Apple, Inc.: Pricing the iPhone
On September 5, 2007, Apple, Inc.’s Chief Executive, Steve Jobs, announced a 33% price decrease in his company’s newest gadget, the iPhone. The announcement came only ten weeks after the phone’s initial introduction in late June. Billed as a revolutionary product that would change the mobile communications industry, the iPhone retailed at $599 in Apple and AT&T Wireless stores throughout the country. Unfortunately, the initiative set off a wave of backlash as early iPhone adopters flooded internet chatrooms and sent scathing emails to company executives exclaiming their distaste for the company’s actions. Analysts and investors shared similar concerns as Apple’s stock price dropped 6.1% on the date of the announcement amidst fears that the price reduction was fueled by weakening demand for the company’s newest \blockbuster\ product. Going forward, Steve Jobs and his executive management team had to develop a strategy that would effectively respond to consumer complaints and simultaneously suppress investor concerns. (A) case, 14 pp. (B) case, 3 pp. Case #08-05. (2008)
- To provide an example of how an initiative designed to increase market share could backfire and create resentment among brand loyalists and consequently affect a company’s brand reputation;
- To prove that even the strongest brand reputations can be tarnished quickly;
- To identify how companies can and should respond to consumer backlash;
- To demonstrate the need for companies to thoroughly analyze not only the short term implications but also the long term effects of their actions;
- To exhibit the complications involved in entering a new business segment and to emphasize the difficulties associated with gaining market share;
- To demonstrate the possibility of alienating loyal customers with new marketing initiatives and highlight how that group can seriously affect a company’s financial position and overall reputation.