By BoLOBOOLNE payday loans

Is Apple using scarcity to hide iPhone quality problems?

Here I propose an alternative explanation for iPhone scarcity: the difficulty in obtaining a new iPhone keeps people from complaining about problems with it.  I will explore this sophisticated marketing technique that Apple may or may not be employing to cover up quality problems with the new iPhone 3G.  Even if Apple is not doing this deliberately, I assert that it is a valid and potentially very useful technique if your product is lucky enough to have the prerequisites.

New iPhones are hard to get

The blogosphere is full of speculation about whether or not Apple deliberately made the iPhone scarce on opening day and since then.  Most assume that this is deliberate on Apple’s part for a variety of reasons, mostly to attract more attention, increase demand, etc.  I assume most of these rants are from bloggers who want their new iPhones but haven’t overcome the barriers to obtain one yet.

But if Apple’s goal was purely to meter out their distribution, why not sell them online?  To get a phone you need to place an order for one, wait a week or two, and then you can get it.  This seems reasonable in conditions of scarcity.  But to get an iPhone 3G, you need to walk into an at&t store to place your order, and then walk into the store again to pick it up.  Think about this.  If the limitation was purely lack of supply then there are several ways this could be easier for customers:

  1. You could order a phone online to be delivered to your house.
  2. You could order a phone to be delivered to your nearest at&t store.
  3. You could call the nearest at&t store to place your order, but still have to walk in to pick it up.

Try asking them why you can’t do any of these things and they will answer with one word: policy.  Clearly Apple & at&t have gone out of their way to make it difficult for people to get their hands on a phone.   This goes above and beyond just preserving a limited supply.  You have to work to get an iPhone 3G.

New iPhones have Issues

From all the reports I’ve read, the problems with the new iPhone are in the software not the hardware.  I conclude this because my friends with first generation iPhones are experiencing the same problems as those with the new 3G iPhones.  Moreover everybody seems to agree that these problems only showed up after they upgraded their iPhone software.  Problems include:

  • Frequent crashes of applications, especially Safari
  • Increased lag in common operations
  • Significant problems with large contact lists (>200 contacts)
  • Extended delays before placing a call

Apple is legendary for their high quality software.  People buy Macs because they "just work."  It’s really not like Apple to release a buggy piece of software.  But it sure seems that they did in this case.  Why?  Obvious answers of fierce competition for high-end smartphones.  The more interesting question for me is "How did they get away with it?"  Which it sure seems they are.

Escalation of Commitment: The Hush-factor

There’s a well-document psychological principal at play which prevents people from objectively critiquing things that they are personally invested in.  Sometimes called escalation of commitment, or irrational escalation, the idea is the same.  If somebody works really hard to obtain something, they will blind themselves to its faults.  Imagine this conversation:

    "Dude, I can’t believe you waited in line for hours to get that phone.  What do you think of it?"

    "Actually, it’s just okay.  The applications crash a lot.  And it’s not nearly as fast as I’d hoped it would be — sometimes it just hangs for like 10 seconds.  But at least it’s pretty."

Very few people have the objectivity to imply that their personal sacrifice was not worth while.  This effect is commonly observed in people who buy high-end items. 

The flip side of this effect is buyer’s remorse.  But since the phone itself is not actually at all expensive (when compared to the monthly fees), that’s unlikely.  Also, it has become a positional good, whereby it has value simply because other people don’t have one.  That fact remains regardless of how unreliable it is.

Speculative Conclusion

I posit that Apple knew about the software problems with the iPhone 3G before launch.  They did manage to iron out all the performance and stability problems they encountered before launch.  They felt they needed to launch it this summer to get ahead of other notable smartphones like the Blackberry Bold, HTC Touch, and Android which are hot on their heels.  So they rushed it out the door at sub-standard quality.

In order to partially cover for this mistake, they have made this device especially hard to get.  This covers their tracks in two ways: people make even more noise about scarcity.  And those who do jump through the whoops to obtain one are far less likely to complain about it.

  1. leodirac says:

    This blog accepts anonymous comments for the purpose of respectful, constructive discussion. I have removed one comment from this post that was very long, contained uninformed opinions, and was rude. My readers shouldn't need to wade through rambling flames.

    Worse, it quoted facts that I suspect were fabricated since they contained no references and seemed unlikely. I tried to verify them myself, but after reasonable searching for what the author claims is readily available, I cannot find anything to support their comments. I definitely do not want my readers to question the accuracy of information posted on this site.

    If the author of that anonymous comment would like to discuss the matter further, they are welcome to contact me by e-mail. See http://leodirac.com/contact for my address.

  2. leodirac says:

    Mr. User, thanks for checking back on the discussion.

    I don't see any reason why _online_ iPhone buyers would be more likely to unlock the phone and take it to a different carrier than those who walked in the store to strike up the same deal. I'm certainly not suggesting that Apple would offer contract-free phones online, just that they remove the pointless barriers of having to walk in to a store (twice) to buy a phone. The only counter-argument I can imagine is that in person the blue-shirts at the at&t stores could convince people that at&t is worth the extra money over T-Mobile and that they shouldn't switch. I don't believe this at all — it's pretty well accepted that T-Mobile is a cheaper, lower-quality alternative to at&t, meaning it fills a different niche. I haven't found any public data on unlock rates, please share, but I would bet it's well under 1% because of the hassle and risk, which puts it squarely in the noise as far as at&t is concerned. Besides, as you point out, they get their contract cancellation fee, which is comparable to the subsidy anyway. Which again would be the same whether the phone was purchased online or by walking to a store.

    I'm sorry that you think "other phones aren't computers that can be completely reprogramed." Actually, all cell phones are computers. See http://www.cell-phone-accessories.com/how-does-cell-phone-work.html . And, with vanishingly few exceptions, they are all reprogrammable. Think about it — if you're building a phone that has enough features that there's even a chance you'll ship it with bugs, then you're going to make it possible to upgrade the software to fix those bugs later. If it's possible for you to replace the phone's software with legitimate upgrades, then it's possible for hackers to put their own software on the device through the same mechanism. Given sufficient motivation, they'll figure out how.

    http://xkcd.com/386/

  3. iPhone User says:

    Leo, still your points have to make sense, saying, "If Apple's primary goal was to deliver as many iPhones as possible, they would accept online and/or telephone orders" is pretty limited thinking and shows a lack of depth to your analysis. Apple decision to sell iPhone only in stores was primarily driven by the telephone companies and pricing. AT&T is not going to subsidize a phone if people unlock them at the rate they unlocked iPhone 1.0. An argument that other subsidized phones are sold online doesn't float because other phones aren't computers that can be completely reprogramed. Also if they sold it online people who buy them and unlock them can just pay the penalty and AT&T loses the recurring revenues. Would a $600 iPhone with no subsidy sell as well as a $300 one with a carrier subsidy? We have all this data and research from version 1.0 and the results are easy to analyze.

    Once again you are failing to look at the evidence. In forming your theory you can't ignore all of the obvious facts and only rely on the ones that are barely logical.

  4. leodirac says:

    Thanks for all the comments.

    I'm not surprised that questioning the limits of Apple's capabilities acted as a lightning rod for feedback. Regardless of whether you're in the camp that believes all early software is buggy or the camp that believes Apple never adjusts schedules because of competitive pressures, everybody's got an opinion. Personally I think Apple usually releases software at a significantly higher quality level than most of the industry, but in this case it seems they're closer to average, which is why I'm writing about it. Their customers are usually highly dedicated, and wouldn't consider alternatives. This topic deserves its own post, but briefly they're expanding down-market in a new way for them, trying to build a services business with mobile.me and app store, which requires having critical mass to compete with other mobile platforms. So to capture this new, less dedicated market segment, Apple is being forced to react to competitive pressures.

    There's no doubt that supply chain management is very difficult. One of the biggest challenges is forecasting demand. If Apple's primary goal was to deliver as many iPhones as possible, they would accept online and/or telephone orders. Making it easier to place orders would give them more orders which represent a very concrete demand forecast, which would help them fill the supply chain. The fact that they're not allowing this clearly demonstrates that they're not trying to sell iPhones as fast as they can. Why? Good question. I've offered one possible explanation of their motive. It happens to be consistent with other unusual facts about the product release. Feel free to draw your own conclusion, even if it's that I'm an idiotic conspiracy theorist.

    One last note. The notion that "if you didn't do through the hassle of getting one then you're not allowed to talk about it" really just supports my arguments about escalation of commitment. :)

  5. Adam Rakunas says:

    Yay, the Mac Cultist Trolls are here!

    I don't buy Apple products until they're in their third or fourth iteration, not after seeing all my early adopter friends pitch their Shiny New Toys aside when they break down. It takes Cupertino that long to iron out the bugs and stupid design choices. Apple should just call their early adopters Public Alpha Testers and be done with it.

  6. AdamC says:

    Do you own an iPhone and experience the problems which you had mentioned?

    If yes you are qualified and if the honest answer is no, then buy one and use it and then comment.

  7. Leo,

    You sound as though you're unfamiliar with the history of Apple's behaviors in bringing products to market.

    Apple gets much more pre-release press than pretty much any other vendor. Mac users are a loyal bunch, excited to see the next generation. Apple has done a good job of extending that excitement to the iPhone line.

    Historically, Apple's day-of-release supplies are not able to meet the pent-up demand. This has been SOP for Apple for over a decade. There may be aspects of artificial scarcity going on, but I suspect more of it is simply not wanting to tie up capital and postpone the releases for as long as it would take to saturate the supply pipeline. The customer base isn't going anywhere in the meantime, release or not, so making them wait post-release carries very little penalty. Getting some of the product moving while ramping up production makes good financial sense.

    Also, to be fair to Apple, they're shipping a phenomenal number of devices. I haven't seen the latest numbers, but in Q3 2007, the first full quarter that it was available, the original iPhone sold more units than all windows-based mobile phone models combined, and was second only to RIM in terms of number of units sold.
    http://apple20.blogs.fortune.cnn.com/2007/12/19/iphones-q3-sales-second-only-to-blackberry/
    http://www.roughlydrafted.com/2007/12/14/canalys-symbian-apple-iphone-already-leads-windows-mobile-in-us-market-share-q3-2007/

    My understanding is that iPhone 2.0 is selling more quickly than the original. To me, it makes sense to ramp up to those volumes, rather than trying to start out at full speed.

    So. A software vendor ships something that's not quite ready for prime time. Everyone does it, including Apple. This isn't news.

    Best, Noah

  8. iPhone User says:

    I posit that the author of this article is an idiot. Why all the conspiracy theories? Fact iPhone 3G is available in at least 25 Countries. Fact many of these countries have very high iPhone 3G demand. Fact 50 additional countries are scheduled to come online before the end of the year. Fact iPhone 3G sold more units in 3 days than iPhone Edge did in 75.

    Could it be that the iPhone 3G just has a higher global demand? If Apple is trying to artificially restrict iPhone supply; why release it in 25 countries with 50 coming soon? Why are the sales numbers so staggering compared to iPhone Edge which was much easier to purchase? Why modify the Apple Store hours to open an hour earlier for iPhone sales? Why modify line policy to make it easier to buy an iPhone 3G? Apple is not know for altering its release dates because of competitors, so why start now all of the sudden? How do you hush criticism of a devices with such high sales, in so many markets, with so much media coverage? It is not at all difficult to find an iPhone review negative or positive on the net. In fact there are more reviews of the iPhone online than any cell phone ever. Not mention that fact that the US economy is in the toilet, with consumer spending and confidence at the lowest levels in a decade? I'm just saying along the path to any theory logic should get its fair shake too.

    Almost nothing about what Apple is doing speaks to them trying to limit sales. Some times a far reaching loosely credible conspiracy theory is just that, a theory.

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