THE BLOG
09/16/2007 04:43 pm ET | Updated May 25, 2011

iPhoney? What Is An Apple If It Loses Its Core?

One thing jumped out at me during Apple's latest customer relations
challenge. Charting the consumer and public reaction of consumers to
Apple's iPhone price cut, the Los Angeles Times quoted Jonte Richardson, a 36-year old filmmaker, who said:

It feels like you're being punished for being brand-loyal. If they're
going to change their price and policies, then they should at least
take into consideration the people who made them who they are.

Apple has developed an admirably close relationship with its customers
over the years. Early-on, it embraced the value of providing a great
customer experience and have always seen its products as lifestyle
extensions rather than just functional commodities. Apple never seemed
to compete on price; its customers are willing to pay a premium to
wear the white ear buds of an iPod or have a gleaming black MacBook
instead of a battleship gray folding brick like the Wintel masses.
Instead, all that it does and makes has been guided by seemingly
"soft" qualities such as intuitive use, elegant design, and
aesthetics. These business principles, guided by the company's deeper
values, make Apple what it is.

Which is why the precedent-setting early price reduction on the iPhone
was big news, and may have lasting impact on their business. Apple has
long-honored its partnership with consumers by eschewing the kind of
competitive price-cutting rampant in the rest of the PC industry.
Apple owners have come to trust that their journey with the company is
based on overall user value, not price/feature calculations. People
bought iPhones upon their release because they were cool, yes, but
they paid top dollar under the impression that it was the fair price
Apple needed to bring its revolutionary technology to market.

By rapidly reducing that price in order to boost units sales, Apple
may have weakened that trust. Suddenly, it seemed that Apple's price
points were designed only for short-term corporate gain.

"Trust is like a ladder," Mike Fricklas, general Counsel of Viacom
once said to me. You climb it one rung at a time, but when you slip,
you fall all the way to the ground.

Apple CEO Steve Jobs quickly realized the error Apple had made and
tried to repair the breech two days later. In a widely circulated open
letter
Jobs
acknowledged Apple's violation of this core principle.

Our early customers trusted us, and we must live up to that trust with
our actions in moments like these...We apologize for disappointing some
of you, and we are doing our best to live up to your high expectations
of Apple.

It is often hard to put a price tag on trust. We all know it is
valuable, but business can seldom quantify trust in ways that make it
a proactive part of their strategy and planning. Apple's breech,
though, may prove instructive.

Jobs' statement, with its attendant store credit, may in time prove
enough to placate the faithful. Apple has built a large storehouse of
trust over the years and it may indeed take more than a single gaffe
to destroy it. But what is the cost of simply diminishing it slightly?

The next time Apple rolls out something new, those Apple customers -- and
potential customers -- with thinner bonds to the company may just wait
before buying in. How would Apple's various stakeholders have felt
about the company if, instead of the million-plus iPhones it sold in
the first couple of months of the launch, they had sold half that
many? Or just one-third?

If core early adopters choose instead to wait on the sidelines for the
first price drop, the ramifications to shareholder confidence, market
acceptance, and the bottom line will make that lost trust seem very
valuable indeed.