• by Mark Walsh  @markfwal, October 1, 2007

Apple Inc. left early adopters fuming when it cut the price on its 8-gigabyte iPhone by $200 in September only two months after launching the device. The move marked a rare misstep by Apple when it comes to maintaining customer loyalty.

“The challenge Apple has right now relates to its integrity,” says Jim Kane of the Brookside Group, a consulting firm that specializes in customer loyalty research. “The price cut tells everyone who bought an iPhone already that they got ripped off.”

Kane explained that integrity is one of the six key ingredients of customer loyalty, along with competence, proactivity and chemistry, among others. In the past, Apple has either added features to a product while keeping the initial price, or introduced simpler, cheaper versions of a product, such as the iPod Nano. With the iPhone, Apple did neither, suggesting it was never a $600 value to begin with, says Kane.

He adds that Apple can make up for the marketing gaffe partly through its offer of a $100 Apple store credit to anyone who bought an iPhone before the price cut. “But why not $200?” asks Kane.

“That’s how much they’re out.”