Is the $100 iPhone gift card the “Bonus Fries” of technology? - Macenstein

Is the $100 iPhone gift card the “Bonus Fries” of technology?

It’s well known that we here at Macenstein love a good conspiracy theory, and this is all the more true on a slow news day.

So it was great timing when faithful Macenstein reader Chris wrote us with this very thought-provoking 1 line message:

“Do you think Jobs planned the $100 credit all along?”.

Hmmm. Do I think Steve Jobs (aka Apple Inc.) planned to offer the early iPhone adopters a $100 credit from the beginning… Well, let me think about that. I didn’t… but now that you mention it Chris, let’s take a look at what that would mean…

From the term “All Along”, I will assume that you mean from the first day of iPhone sales. Therefore, we are going under the premise that Apple had always planned to drastically drop the iPhone’s price 2 months after its launch, and did not drop the price to spur sluggish sales.

OK, well, Apple obviously knew the initial sales would be primarily made by its most loyal fan base, the “Mac faithful“, as we are often called. Yes, there would be a fair amount of Windows users drawn in by the hype as well, but primarily the early adopters would already be fans of Apple and their gear. So the question you are really asking, Chris, is “Would Apple purposely overcharge its most loyal customers?” Well, my gut reaction is “no”, but the conspiracy advocate inside me says “maybe”. Here’s why.

By charging $600 to its most loyal base of fans for a device it was prepared to sell for $400 (and eventually, likely even lower), you may think Apple was taking a terrible risk. On the surface it would seem that this slight could turn a lot of Apple fanatics against Apple, and indeed, on the day of the announced price cut there were hundreds of angry posts on the Apple discussion forums. Such hasty rants as “That’s the last time I buy anything day 1 from Apple!” and “I will never buy another Apple product” were very common. But think about that for a minute.

I was among those angry authors, so I think I can speak with some authority here. Yes, we felt slighted. Yes, it seemed like Apple took advantage of their fanatics’ love of their products to try to make an extra 33% profit that quarter. Yes, it made sense (in our heads, at least) to demand some sort of compensation. After all, when was the last time ANY Apple product was reduced in price without a product line refresh, let alone a brand new 1st gen product? Apple’s usual M.O. is to release a slightly newer model, then drop all the current models down one notch in price, killing off the former low-end unit. In the case of the iPhone, this was still the latest technology. Apple did not release a new iPhone, they simply said the iPhone we sold you for $600 is now worth $400.

But I’ll tell you what. Apple could have dropped the iPhone to $199 and still not lost one of its truly devout fans, and they know this.

Think about it. If you are reading this, odds are you don’t just like Apple stuff, you LOVE it. I know a lot of Mac users who say they love their MacBook or iMac, but who have never once thought to kick it up a notch and join the super Mac Geek community that reads such sites as MacRumors, AppleInsider, or Macenstein. Those of us who invest the time to read about the Mac universe (or even write about it) are so firmly entrenched in the Mac way of life that it would take a hell of a lot more than $200 to make us even remember Dell makes a laptop next time we are computer shopping. Which of those people standing in line 2 days for an iPhone is going to buy a Windows computer because Apple “stiffed them” out of $200? In the Mac faithful’s mind (and again, I am speaking of myself as well) there ARE no computer companies other than Apple, and is no OS other than OS X.

But if Apple knew it in effect had us early iPhone adopters “over a barrel”, unable to control ourselves, why even bother to offer the $100 iPhone credit at all? We’re stuck with Apple forever anyway, right? Well, the iPhone credit does 2 things. First, it sooths some hurt feelings. Apple wasn’t going to lose any customers over the price drop, but they were going to lose a couple months of free Mac evangelism from their hard core fans who had flaunted their shiny new iPhones in the faces of all their Windows co-workers. Now these same co-workers had embarrassing ammunition to throw at them. The $100 rebate provides somewhat of a shield against these attacks. While we can rationalize that technology prices do in fact drop, a $200 drop so quickly is a bit hard to defend. However, a $100 drop is much more palatable, and something many of have experienced with other beloved technology such as the PS3.

But second, and more importantly, the rebate makes Apple look good to the press, and the world in general. To them, Apple is still the company that listens to “the little guy”, and tries to do right. After all, with 1 million iPhones sold, likely a good 800,000 or so were and eligible for that $100. That’s $80,000,000 Apple is losing! What a great company!

Well, not really. I mean, they ARE a great company, but the $80,000,000 figure is a bit high, as was pointed out to me. You see, first, not everyone will take advantage of the $100 rebate. Again, those of us obsessed with the Mac community are monitoring the situation like hawks, but I know of 2 people who until I recently told them, we unaware they were eligible for a $100 credit. Second, Apple isn’t giving away cash, they are giving away store credit. Apple might feel a little pinch if we all walked in a used the $100 to buy 3rd party accessories, but odds are that ain’t gonna happen. Apple already has a pretty good markup on most of the stuff it sells, so if the $100 credit inspires someone to walk in and buy another iPhone, MacBook, iPod or iMac, Apple will still make money. In fact, odds are the rebate will actually end up costing many of the Mac faithful money. I for one plan to either go buy the new 8 GB nano, or put the $100 credit towards a MacBook. Granted, I was likely going to buy those eventually anyway, but this is the kick in the pants to get me back in the Apple store and spending again, like a good little fanboy.

So what’s the answer?

Let me tell you a quick story.

A “friend” of mine once worked at a certain fast food restaurant, which I shall call “McRonald’s”, to protect all involved. And while working at McRonald’s, during his training, he was told by a manager that the restaurant had a policy of delivering “bonus fries” to the customers. “What are bonus fries?”, he asked. “Bonus fries are the extra fries you find at the bottom of your bag,” explained the manager. “What we do is, we put the fries in, along with the food, and then give the bag a quick shake before handing it out the window to the customer. That shake causes some of the fries to fall out of their container to the bottom of the bag. When the customer sees those “extra” fries at the bottom he subconsciously thinks he got extra fries. Really, he gets what he paid for, but he leaves happy, thinking he got something extra out of us. All we did was shake the bag a little.”

So to answer Chris’ question, do I think Apple always planned to offer early iPhone buyers a credit? I don’t know. But I do think there’s a chance Apple “shook the bag a little” here with this credit.

6 Responses to “Is the $100 iPhone gift card the “Bonus Fries” of technology?”
  1. Rowlings says:

    I actually heard that about McRonalds.

  2. Ryan says:

    You know, I’ve never even been subconsciously thrilled by “bonus fries.” My overriding emotion has always been frustration that the incompetent jerk at the window couldn’t be more careful and not spill my fries.

  3. widgetboy says:

    i think it’s more like the ‘new coke’ of technology. they replaced coke with new coke, and the result was a bunch of free press about how much people liked real coke better, thus coke classic. they’ve been on top ever since. basically iSteve got infinite free press that was ostensibly bad, but the message was clear either way: the iphone is $200 cheaper now than it was.

  4. Brian says:

    Now my question is why arent we getting 200 dollars store credit?

  5. JJMSpartan says:

    I posted something along these lines over at The Motley Fool a few weeks ago. Here are my thoughts…

    Note: This is entirely my own guessing here…

    What was the last product that Apple released a V1.0 product of that had this kind of press and expectations? In all honesty, I think you have to go all the way back to the original Macintosh. The original iPod never had this kind of pre-release hype. Not Intel Macs, not original iMac, not powerbook, not Newton, nothing. Knowing that this would be the most high profile initial product launch they had ever done, I’m guessing that there were a few factors at play in the pricing decision. Follow this stream of logic…

    – V1.0 products are known for bugs, even Apple’s V1.0 products.

    – Mainstream audiences are much less forgiving of V1.0 bugs than FanBoy’s.

    – FanBoy’s will buy whatever product that Apple ships, provide feedback, and wait for updates.

    – Knowing there will likely be bugs then, you really only want fanboy’s with iPhones for a short while until you can get the kinks worked out.

    – How do you keep the mainstream public from all purchasing the most anticipated product in your companies history? Price them out of it!

    – This gives you time to work out bugs with a smaller installed base, get the device more stable, and then when it’s closer to being idiot proof, you lower the price to bring in the larger consumer base.

    – Yes, you might get the FanBoy’s mad at the price drop, but they won’t stop buying Apple products.

    – If the mass consumer market is disappointed by the unresolved bugs in V1.0, they might not make a repeat Apple purchase.

    Now I’m not saying that I’m right about this line of logic, but the more I think about it, the more sense it makes…


  6. Steve Hodson says:

    Scanning round the forums, it seemed to me like many of the most vocal dissenters of the $100 price drop were actually Windows users rather than true fanboys. This is as much a crossover product as the iPod.

    Perhaps they had been coerced by friends into buying an Apple product, possibly for the first time ever and who knows what the ‘fanboy’ told them let alone the typical rumours that run rife about Apple and Macs in general.

    I’m pretty sure the price was high to start with for two reasons:

    1. It’s Apple…look at how great the product is, here’s the premium

    2. At $399 the manufacturer would absolutely never have been able to meet the demand

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