Xlog

Where to begin? Do I begin with the 4 hours waiting in lines at two Apple stores, the lack of pre-sale information from Apple, the friendly and well meaning, but essentially non-helpful Apple store employees, the unfriendly, unhelpful and annoying AT&T retail employees, the constantly changing information about iPhone 3G inventories, the useless Apple retail website?

I can’t think of many ways Apple and AT&T could have bungled the iPhone 3G launch more than they did. And in doing so, they are alienating the very loyal customers they need to be successful. I am certainly not alone, the WSJ blogged about the launch calling it “chaos”.  I couldn’t agree more. Let me explain…

I went to the Apple store @Bellevue Square mall on Friday with colleagues from work (both interested in the iPhone 3G) during our lunch break, only to find a line I was told was about 4 hours long. We checked with the AT&T store at the mall to find they had sold out within the first hour. The AT&T store only received about 40 units.

Later that afternoon, I went to another Apple Store (UVillage in Seattle) where the line was about 2 hours. It turns out the line was closer to 4 hours because the employees assisting with iPhone activations were beginning to go home and the processing rate was cut in half. I was initially informed there were plenty of iPhones and everyone in line would get one. About 10 minutes later a different Apple employee came out and told us they were runnning low on 16GB Black iPhones and probably wouldn’t have sufficient for everyone in line. About every 20 minutes a friendly Apple employee would come out and give us an update. Each time, we heard a slightly different story, and the Apple employees were careful not to deviate from script–they politely declined to answer questions like–How many iPhones are left? How many people are working on sales/activation? Will you run out of model X, Y or Z? At various times, an employee would come out and tell us that model X was low (usually 16 GB Black), the next employee would say, “No, we have model X, but Y is low”, the next would say, “X and Y are fine, but Z is running low” ?!? Each encounter left those of us in line scratching our heads, but we were all hopeful we would still be able to purchase our desired model. After 2.5 hours, a manager came out to inform us that the 16 GB Black model had sold out. I left.

The next morning, I got up early to get back to the Bellevue Square Apple store. At 10:30 (30 minutes after opening), the line had already grown to two hours. We were assured that they supplies looked good and that they were processing new activations as quickly as possible. The line wasn’t moving. When we asked why, we were told that there were fewer employees working on iPhones that day (day 2) so we should expect delays. Behind me the line continued to grow. At one point, an Apple employee came out and told those at the very back of the line (20+ people and 1 hour behind) that the 16 GB models were running low. When she came toward us, we asked about supplies and were told, we would be fine. The line continued to move slowly. After 2 hours, I was number 20 in line. At that point, an Apple manager came out and told us, they were out of 16 GB Black iPhones. I left.

Whenever we asked about inventories, we were repeatedly told, “We don’t know how many we have, we can’t count them”. Why not? How hard would it have been to count to 50, 100, 150? How hard would it have been to hand out a card with the desired model based on actual inventory? While I appreciated the bottled water and snacks, I wondered why go the extra mile to alienate customers by witholding information they can use to decided whether or not to stay in line.

Until this weekend, I was a very happy and loyal Apple customer. I have 6 (yes, 6–and trust me, they all serve a useful and necessary purpose) Apple computers at home. I have evangelized Apple computers, at the company I co-founded, for over 5 years. I even used a PowerBook G4 and MacBook Pro while I was working for Siemens–an all Windows shop (~450,000 employees in the Active Directory GAL–one of the largest in the world). At the startup where I am currently working, we use Apple computers exclusively (except for Linux servers). In addition to the 6 Macs, we have two iPhones, an AppleTV, a Time Capsule, and 4 Airport Expresses. Additionally, in the past 7 years, I have owned two additional Macs (sold them on eBay), and Apple software and countless Apple accessories. I mention all of this simplly to say–I think I qualify as a good Apple customer.

As for AT&T, we have a family plan ($149/mo plus extra texting) with two iPhones and an additional user. Unlimited texting for one iPhone, and the additional phone. Additionally, I have an AT&T 3G card for my MacBook Pro ($60/month). I think we also qualify as a good AT&T customer.

So, why do Apple and AT&T treat me like a “new” customer?

They treat me like a new customer by forcing me to stand in line at their stores with no guarantee that I will be able to purchase the latest object of my desire. By doing this, they risk alienating a long-term customer, fan and evangelist. Seth Godin recently blogged about this in a post entitled “Scarcity“. He addressed this specific issue. He says,

The danger is that you can kill long-term loyalty. You can annoy your best customers. You can spread negative word of mouth. You can train people to hate your scarcity strategy (Apple did all four this weekend).

The problem is that our kneejerk way of dealing with scarcity is to treat everyone the same and to have people ‘pay’ by spending time to indicate their desire.

Waiting in line is a very old-school way of dealing with scarcity. And treating new customers like old customers, treating unknown customers the same as high-value customers is painful and unnecessary.

So, Apple knew the iPhone 3G would be a hot item. To think that the Apple and AT&T marketing groups may have conspired to create even more “scarcity” to drive additional sales makes the pain they subjected their best customers to this weekend even more incredible.

Seth goes on to talk about 5 principles on managing the relationship with your best customers.

Principle 1: Use the internet to form a queue. If you have a scarce product, you almost certainly know it’s scarce in advance. Instead of taxing customers by wasting their time, reward the early shoppers by taking orders online. A month before sale date, for example, tell them it’s coming. If you sell out before ship date, that’s great, because next time people will be even quicker to order when they hear about what you’ve got. (And you can do this in the real world, too–postcards with numbers or even playing cards work just fine.)A hot band that regularly sells out on the road, for example, could put a VIP serial number inside every CD or t-shirt they sell. Use that to pre-order your tix.

Principle 2: Give the early adopters a reward. In the case of Apple, I would have made the first 100,000 phones a different color. Then, instead of the buyer being a hero for ten seconds, he gets to be a hero for a year.

Principle 3: Treat different customers differently. Apple, for example, knows how to contact every single existing customer. Why not offer VIP status to big spenders? Or to those that make a lot of calls? Let them cut the line. It’s not fair? What’s fair mean? I can’t think of anything more fair than treating the people who treat you well, better.

Principle 4: When things happen in real time, you’re way more likely to screw up. One of the giant advantages of the Net is that you can fix things before the whole world notices. Try to do your rollout in small sections, so you can fix mistakes before you hurt the very people you’re trying to embrace.

Principle 5: Give your early adopters a forum to celebrate. A place to brag or demonstrate or show off or share insights and ideas. Amplify the heroes, which is far better than amplifying the pain of standing in line.

Imagine what the Apple and AT&T stores would have been like this weekend if they were filled with happy customers who had pre-paid, pre-registered and were just dropping in for three minutes to pick up their (very coveted) phones, walking up the VIP line, past all the others just waiting for a chance to buy one…

Imagine…

Oh, and I still don’t have my 16 GB Black iPhone 3G. I finally resorted to ordering it through an AT&T store–although they aren’t sure if I will get it in 3 days or a month!