Price Cut

Yes, I bought an iPhone the first week. Yes, I was mighty irritated when they cut the price $200. Then Apple announced a rebate, a $100 gift certificate to the Apple Store. I thought about it a minute, decided I was half-satisfied, and considered it a glass half full.

Then I thought about it a little longer. I realized that $100 of retail goods at the Apple store is likely to be around $50 wholesale cost, so Apple is covering my $200 loss with about $50 cash. The glass is only one-quarter full, I am now 75% dissatisfied.

I’ve been there plenty of times. I always tell people, if you want to know when Apple is going to drop prices on something, wait until I buy it. Apple always seems to cut prices right after I buy something. I remember buying my PowerMac 8100/110, I bought it the week it was introduced, figuring it would be a long time before a price cut. It took almost three months to deliver the machine, and they cut the price $300 before I ever received it. No, I didn’t get my $300 back.

I’ve seen it from the dealer’s side too, when I worked in computer sales. Customers would sometimes express their irritation when their computers dropped in price, and I would use almost the exact same spiel that Steve Jobs used in his rebate announcement.

There is always change and improvement, and there is always someone who bought a product before a particular cutoff date and misses the new price or the new operating system or the new whatever. This is life in the technology lane. If you always wait for the next price cut or to buy the new improved model, you’ll never buy any technology product because there is always something better and less expensive on the horizon.

I would usually try to put it a little more diplomatically than that, but the last sentence is almost verbatim from Apple sales training, and has been conventional wisdom for decades. Most customers would accept this logic, but once in a while, you get a case that is so egregious that you have to do something about it.

I remember when I worked at ComputerLand, around 1985, one of my favorite customers came in just before closing time. She was a young woman with punky purple dyed hair, a college student on a low budget, she’d bought an Apple //c last Christmas. She was so happy with it, she scrimped and saved for months and now she wanted to buy two more computers, one for her boyfriend and one for her mom. I was pleased to help her, a salesman loves nothing more than a happy repeat customer. She paid cash, I loaded them in her car, and left the office for the day with a smile on my face.

The next morning, I arrived at the office and sipped my coffee while reading the morning updates from ComputerLand Headquarters. I was stunned, as of this morning, Apple dropped the retail price of the //c by $200, about 1/3 of the price of the machine. I’d just screwed my customer out of $400. I immediately talked to the store manager, he had the same reaction, “oh crap.” We decided we had to find a way to fix this deal, and we better have it in place fast, before she called to complain about it.

Apple traditionally had price protection for dealers, so if inventory in the dealer’s warehouse was devalued by a price cut, Apple would write a check for the difference in the wholesale price. But they offered no price protection to buyers. I figured that we should just void the sale from yesterday, so officially the computers would still be in our warehouse, and ComputerLand would get a check for the price protection. Then we would sell the computers to her with a new receipt dated today, at the new lower price. We’d be screwing Apple but they’d never know. Everyone would be happy.

Just as I was on the phone getting final approval from Headquarters to rewrite this deal, the store manager got a phone call.. from the customer’s mother. The manager transferred the call to me, so I could look good by proposing the solution we’d already worked out. She said her daughter was so distraught when she heard the news of the price cut, she’d been crying inconsolably for the last two hours, she was so broken up she was unable to speak on the phone. I told her I was surprised and upset when I learned of the price cut, and I’d just spent the last two hours working on a solution, and I was just about to call her. I described the deal, and said her daughter should come in right away and I would take care of her.

Within an hour, the poor girl came in to the store, her eyes were puffy and red, she was still sobbing and crying, but trying to put on a brave face. I told her how upset I was when I heard the news, and that I’d worked hard to recover her money. And besides, you don’t think I was the sort of person who would do this deliberately, now do you? If I’d known the price was going to drop, I wouldn’t have sold them to you until the next day. She cracked a weak smile, but she was still sobbing.

So I refunded her money and voided the sale, then rewrote the sale on a new ticket dated today, and handed her 4 hundred-dollar bills from the till, the same bills she’d paid with yesterday. I apologized to her for any hard feelings, and said that despite the hassles, she should be happier than ever, since she ultimately paid far less than she ever expected. She said she was happy with how we’d resolved the problem, and thanked me for working on her behalf. But I wondered, why was she still crying?

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