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Will AT&T’s Big Gamble Pay Off?

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What was it that prompted Apple’s $200 price reduction for the most coveted gadget so far this year?

Did Steve Jobs and AT&T finally realize that the demand for the iPhone had cooled off?

Was the price drop a clever marketing ploy to revive waning interest and appeal to mainstream consumers who thought the iPhone was overpriced?

The original iPhone made its debut last year in June and was priced at $599 for the 8GB version. The price for the 8GB was reduced two months later to $399.

In a move that has left most of Apple’s loyal customers heated, the prices of both versions have been slashed again by $200.

The reason for the price drop is quite simple . . . Apple needs to sell more iPhones in order to reach its targeted goal of 10 million in 2008.

On the surface, what may look like a blessing to consumers’ amounts to nothing more than a charlatan’s trick with numbers.

The basic rate plan for the current phone was $59.99 per month with 200 text messages.

The lowest new rate plan for the 3G iPhone is $69.99 per month. Text messaging will cost consumers an additional $5 (200 Messages) to $20 (Unlimited) per month.

To maintain the original plan at the new rate would cost consumers an extra $180. Where is the proposed savings?

AT&T’s big gamble is that consumers who thought that the iPhone was overpriced, will be so enamored with the price reduction, they won’t notice that there was no significant savings at all.

In fact they are counting on individuals who covet the device, but wish to remain with their existing carriers that they’re willing to sell the iPhone without a contract: $599 for 8GB and $699 for 16GB.

In the final equation Steve Jobs has pulled off yet another marketing coup:

  1. AT&T subsidies the cost of the iPhones. Apple gets paid the full value.
  2. The hoopla surrounding the phone will make other carriers’ consumers fork over $599 for the 8GB and $699 for the 16GB to AT&T.
  3. AT&T will recoup nearly the entire amount it subsidies. The lowest plan including text messaging will cost consumers an additional $180.
  4. The price reduction will eliminate mainstream consumers’ resistance for buying the iPhone.
  5. Steve Jobs’ prediction of 10 million iPhones being sold in 2008 will be realized now that the phone will retail in over 70 countries.
  6. An upgrade will cost ineligible consumers $399.

July 11 will be a day of mixed emotions . . .

Consumers, who bought the initial iPhone, will be characterized as CHUMPS, since they couldn’t restrain their urge to be the first one with the phone.

While AT&T and Apple executives will congratulate themselves on a marvelous marketing strategy that has opened the floodgates to mainstream consumers, who they hope won’t realize that they’re not actually saving money.

Will AT&T’s big gamble pay off?

From the lines that are forming to buy the new 3G iPhone . . .

It looks like it already has.

Bradley Booth/Freelance Commercial Writer/Author

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