The original iPhone went on sale June 29, 2007 for $499 for a 4GB model, and $599 for an 8GB version. Just a little over two months later, on September 5, Apple dropped the 4GB model and lowered the price on the 8GB iPhone by $200--which, if you were holding out to buy one during the holidays, was a great deal. If, however, you were one of the people who bought one when it was released, it was a smack in the face.
Nothing else had changed about the iPhone except the price. If you paid full price when it was released, you didn't get anything more than the privilege of handing your money to Apple earlier than everyone else, which doesn't seem like the type of thing most people would want to pay $200 for.
You can imagine people were not happy. The blowback got so bad that just one day later, on September 6, 2007, Apple CEO Steve Jobs wrote an open letter to "all iPhone customers," that was published on Apple's website. (It's no longer available there, but you can read the entire thing via a copy on the internet archive.)
The letter was part apology and part explanation, but the entire thing is a masterclass in admitting when you're wrong. For that reason, it's worth reading in full, but there are a few things that stand out enough that I think are worth unpacking here.
Job starts by writing that he has received hundreds of emails from iPhone owners and that he read every single one. As a result he has some "observations and conclusions."
First, I am sure that we are making the correct decision to lower the price of the 8GB iPhone from $599 to $399, and that now is the right time to do it. iPhone is a breakthrough product, and we have the chance to "go for it" this holiday season.
I think it's notable that while Jobs does later apologize (we'll get to that), he doesn't apologize for changing the price. Apple believes strongly that the new price point the right one and Jobs explains that lowering the price will be key to more people buying iPhones during the upcoming holiday season.
Apple isn't the type of company that generally explains its actions or gives much insight into its thinking, but here Jobs is candid about why the company made the change. Just as important, he doesn't back down.
In fact, he suggests that selling more iPhones "benefits both Apple and every iPhone user," because it helps get more customers "in the iPhone tent." That's actually a big deal because even though no one outside of Apple knew it at the time, a year later Apple would introduce the App Store. It featured 500 apps from third-party developers who were willing to take a chance on an entirely new platform because it quickly became the most popular computer on earth.
Job's letter also reminds people that 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." That's actually an important reminder.
The most important part of the letter, however, comes next:
Third, 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.
This is the part Apple got wrong. It wasn't wrong to lower prices. I mean, if you think about it, a company lowering prices on the hottest new product ever is definitely a good thing. If, however, you paid the higher price, you're not going to feel very good about your purchase, or about Apple. That's the part Jobs acknowledges was a mistake. It's about the way it made iPhone customers feel.
We want to do the right thing for our valued iPhone customers. We apologize for disappointing some of you, and we are doing our best to live up to your high expectations of Apple.
Jobs was not dumb--he knew exactly how popular the iPhone was. He may not have known at the time that it would make Apple the most valuable company on earth, but he absolutely understood that if he wanted the iPhone to be a success, the experience of buying one had to live up to Apple's "high expectations."
The letter also goes on to explain that Apple was giving every customer who bought an iPhone at the higher price a $100 credit that could be used in an Apple Store or on its website. It's pretty remarkable when you consider that within 24 hours, Apple had lowered the price, recognized that it had made a mistake in rolling it out, issued an apology, and offered to make it right.
The lesson is simple: When you're wrong, admit it and make it right. Somehow leaders mistake apologizing to your customers as a weakness. It's not. If you're wrong and you refuse to apologize, you're still wrong. It doesn't make you strong, it just makes you a bad leader.
On the other hand, it's amazing how far an apology can go. It communicates that you value your customers, and you take responsibility for letting them down. It also has the benefit of being the right thing to do.
That's the key, and it wasn't just true for Apple 15 years ago. It's true for every business. Every company could learn from Jobs's reminder to "do a better job taking care" of customers.