The recent debacle regarding the pricing of the iPhone illustrates the fundamental shortcomings of the Apple business model. Instead of relying on traditional means to improve sales of this product, such as holiday sales or the occasional rebate offer, Steve Jobs abruptly dropped $200 off the price of the iPhone. This move represents the image-driven tactics of this company, which are more appropriate for the fashion world than the technology market.

My own experience with Apple leads me to be skeptical of their overall business protocol. For example, for my external iPod battery, I had to purchase a FireWire (rather than USB) charger at a local Apple store. There, I asked the manager about this product, only for him to tell me that the store no longer carried this product. As I was still searching for merchandise, another sales associate came up to me and I asked him about this FireWire charger. Not knowing any better, he went into the back storeroom and summarily brought out the item for which I was looking. At the checkout, the original manager was noticeably perturbed, curtly asking how I got the charger and stating that I should not be buying it. Logically speaking, they have a product that I wanted to purchase and for which they were going to profit, so it would be mutually beneficial for both parties if I could buy it.

What this situation reflects is a stubborn adherence to the orthodoxy of planned obsolescence and, as a corollary, excessive emphasis on fixed prices. In the case of my charger, some high muckamuck in the Apple hierarchy decided that this product was no longer necessary and should not be sold anymore. Ostensibly, the image-conscious tendencies of Apple prevent the company from selling the remaining stock at a reduced price and making some money on it. This principle is also shown in the rigid price setting of Apple products. Though other computer and electronics merchandise fluctuates in value according to occasional sales and rebate offers, Apple’s iPod (and some other products) will always remain at the same price. The variable prices of other products, while they sometimes deviate from the Manufacturer Suggested Retail Price, reflect the market demand for the product and the extent to which the item can be considered high-tech versus obsolete. While Apple can pull off this strategy with the iPod because of its overwhelming popularity vis–vis similar products, I doubt that such a modus operandi works well for its other products, namely the iPhone and computer lines.

From a public relations standpoint, Apple would be better served if it let market forces determine its prices as described above, especially when it places a product in the competitive mobile communications market. Recently, Steve Jobs made a mistake in stating that the price of the iPhone is going to be “x dollars.” Although he needed to stimulate demand for this product, there are much more canny approaches to this problem than overtly slashing the price. For example, working in tandem with AT&T to develop rebates or different pricing strategies during the holiday rush would serve the same profit-stimulating purpose without alienating Apple’s key customer base. These customers, who willingly paid a premium when it first came out, may consider other companies when looking for a mobile Internet device. Unlike the digital music player market, the margin of error is much smaller for Apple in this respect, as it must compete with the well-established Blackberry.

As a result of this fiasco, the PC vs. Mac commercials should be updated with new and improved casting. While the PC stereotype still holds true, the unassuming and witty “Mac” should be replaced with a conceited and vapid fashionista.

Scott is a member of the class of 2008.



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