaited iPhone by a third. And they did it only a little over 2 months after the phone first came to market. This is the phone the company spent a year doing an excellent job hyping; so successfully, in fact, that people camped out overnight and waited in lines wrapped around the block for a chance to be one of the first to own one.

Furthermore, this is the company that never discounts its products (they cost the same at the Apple Store as they do online – ok, maybe they’re $2 cheaper online). So customers who had purchased the iPhone for a hefty $599 were correct to feel a sense of betrayal when Apple announced unexpectedly that, effective immediately, the phone would cost $399.

Of course, people like me, a forever Apple user, who did not buy the phone smugly breathed a sigh of relief and patted ourselves on the back for not being taken in by all the hype in the first place. Longtime fans know never to buy the 1st generation of anything Apple puts out and sometimes, not even the second. And in my case, although I longed for an iPhone (and sort of still do), my decision was made much easier by the inclusion of AT&T as the sole carrier, a company that I vowed years ago never to do business with again if I could help it.

Even so, as a member of the Apple family, I shook my head and felt that same sense of outrage when I heard the news. Apparently, the emails poured in and Steve Jobs and his marketing team knew they had a problem. So they sprang into action and posted a letter to the Apple website. After several paragraphs making the business case for the price cut, the one line that has any meaning appears: “Our early customers trusted us, and we must live up to that trust with our actions in moments like these.” It’s the only line with any heart.

But if actions speak louder than words, then Apple’s attempt at mollifying irate iPhone owners was a dandy. Apparently “living up to that trust” means a $100 store credit. Some people were placated, but others felt used and let their feelings be known. As one irate customer put it, “I was a $200 iPhone beta tester for Apple.” This could have something to do with another line in the letter that really gets to the crux of things: “This is life in the technology lane.” BAM! Any hope an early iPhone customer might have had that Steve Jobs felt their pain was wiped out. He might as well have yelled, “Suckers!”

This is known as the “Sorry, but” form of apology. “Yes, we admit it, and we're sorry, but you were stupid to think we wouldn’t” or some other form of blame-the-victim. According to the “rules” for apology I laid out last week, Apple and Jobs failed at every, single one:

1.Accept total responsibility. Nope. Blaming the customer for not being up on the latest tech pricing schemes is more Jobs’s style.

2.Apologize. Jobs actually does use the words “We apologize.” In this case, it's just words.

3.Accept your fate. No punishment here. The store credit is nice, but it would have been better and seemed more sincere if a rebate check was sent because, let’s face it, a $100 store credit means it only costs Apple about $50, maybe less. So that’s a smoke screen. It’s like “re-gifting.” (This one really sticks in my craw.)

4.Deliver the apology believably. Nope, failed this one, too. We get the feeling that Jobs and friends didn’t lose a moment’s sleep over this.

Bottom line, Apple screwed its customers that it professes to value so highly. And its efforts to make amends are half-baked, at best. This is not leadership in my book and it certainly doesn't pass for an apology. "Sorry, but" from Jobs and Apple? More like sorry butts.

Ruth Sherman • Ruth Sherman Associates, LLC • Greenwich, CT • www.ruthsherman.com

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  • Alex Sirota

    Forgive me if I sound a bit cynical but this smells like a fairly typical marketing stunt, a novel one at that.

    This smells like the exact kind of thing that gets you more hype, for free, than just pricing the product at an 'unbelievable' low price of 399 to begin with.

    Look how quickly they:

    - got the letter up online

    - created a somewhat elegant "rebate" system, all with authentication and validation cross referenced to phones bought before Aug 22.

    Don't believe the hype -- this is all part of the holiday season hype -- it's all right there:

    '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.'

    This was all part of the plan to begin with, if I had to guess. Brilliant actually.

  • Ruth Sherman

    Gianandrea makes an excellent point about cell phone v. Apple product and clarifies something I had said. If, in fact, people viewed the iPhone as a cell phone, then the $200 price reduction would have been no surprise, crisis averted.

    Customers, however, did NOT view it as a cell phone, or at least just another cell phone; they viewed it as a, fabulous, new, must-have Apple product. This is something that Apple, of course, is the best at and most of the time it succeeds.

    So the mistake was not, as I think Gianandrea suggests, that Apple marketed the iPhone as a cell phone when they should've been marketing it as a new Apple product; it was the opposite -- they marketed it as a great, new product instead of as a cell phone. Apple created this monster.

    This is a tough one, though, because the iPhone really is different from any other cell phone on the market. Apple wants to have it both ways. Maybe it can and maybe not. It'll be interesting to see how many they sell now that the price has dropped. We'll certainly know the ending to this story as the holiday buying season heats up toward the end of Q4.

  • Jason

    Another interesting thing about this whole dust up over the iPhone price that is amazing me is the fact that many of the early iPhone buyers don't seem to be happy with their $ 100 rebate.

    I for the life of me cannot figure out why. Many of them have had their phones for over two months now. They've had the value of having an iPhone over that time. $100 is a completely reasonable redress of the greviances of the early iPhone owners. But, even after that, so many of them just haven't shut up about it. I mean they whined, and they got paid off. Game over, everyone should be happy. Had Apple screwed them out of their $ 200 forever, I could see why they would remain upset. I just absolutely can't grasp why so many are still upset now.

    From the outside looking in I think they got a great deal from Apple, and should be happy about it. I mean how many early PS3 owners are getting _any_ of their extra $ 200 back? I know their price drop came over 6th months after release, but there we certainly still some people who bought PS3's only a few months before the drop. Where's the endless web consternation about that?

    iPhone owners... Don't Worry, Be Happy. Go to iTunes and treat yourself to 100 new songs :-).

  • Ruth Sherman

    Mark goes to the business case for the price reduction. I have no argument with that and do not take issue with it in the post.

    There is also a business case to be made for stepping up when things go awry. In this instance, Apple failed miserably.

    I must also add, however, that Mark's reasoning seems somewhat dubious -- pricing at $599 is good in June because Apple might have run short of phones had it been priced lower, then only 2 months later, lowering the price because they're not selling enough phones? Hmmmm...

  • Ruth Sherman

    Scott makes an excellent point about pricing and patience. As other comments have noted, we are not forced to spend too much for too little. It's all voluntary.

    Still, the pricing structure long-time Apple customers have grown accustomed to was suddently thrown out. Apple changed the rules of the game and did so with no warning. This is their right.

    They need to tread carefully, however. Loyal customers expect a certain level of loyalty from Apple. That level this time from Apple was too low.

  • Ruth Sherman

    Halhiker, I couldn't have said it better myself. And I appreciate the heads up about the WSJ article -- I'm going to look for it! Looks like we have some company. Thanks.

  • Ruth Sherman

    Jason argues forcefully in favor of Apple's approach. As I mentioned in an earlier response, the business case for the price reduction may fine and I do not take issue with it.

    Apple, however, must also take into consideration how they treat their long-time customers as good treatment is also good for business and pays great dividends in the long-run.

    I stand by my assertion that Apple could've done a much better job than it did.

  • Ruth Sherman

    Socialist!!??? Haha, I've been called a lot of things, but that is a first.

    I respectfully disagree with Jim Hart's take on the situation. One point that needs to be made is that long-time customers of Apple are accustomed to a certain type of pricing scheme. Apple hypes a new, often cool, product, prices it at a premium to competitors' similar or copycat products, and maintains that price for a significant period of time -- often a year or more.

    I think much of customers' disappointment was due to the fact that Apple lowered the price so significantly, so soon. That left them feeling as if the rug had been pulled out from under them.

    I do not take issue with the business case for the price reduction, only the way Apple/Jobs apologized and made early adopters "whole." It is left wanting in so many ways that I detailed in my post.

  • Ruth Sherman

    It's interesting to get Chris's perspective because he/she can compare the service among OS providers and, apparently, Apple comes up way short.

    Treating customers shabbily is never a good business practice, especially when your competition treats them well. In fact, good customer service can keep customers hanging on to a (perhaps) inferior product. Anyone who has used both a Windows OS and a Mac OS knows what I mean by this.

    Who wants latest, greatest, prettiest thing, but with shabby customer service when you have have service with a smile with the old workhorse? Worth thinking about. Thanks, Chris.

  • gianandrea facchini

    The early adopters are the milk cows of the tech world: they know and they are happy with this. So why to cry about this story?
    I agree with Scott business analysis: it was clear enough that prices should go down sooner or later, this is the mobile device industry.
    Should we suppose that a lot of these guys who bought it for the sake of having it before any other else do not know this basic economic principle?
    Last, I suggest that the real Apple mistake was to act as a mobile phone company and not to enter in the market Apple style. They betrayed their mantra: think different.

  • Scott

    I don't feel that Apple was in the wrong here. I knew immediately that the IPhone was not going to stay at that price.....Not if Apple REALLY wanted to see it become a mainstream choice. Even at $400, it's still too high. The cost of the phone, coupled with the expensive monthly charge by AT & T needed to run all of its features, makes it highly overpriced in my opinion. I presently use a simple Samsung slim camera phone I purchased when I signed up with Cingular last year and if I upgrade, it will be to a Blackberry Pearl or something similar.

    The free market is what it is. Those people whining were sure grinning in our faces when they walked out of the stores with a $600 phone weren't they? Now, it's the people who practiced the art of being patient who can smile.

    Take my word, next year, the IPhone will be even cheaper. Hopefully, closer to $250-$275 and you'll be able to bundle it in some program that will make it affordable for more than just the blingage crowd.

    'Til then, I'm content with what I have.

  • halhiker

    Since when is registering your dissatisfaction with a company whining? People are unhappy with their experience with Apple. They are registering the displeasure. If Apple wants to keep a vast majority of them as customers they'd damn well better listen.
    A lot of iphone buyers are (were) major Apple promoters. They speak with passion about their products. They are Apple's greatest form of advertising--i personally have accounted for five friends buying Macs in the past year. These early adopters are core apple customers. They now feel slighted. Do you think they will passionately promote Apple anytime in the near future?

    Apple doesn't owe iPhone customers a thing and guess what? Those customers will return that same sentiment. They won't get a new iPod, they won't be in line when the next "one more thing" hits the shelves and Apple will in the end be the loser.

    In the Wall Street Journal today there was an article that said Apple may have violated a cardinal rule of business which is, "don't make your repeat customers feel like a chump". I've heard it said many times that it's much easier to keep a customer you already have than to get a new one. Apple may be learning this the hard way.

    There are those who think Apple owes it's customers nothing. Some of us know better. Apple owes it's customers everything because without them Apple would not exist. Now only if someone would remind them of this fact we can all have a good laugh and move on.

  • Jason

    Give me a break!! Apple's apology wasn't good enough?

    I don't care that they gave you store credit, they didn't have to give you anything at all. They did
    indeed show care and compassion for their customers. They didn't _have_ to give you any money back. The business reasons Steve gave in his letter were sound. But as soon as I opened the "Open Letter" I knew iPhone buyers were getting money back. And I totally agree with the action, the amount, and method they're using.

    Basically iPhone buyers certainly valued the iPhone at the full $599 price. Now, anyone would want one for cheaper, but the customers were _willing_ to pay that. Apple was in no way required to give them anything, but they (quite graciously) did. As to the fact that early iPhone buyers are getting only $ 100 credit instead of $200, well being an early adopter has to have _some_ tangible value, I'd say $ 100 is about right.

    Your comments about the $ 100 being Apple store credit. So what?!! iPhone buyers gave Apple the extra $ 200 to begin with, they spent a whopping $ 600 on the thing, you can't possibly tell me the people would find nothing at Apple to spend their $ 100 on. Apple can rebate already purchased products however it wants.

    Apple was very, very kind to the iPhone customers here. The REAL reason for that is because they were really being kind to other customers. Customers who didn't buy an iPhone, but were waiting for months to see an iPod with a touchscreen. Now its here. What so many are missing is that the price point on the touch is $ 299. I believe that that is the best price Apple can sell that product for. I also believe that if the iPhone were $ 600 and the iPod touch were $ 299, people would just buy the touch and take a free phone from their cellular carrier. They _had_ to lower the iPhones price to keep it competitive against Apple's own iPod touch. Thats the real reason for the price cut.

    The rebate to their iPhone customers was just being nice about dealing with a business move they had to make.

  • Mark

    Unbelievable... people can not take responsibility for their own actions. On June 29, all the people that bought iPhones for $599 felt that was worth that much (and many of them even more by staying up over night). If it wasn't worth $599, don't buy it. Even at the time, it was reported that the actual cost of manufacturing the phone was much lower. Apple set it properly to maximize profit, exactly what a company is supposed to. They didn't run out, everyone that wanted one was able to get one. If they priced it at that point $399, they may have ran out (one of the sites reported that over 100k of the 1M phones they sold was due to the price reduction). None of the people that only bought it to try and flip it on ebay were successful... again pointing to a proper priced item. The $200 delta is less than three months of the lowest priced plan ($60 + tax).
    At $599, it apparently was not selling at the rate Apple wanted, so lower the price and attract more customers. Things go on sale all the time. New, better products come out at the same or lower prices. That is the way it's been since the 80's. If you don't like it, don't buy the product.

  • Jim Hart

    Are you kidding? It costs what it costs? The fact that millions of other customers are able to afford an iPhone now is a great thing. Perceived scarcity or rarity can add to value.

    The "early adopters" felt that the phone was worth $599. Perhaps Apple realized they could not reach all of the buyers they wanted at that price, so they lowered the price by either a) lowering their costs, or b)taking a smaller margin. Either way, all transactions were voluntary. Nobody was holding a gun to anyone's head. That capability/job is reserved for the government (taxes).

    Please keep your socialist whining to a minimum. The idea that someone who got what they wanted at a price they agreed to, and then got more ($100 credit), and whined about it... GIVE ME A BREAK!!!

  • Chris

    This is another example of Apple's "We-are-above-it-all"-ism. I work for a company whose user base is mixed - Windows, Linux, OSX. When it comes to dealing with vendors like Cisco and Dell we never experience anything but excellent responses, great customer service - a real desire to make things happen for our business and in turn the get our loyalty. Apple is a polar opposite. They shipped us a broken machine (which took 3 weeks compared to Dell's next day). Their suggestion for a speedy resolution? Go to the Apple store. They would not ship a working machine until the dead one was back in their hands. This is a small example - I have many more but not the time to post them here. The bottom line - Apple Business service really sucks because they completely marry themselves to their consumer side. As it turns out, they treat the consumer side customers like crap too. So to summarize - if you want the ultimate OS and the prettiest hardware - you have got to accept the big hard one of Apple as your eternal pacifier. Nice.