Apple to offer $100 store credit to iPhone customers

After protests over its decision to cut the price of the iPhone by $200, Apple will give iPhone users a $100 store credit.

Apple CEO Steve Jobs unveils the iPod Touch on Wednesday. It looks like the iPhone, but there's no phone there.

(Credit: Ina Fried/CNET News.com)

The company on Thursday posted an open letter from CEO Steve Jobs on its Web site defending the decision to cut the price of the 8GB iPhone from $599 to $399, but acknowledging that Apple shouldn't have treated its early adopters in such a fashion. Jobs had announced the price cut just a day earlier at a San Francisco event at which the company unveiled a refresh of its iPod line, including the new iPod Touch.

"Even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, we need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers trusted us, and we must live up to that trust with our actions in moments like these," Jobs wrote. Details on how to obtain the $100 store credit will be posted on Apple's Web site next week, he said.

An Apple representative said the $100 store credit will not apply to the iTunes Store. The store credit also does not apply to customers who are eligible for a rebate because they bought a $599 iPhone either 10 or 14 calendar days before Wednesday (10 days for online sales, 14 days for retail sales).

In the letter, Jobs echoed comments he made to reporters Wednesday that Apple wants to attract new customers this holiday season with more aggressive pricing. "It benefits both Apple and every iPhone user to get as many new customers as possible in the iPhone 'tent'. We strongly believe the $399 price will help us do just that this holiday season," he wrote.

He also pointed out that this can be the way of life in the technology business. "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," Jobs wrote.

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Apple doesn't often admit mistakes, and the letter was a forthright admission that the company didn't handle the price move correctly. "We apologize for disappointing some of you, and we are doing our best to live up to your high expectations of Apple," Jobs wrote.

How Apple could not have forseen the backlash, I'm not sure. But the move should go a long way to mollify some iPhone customers peeved by the steep drop, although a store credit isn't as good as money in hand. Still, those who were iPhone early adopters likely own a few other Apple products, and will want to update those in the future. Leopard's coming soon, after all.

Some Mac bloggers and users seemed satisfied with Apple's response to the iPhone flap. "I think it's clear that Apple was taken by surprise by the magnitude of the backlash regarding the price cut. They've responded quickly, humbly, and well, to avoid letting this issue spoil the good news from their impressive product releases yesterday," wrote John Gruber on his blog, Daring Fireball. Scott McNulty, on The Unofficial Apple Weblog, wrote "While I still think the reaction to the price reduction was way overblown, this is a great example of Apple listening to their customers and trying to make the situation right."

Others noted that Apple, so dependent on a core group of loyalists to help create buzz for its products, had little choice. "You just don't screw over your most ardent fans...always a bad plan. You may not pay for it intitially, but you will long-term," wrote poster TBaggins on AppleInsider's forums. Samir Bhavnani, an analyst with CurrentAnalysisWest, saw a savvy business move in offering a store credit instead of a refund. "They'll get new traffic to the site and stores, and almost everything costs more than $100 in any case, so customers will be spending even more of their dollars with Apple," he wrote in an e-mail.

But on our own TalkBack section, Jake Kushner, president of JK Media, said that Apple's response doesn't go far enough to satisfy those who bought a 4GB iPhone for $499, only to see the 8GB model become $100 cheaper. "I feel wronged and misled by Apple. Such a quick price reduction indicates that Apple pre-meditated this reduction before the initial release. I read your public response on apple.com to this issue, but I still feel that the solution you are offering is not adequate," Kushner wrote, calling for Apple to offer a free upgrade to a 8GB model to owners of the 4GB iPhone or a $200 rebate.

Some iPhone customers are reporting that they have received at least partial refunds from their local Apple stores. And some AT&T customers have said the same thing, as my colleague Maggie Reardon noted earlier today. It's difficult right now to tell what exactly is going on at individual stores around the country--we're trying to get more details about people who received at least some cash back.

Jobs pointedly did not address in the letter whether iPhone sales were living up to expectations, although he said Wednesday during Apple's iPod event that the company remains on track to hit its stated goal of shipping 1 million iPhones by the end of September.

[drhamad]

Apple should NOT have had to do this

Apple should NOT have had to do this... it's silly. People are
complaining about a price cut? Give me a break. If Apple had
introduced a 16GB iPhone at a higher price point, and kept the 8
GB at $399, you wouldn't have had any complaints... but since they
just lowered the price, you do. Lame.

[funkypickl]

Nicely Played

Wow, that is quite a precedent from one of the industry big dogs. I didn't buy the iPhone, but I'm sure I would have been a little sore about the price drop, but like Steve eludes to in his note, that is sometimes the price you pay for going all-in early. I think what he is offering those customers is more than what can be expected from Apple, good job. That being said, I will be running out to get my hands on that lovely new iPod Touch as soon as it hits the shelves, and will be doing so knowing full well that shortly after doing it, there will most certainly be a bigger capacity one right behind it.

[herbdye]

The other shoe for iPhone screwups

Unless Apple does something about AT&T and the outrageous International Data Fees they charge all businesses and idividuals who travel outside the US should stay away. Had I known of the charges I would not have purchased the iPhone. I spoke with both Apple and AT&T and got a "we'll kick it upstairs response." $0.68 per email and $0.05/KB make the device useless. Yes they will turn off Edge and possibly the virtual voicemail listing so that you just have an over weight phone when traveling outside the US. This was noted by Walt Mossberg in the WSJ in the past and I'm surprised there has not been more protest about it. If Apple is serious about getting the business dollar they had best look to these issues.

[andrewhrivnak]

money

i agree, they should not have to refund the money. this is part of
apple's beloved hype is that there may or may not be something
new coming out tomorrow. I've thought about what my response
would be had I bought the day bfore the discount, but really, what
can you do? That's life.

[Vegaman_Dan]

$100 store credit.. is stil Apple's money

Note they aren't offering a refund. They are offering a store credit. That's not the same thing- they are giving back credit on money you paid them anyways and.. well, they still keep it.

Now if we had the option of going to an Apple store and bringing in a selection of Bluetooth handsets, chargers, travel adapters, and cases in exchange for $100 off a new iPhone, THEN we could be comparing things correctly. Somehow I don't think you'd get that sort of deal though.

So on one hand it's good that they recognized their horrible PR move and are willing to do something about it.

On the other hand, offering people half of the amount that was cut, AND doing it through a shady store credit only deal is a bit of an insult.

How many more times can you insult your loyal customer base, I wonder? What sort of excuse can you use? Jobs had one-

"That's technology."

And that's me not buying into your excuse.

[dirty55409]

$100 Store Credit?

It's not the fact that the price was dropped, that'll happen as technology presses on and more devices come out. The problem here is that it happened so fast! Two months after a product is out!? That's insane and an insult to loyal apple customers. To add insult to injury they are offering $100 of store credit why? so you can buy more apple stuff duh! lol $100 rebate checks would've been a little more satisfying I'm sure. Oh well I'm not buying anything from apple so it doesn't affect me

[faust]

33% in 10 weeks?

Show me another product that went down 33% in 10 weeks.

They can give folks back something or risk loosing future sales, what costs more money?

Have you ever taken a business class?

[applehazelnut]

Apple Strategy Brilliant. High prices are what the customers want.

I really love how people don't think before they say something. I
wonder if the early iPhone people realize that they're actually
COMPLAINING ABOUT HOW APPLE PRICES ARE NOT HIGH
ENOUGH!!!!!

Retards all.

[solrosenberg]

Quite generous

This is quite generous of Apple. The people who bought early bought for the "prestige" of being first on the block with an iPhone. Why shouldn't they pay extra for that? All technology products decline in price over time, so they knew it would be cheaper if they waited. The complainers wanted to have their cake and eat it too. Nice of Apple to let them.

[garygroc]

Credit is nice

The only thing that really pissed me off about the price cut is that I don't think my Iphone is worth the 600 I paid for it. So I have another 22 months of constant reminder that I overpaid for it. 100 bucks back though seems to lessen the sting.

[rcardona2k]

I'm happy

Thank you Steve

[mathmeister]

YOU chose to pay $599 for an iPhone

You chose to pay $599 for an iPhone. Obviously you decided it was worth it, or you would not have made the purchase. Don't blaim Apple for your decision if you regret it now.

[Robert337]

iSheep get fleeced

A small repreive for you iSheep out there - never, Never, NEVER jump on the first new piece of hardware that comes down the pipe (especially where Apple is concerned). I willing to bet that the "phased out" 4Gb models will be on sale for $199 for the Christmas rush - just to clear the inventory and make way for the new models with more storage space, wi-fi and new built-in applications....

[Chingchong_Wingwong]

$100 and you CANT use it for iTunes???

That is lame. What are you gonna buy at the store for $100? A bag, a mouse, or something more useless?
Another slap in the face from the Steve, the devil himself.

I'm starting to almost feel sorry for you sheep. Almost...

[ikiru71]

Apple Whiners!!!!!!

Talk about a bunch of privileged, selfish, whiny jerks! I'm sorry if you can afford to pay $600 plus $70 a month just to get the latest and greatest cell phone then you have no business complaining about a price cut. Do you know what happens if I buy anything at an electronics store and 3 months later it's 30% cheaper? NOTHING! Apple should never have bowed to their whiny fan base! You all should be ashamed.

[SilverbackRK]

When is next iPhone Price Cut?

Well, isn't it great! $200 off in 60 days!

Just imagine, at this rate, the iPhone will be free in 120 days, right after Christmas when AT&T will give it away if you sign up for service!

The iPhone will join the Motorola Razr and other 'hot' items that had their moment in the sun, and then got widely imitated by everyone, leading to a collapse of pricing.

Consumers win.

Now.... about that Google phone rumor....

I want my free phone!

[b8375629]

Cry me a river, Apple crybabies

Whaaaa....whaaaa...whaaa.... ;/

C'mon, fanboys. You knew this was gonna happen. Don't act shocked because I wasn't, that's for sure.

Why do I have no sympathy for a bunch of crybabies who felt they had to be the first to have the iPhone?

Couldn't you wait a few months? Do you always have to camp outside the first day to get the latest gadget or fad?

Not only does the price come down but all you early suckers have all the bad firmware and bugs to deal with.

Too bad fo yu...

[crue24]

Not necessary, but very cool...

I managed to get lucky. The announcement came out on day 14 for me so I got to the Apple store and got my credit for $210. My knee jerk reaction was disappointment, but not anger at Apple, it happens all the time. I paid $350 for a blazer at BR and a month later it was on sale for $99, I didn't get a refund from BR. If you buy clothes, you deal with this all the time. How many times have you bought a hard drive, RAM, etc. and seen price reductions or rebates within weeks that cut the price in 1/2 or more?

Apple went above and beyond with the store credit. And I don't think its the Apple faithful that were making the fuss, early adopters always get screwed on price. Happens with all kinds of products, technology and otherwise. It's hardly a secret.

It would be nice to be able to use the credit for music, but my guess would be that retail and the music store are different business units and you don't want the negative numbers from one unit screwing up the numbers for another. It's business.

And for the Apple haters, why do you waste your time reading and posting on Apple articles? You just like to hear yourself talk? How many times to you see Apple "fanboys" posting comments on Windows articles saying that it sucks? You don't see it, we'd rather spend our time reading and posting about things we're interested in.

[oludir]

Sorry Microsoft

The Zune is officially dead!

[kcar27]

Has a hi-tech firm ever done this before?

I'm a bigbig Apple fan, but I have to say that Apple goofed in cutting the iPhone's price so soon and so drastically. Part of me is exasperated with those complaining about the cut, and part of me realizes I'd be shocked and upset if it happened to me.

Anyway...does anyone recall a computer company or any other hi-tech firm offering a rebate like this because of an unexpected and deep price cut? Companies have extended warranties and offered refunds when their products fail or don't work as advertised, but I can't recall a previous rebate because of a price cut.

I hope this move eases the unhappiness of most early buyers. It may be that the next time Jobs introduces a big product, he'll have to promise not to slash its price within three months in order to get people to buy.

One final thought: was this cut due to the impending announcement of the Google phone, which could be even better than the iPhone?