6 guesses why Apple cut the iPhone price

Who'd have thunk that the biggest story of the week from Apple wasn't its shiny new iPod devices or its spat with NBC regarding iTunes, but the $200 price drop on its 8GB iPhone? From the initial announcement of the cut, to the $100 rebates now being offered by Apple to "disgruntled" early adopters who shelled out $600 to be the first "look at me" owners of the device, the world seems more interested in this news than about the new devices themselves. So why did Apple decide to drop the price of its 8GB iPhone and discontinue the 4GB model, and so soon after its mega-hyped launch? Most hyped devices, especially in the consumer electronics space, can stay at the same price for much longer periods of time (even Apple's own iPods never faced dramatic price drops). Witness the gaming console market, where it practically takes an act of God for Microsoft, Sony or Nintendo to drop its prices. So was this move a bold, aggressive move on the part of Apple to get more competitive in the mobile phone space, or a company that realized its hyped product was losing ground and needed a jump start? I have six theories (in no particular order of preference) on why Apple did the price cut. They're probably all wrong: 6) Apple realized that the iPhone price tag was too high. One of the complaints about the iPhone was its high price, so they address this by cutting the price $200. Some analysts are saying that the pace of sales for the iPhone are slowing, and a price cut is one way to spark interest in the device as it goes towards its 1 million iPhone mark. With the price drop, nobody can really say that the iPhone is overpriced except for Apple-hating bloggers who wouldn't like anything the company does anyway. 5) Apple is scared of a potential competitor – the gPhone. Perhaps Apple wants to avoid the same kind of situation that Sony found itself in last year, when its higher-priced PS3 sat on shelves while the less-expensive (and more intuitive and fun) Nintendo Wii took the title of "hottest gadget of the holidays." While comparing the iPhone vs. gPhone (which has only been rumored) to the PS3/Wii battle is like comparing apples to oranges, the last thing Apple wants this holiday is a lot of iPhones sitting on store shelves. 4) Apple wanted even more publicity by getting the "early adopters" up in arms about them shelling out $200 extra dollars at launch, then quickly respond to the criticism by offering the $100 rebate. If I was a conspiracy theorist, I'd say this was part of the plan all along – comments on blogs about the $100 rebate includes praise for Apple for addressing the complaints so quickly and effectively. Heck, if I got a $100 rebate for my iPhone I'd probably run right back to the Apple Store and buy some accessories anyway, so it's win-win for Apple. 3) Price is the quickest complaint that Apple can fix. My two biggest complaints about the iPhone are ones that might take Apple longer to fix – the lack of enterprise e-mail support and the wide-area wireless network it runs on for Internet and e-mail. If the iPhone was on Verizon's EV-DO network, I probably would have lined up in front of an Apple Store on June 29. Enterprise e-mail is likely to get addressed, but probably not until the 2nd generation device (although they probably could do this with a software update too). 2) Apple knew that it needed to drop the price, and instead of just announcing this separately, they hid the news along all of the other iPod announcements, hoping that the fanboy bloggers and others would ooh and ahh about that stuff instead of noticing the price drop. More conspiracy theory than guess. 1) Apple really does want more people to experience the iPhone: From the official press release: "We've clearly got a breakthrough product and we want to make it affordable for even more customers as we enter this holiday season." Some customer research bears this out – research firm Compete shared some data that says the price cut could more than double interest in the iPhone. A June survey shows that 18% of respondents would pay $400 or more for an iPhone, compared with just 8% at the $599 price tag. Apple gets an additional 10% of people interested through the price drop. Do you have any additional guesses? Was this move a good one or bad one for Apple? Hit reply and let's get the conversation started…

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.
Now read: Getting grounded in IoT