Price Cuts on High Tech Products Are Nothing New

Surprise. Anger. Outrage. All of these words have been used to describe the reaction of some customers of the Apple iPhone. Apple has announced it is dropping the price of its 8GB iPhone by $200 to $399. This move infuriated some customers who paid $599 for the product when it launched in late June. The noteriety the price is receiving is surprising because it is a common practice for marketers of high tech products to skim the market at product introduction, then lower prices to make products more appealing to a wider market. People who buy products when first introduced are considered to be risk takers, have higher incomes, and like being among the first to own innovations like the iPhone.

There are two major differences between typical pricing for new products and the iPhone. First, the timing of the price cut is surprising. The product has not been on the market 100 days yet, and the cut signals either the product was overpriced or Apple misread the market's desire for a multipurpose device. Second, it's noteworthy because it's the iPhone, which even got the label of the "Jesus phone" when rolled out because of all the hype and buzz about it. Apple has been on an amazing roll in recent years, fueled by the success of the iPod. But, Apple has failed before (its Newton PDA being one example), and it is conceivable that the iPhone could fail, too. However, the price cut may be the bait consumers needed to bite, especially with the Christmas selling season just around the corner.