When online criticism subsides, does that mean the problem has gone away? Apple's 3GS upgrade problem

[Since this was first published on PRNewsOnline.com, Apple and AT&T announced an extension of upgrade subsidies for several people who are coming due.  It's probably not enough to mollify the overall complainers, but certainly enough to take the wind out of its sails.  I expect that Apple decided to look forward, and grow the overall iPhone market, as opposed to fighting over the existing users they already had. 

After all, if you've been a loyal iPhone user for a year, and someone whose never had one goes and buys a better one, how long are you likely to hold out?

Though internally executives at Apple and AT&T know exactly how many 3G owners decided to pass on the upgrade to 3GS, I doubt they'll ever release those figures.  -S]

Last week, Apple announced a new iPhone model, the 3GS, and a very unpopular pricing plan built around AT&T’s standard two year service agreement.  Apple’s desire to sell a new iPhone more often than once every two years created a lot of angry iPhone owners who just recently bought the 3G model last year and will have to pay as much as $600 to upgrade to the new model because they don't qualify for a carrier subsidy mid-contract.  A twitter-based petition, numbering 12,000 signatories at last count, was driving attention to the issue.

Look at this graph below.  I used one of my favorite tools, Radian6, to find all the online conversations about this topic:

Indeed, 4,000 posts about this topic at its height is a lot.  What does this graph, and in particular the falling volume on the right, really mean though?

1. There’s a lot of angry iPhone customers, but they’re over it.
2. There’s a lot of angry iPhone customers, but they’ve forgiven you.
3. There’s a lot of angry iPhone customers, and they’re just catching their breath before yelling again.

Depending on the particular client situation, any of these things could be true.  It takes a savvy professional who understands a client’s specific situation to discern what this data really means.  In the end, Radian6 is simply a tool, albeit a powerful one, for those who understand the dynamics of communications.

In this case, with the new model going on sale on Friday, the very heavy competition for the iPhone coming from every carrier, it’s entirely possible that there’s a fourth option:

1. There’s a lot of angry iPhone owners who have decided to sit out this upgrade cycle unless Apple finds some way to change the economics of this upgrade.

This data point would never show up on a graph, because it’s an offline action.  It’s not measurable in Radian6, but it will most certainly be measurable in Apple’s sales numbers on Saturday morning.  Even if people threatened it online, that’s still a poor approximation of actual behavior.  After all, people consistently complain about privacy intrusions by major corporations while still posting drunken photos of themselves on facebook.   What you say is not the same as what you do.

I certainly hope Apple’s PR department isn’t looking at this same graph and patting themselves on the back.

The problem doesn’t lie in the tool.  Radian6 is an excellent tool.  My t square in my basement shop is excellent as well, but not if I don’t use it correctly, or fail to understand how to use it.  I could probably use the edge of it as a screwdriver, but that doesn’t make it a good screwdriver, no matter how much I told myself using a Tsquare edge as a screwdriver is smart.

So what should Apple do now?
Apple has traditionally not responded to its critics with a change in pricing or policies.  Even when Steve Jobs health was an open secret pummeling Apple’s stock price, Apple’s black hole of a PR department continued to toe the line that everything was fine and Jobs health is a private matter.  (To the shareholders of Apple, it clearly was not)

There are two recent occasions when this silence has been broken:

1. When Apple needed to assuage early iPhone adopters about the fact that months after they bought their phones, Apple dropped the price by $200. 
2. In 2008, when Apple deeply screwed up the Mobile Me rollout so badly that it affected adoption rates.

I believe that this shows that Apple doesn’t bother to respond to criticism except when it appears to affect their product adoption cycle.  In many ways, this is an excellent ego-less approach to communications for a consumer products company, because it puts the products front and center.  For a company that makes products with such a strong brand halo, this strategy maximizes the products' market position.

However Apple doesn’t ignore these topics entirely, and the current protest on Twitter and the criticism in the press has the potential to really damage Apple’s product launch when the 3GS goes on sale Friday.  If existing iPhone users decide to skip upgrading to the iPhone 3GS this summer, there are a number of very bad outcomes along with the significant loss of revenue to Apple which is made both on the hardware as well as in a bonus paid to Apple from AT&T on every iPhone activation.

Worse yet, the protest creates a window for competition: You can already see every tech reporter writing the story headline, “Don’t want to pay a $200 premium to AT&T for a new iPhone?  Here are 5 phones on other carriers that will give you almost the same features when you switch.” 

Apple will never forget the lessons of the PC wars: that having the best product doesn’t guarantee success against a motivated, opportunistic opponent who see non-textbook market opportunities you miss.

The problem lies not in recognizing the issue at hand, but in solving it.  AT&T’s exclusive contract with Apple for the iPhone is up next year, and they are eager to lock in those customers.  They don’t want to pay the cost of reducing the upgrade premium, and frankly, neither does Apple.  Both companies are probably currently having a very tense discussion right now about whose hide this is going to come out of, since letting the customer base foment protest means that many will simply stick with the phone they have. 

This is the downside of making really great products, sometimes, what people have is good enough.

What’s really unique about this protest is that it’s purely Twitter and media-based.  No Facebook groups and no flash protest websites.  In this case measurement tools might suggest that what you have are 12k users who have gotten an inordinate amount of ink for their issue, but I would disagree.

There’s a reason that communications is not a discipline that can be driven entirely by algorithms.  That difference in scale between coverage and names on a petition suggests there is a larger amount of discontent at work.  And the nuanced position that Apple is in with their new product launching in a few days is something that not even the best algorithms could detect.

As these conversational monitoring tools become more and more prevalent, the tendency to equate subsiding conversations with “all’s well” becomes more and more tempting.  Don’t give in to it.