Boy was my brother mad. He waited in line at the AT&T store for hours to buy the new iPhone 3G only to discover two maddening things.
1. AT&T didn't actually have any of the phones in stock. It turns out he was waiting merely for the privilege of ordering one that would arrive more than a week later--the sort of thing he could have easily done at home via the Internet while sipping an ice tea.
2. They wouldn't accept cash. What?! Right, hard, cold, American green backs, that are "legal tender for all debts, public charges, taxes, and dues" aren't worth squat if you're trying to buy an iPhone. And, of course, cash was all he brought.
Fighting Back
Thanks to the Internet, we consumers now have global media platforms from which to express our unhappiness and that is precisely what my brother Adam did with this YouTube video. Take a look and then I'll tell you why Apple did what it did, what I think it should have done instead, the clever solution that allowed my brother to pay cash, and the name of the guy I think will be most upset by all of this.
Why Apple Did This
Apple limits iPhone purchases to two per customer and requires credit cards instead of cash in an attempt to "discourage unauthorized resellers." Read the New York Time's story here. Apple is concerned that resellers will gobble up all the inventory and there won't be enough phones for people buying them for themselves or as gifts and so they choose to solve the manufacturer's inventory problem by inconveniencing the customer.
If I owned Apple stock I would be livid. I can hear Steve Jobs at the stock holder's meeting now. "In order to maximize shareholder value we have reduced the quantity of our most popular product that people are allowed to buy from five to two and reduced the ways those people can pay by eliminating cash as an option." Huh?
I find it especially ironic that Apple would do this, after all Apple is the company that gave us iTunes after watching the music industry's ill-fated attempts to control the market. How could Apple make a similar mistake with its own product and so soon?
Tickle Me Elmo
Apple should have let the market work. If people want to buy the iPhone and resell it, then God bless them. Go for it. Hope you get rich.
Scarcity is a powerful human psychological force. Seth Godin has a nice riff on scarcity's value to marketers here that includes the following thoughts, among others.
- Scarcity creates fashion. People want something that others can't have.
- Lines create demand. People want something that others want.
- Scarcity also creates word of mouth, because people talk about lines and shortages and hot products.
- And finally, scarcity drives your product to the true believers, the ones most likely to spread the word and ignite the ideavirus. Because they expended effort to acquire your product or service, they're not only more likely to talk about it, but they've self-selected as the sort of person likely to talk about it.
Call it the Tickle Me Elmo Effect. People want something more when they can't have it. Apple should have let the resellers buy as many as they wanted, reported record sales to the media, taken pictures of long lines and posted them to flickr, uploaded video interviews of eager consumers to YouTube, and retold the unbelievable stories about the lengths people went to get a phone. Instead, their policies limited sales and spawned negative viral chatter on the web.
What Adam Did
When he couldn't buy the phone with cash at AT&T my brother went to the Apple store and encountered the same problem but he out-foxed them. When the clerk told Adam they wouldn't accept cash for the iPhone, my brother asked him how many different ways he was allowed to pay for an Apple gift card. "Credit card, check, and...uh...cash," he was told. "Fine, then I'd like to buy an Apple gift card with this cash and immediately redeem the gift card for this new iPhone," he replied. And that's what he did. Brilliant. It feels really good to get one over on the man.
Dave Ramsey Isn't Going to Like This
Dave Ramsey, the financial counselor and radio host tells his financially troubled listeners to cut up their credit cards and pay cash for major purchases like, well, iPhones. By refusing to accept cash, Apple is potentially encouraging financially troubled Americans to take on debt they can't afford. That's a bad ideas these days. If Dave Ramsey decides to join the ranks of those complaining about Apple's no cash policy, then the negative chatter will reach nationally syndicated proportions.
Spread the fire. GS
It's easy to see how Apple falls for the same ideas they are supposed to be fighting against.
When they were in the underdog position (music) they fought the power.
When they have the power, they do what all large organisms to.. they try to stay in control.
Fight the power.. fight the man.. Viva le revoloution!
Posted by: Warren Whitlock | July 16, 2008 at 12:16 PM
Good comment Warren. Dead on. GS
Posted by: Greg Stielstra | July 16, 2008 at 04:57 PM