Apple-Iphone

How iPHONE Frenzy Narrowed the chasm: the diffusion process

‘The iPhone was launched with such frenzy that even its premium price did not prove a deterrent to many customers.’

Prior to its launch in 2007, Apple succeeded in creating ‘excitement,’ ‘hype’ and a continuous ‘buzz’ around its long awaited innovation, the iPhone. Steve Jobs was a master in both creating and sustaining endless anticipation around the product and he fully understood that the iPhone itself was ‘innovative enough that demoing it on the ads was enough to generate excitement.’ The teasing ‘hello’ campaign further enhanced the ‘mystique’ through the power of word-of-mouth, bloggers, and the relatively new concept of social media networking.

By whipping their consumers into such ‘frenzy,’ Apple were able to fully justify their premium price and although the iPhone may have been considered ‘the most expensive mobile handset in the world at the time of its release,’ customers were not deterred. The price skimming strategy allowed Apple to maximize their margins and take full advantage of the visionaries and early adopters who were not only willing to stand in long queues outside Apple stores but also to pay a premium once inside.

Initially the iPhone had an elastic demand and whilst their premium pricing strategy was brave, confident and justified, so too was the decision to cut prices in September 2007. Apple perfectly understood that not all customers adopt innovation at the same time or rate and the initial sales from the early adopters were crucial in sowing the seeds of diffusion. However, as demand gradually became inelastic, a new pricing strategy was required. The main bulk of the market, made up of the early and late majority, needed further encouragement to accept change and adopt innovation, something that could only be achieved by lowering prices: ‘It may be an early-adopter product that appeals to technophiles but initially leaves other interested users on the outside...