Tuesday, 10 June 2008

iPhone: Curse of the Early Adopter?

With Apple advertising the new iPhone 3G as "Twice as fast. Half the price", this can only mean bad news for all those who jumped on the bandwagon a little early, right? Not quite, it turns out.

Adopting technology early is a strategy that does not necessarily bear merits. Remember Beta videos and Sony minidiscs? Exactly. As a matter of fact the increasingly short lifecycles of technological equipment lead to two possible strategies when purchasing new goods.

  1. You either postpone buying anything because you know that in a short while you can get a superior piece of machinery for less money or
  2. You just grind your teeth and get on with it. Although in all likelihood, the goods you purchase will be outdated in next-to-no-time.
Following the second strategy at least has you have access to some recent technology whilst with the first one we would still all be computing (or what used to be computing) on a Commodore 64.

As a short background, I have not been a Mac user all my life, but have been converted about four years ago. It was not a decision of religious proportions but one of convenience, although in the meantime, it has gotten to the point where I could not see myself returning to PC mundanity. Ever.

So, when the iPhone hit the UK about 6 months ago, and thankfully my contract with Vodafone had just run out, I jumped on the opportunity to smarten up my phone equipment, albeit for a hefty price. Back then, it cost £269 to purchase, even though you had to commit to a 18 month contract. The upfront cost was dampered by the fact that my wife bought it for me (which led to the Vodafone representative arguing with me - when trying to lure me back - that this is pretty much like paying myself. This is when I stopped dealing with our friends from Newbury).

And while the phone is not perfect, the battery life is a bit meagre for instance, it is in fact a superior piece of engineering which from my point of view is head and shoulder above any other phone I had in the past. Having said that, I went - being patriotic - through a number of Siemens phones which tended to break easily and didn't like the few Sony phones I had afterwards. So I was ready to try a new brand anyway....

In general, as a reasonably passionate Mac user it didn't take much convincing to get me hooked on the iPhone and I have been happily using it since.

Now yesterday, Apple presented the new iPhone 3G which promises all the things that were criticised about version 1.0, 3G access, GPS etc etc. And all of that for half the price of the original one, which makes us early customers look a little silly.

I thought this would again be a case of just having to live with the fact that your car loses half its value driving it around the first corner, until I got a text from O2 tempting me into a free upgrade to the new model.

Last time I checked, O2 was not registered as a charity, so there must be economic reasoning behind this. First of all, they only upgrade those on a contract for £45 a month or more (which I am not) but the ones on the cheaper contracts can buy a new model for £99. So apparently, they must make enough out of the monthly fees to happily subsidise the handset. To tempt even more, they are introducing Pay-as-you-go so that the second (old) iPhone could still be used.

All in all, while I don't think there is concern to be had about O2's future earnings, this is a reasonably happy surprise to the early adopters.

Maybe, in an environment were technology becomes more and more disposable and exchangeable, somebody has actually realised that there is value in binding your customers to you by offering them something they appreciate, rather than leaving them feel ripped off.

This seems to have been Apple's strategy when they refunded the even earlier adopters (before they slashed the price in the US last year after a few months) and O2 has taken this on board.

Aside from tangible products, nowadays it is all about the brand and what consumers are associating with it. Not being penalised for showing brand loyalty is a nice add-on for the customer.