Pi-Consulting

When is a cellphone not just a cellphone? When it’s an iPhone, said all those fanatics back in mid-Summer, as they waited in line to be among the first to pay $599 for one. Apple seemed to have another “gotta-have-it” product on its hands.

So, if the newly-launched iPhone was not just a cellphone, what exactly was it? And why would consumers walk past the free or subsidized phones offered by many wireless telephony companies in order to pay out nearly six hundred bucks? The technical spec described a sleek little techno-miracle that was at the same time a super-phone, a web-browser, a music player, e-mail center and image sharing platform. But none of that was really the point, somehow. “It was a lifestyle choice”, explains a report in the Washington Post, “an advertisement for oneself, …a shiny little slice of the future, a thin slab of cool”.

Probably not enough people saw it that way, since ten weeks later Apple’s chief executive Steve Jobs announced a one-third price cut, to a more accessible – and prosaic — $399. To first-round buyers who indignantly protested that they had been taken for a ride, Mr. Jobs’ laconic message was “That’s technology”. The brush-off did not apparently play too well, so a $100 store credit was thrown in as a sweetener, but no cash refunds for full-price buyers. One waspish syndicated newspaper cartoonist imagined a future when iPhones would be given away free with boxes of breakfast cereal.

The whole episode raises the interesting question of “What is the right price for a desirable new consumer electronics product”? Is there a look-up table somewhere for what things are really worth? Or is it more to do with the value triggered by enthusiasm and anticipation? As the WaPo report put it, the canny Mr. Jobs “understands that people adopt new technology not so much for what it does, but because of what it promises. As long as you promise …a changed life, basically, then you can keep your customers coming back”. The promise in this case was an uncluttered life, a portable gizmo that would obviate the need for other less portable devices, and, well, “control”.

The whole episode points up one of Pi Consulting’s central tenets: the consumer electronics business is at least as much about consumer attitudes as it is about gigabytes, megapixels and free weekend minutes. So you’re selling a phone that will fix my problem of too much to do and too little time? At $599, I’ll take it! Hey, you mean everyone’s going to have something like this? Maybe it’s not saving me enough time after all…

True technical innovations are few and far between. Meanwhile, the consumer electronics industry needs to keep on selling its wares, innovative or not. Pi’s advice? Start looking closer at consumer attitudes.