Apr 21, 2006

Customer Advocacy Nightmare: Apple Surprises With "Not Our Problem" Warranty Strategy

Profound disappointment is setting in as we learn that Apple Computer, a paragon of consumer-driven product and retailing innovation, has stumbled in being true advocates for their loyal customer base. Joe Nocera, who reports to have spent $10,000 on Apple products since the iPod first came out, writes the following in his column (Good Luck With That Broken iPod, NYT, 2/4/06):

  • His $300 iPod broke after less than two years of use, and was out of the one-year warranty period Apple provides.
  • He had declined an extended warranty at time of purchase – it would have cost 20% of the original purchase price of the device.
  • The Apple customer support number took Hurculean effort to find on their website
  • Only option provided by Apple tech support: buy a new iPod
  • One industry guru with Apple experience indicated the company felt “everyone knows that iPods are only good for one or two years”
  • When pressed for repair support, Apple indicates it will charge $250 - and you are responsible for shipping

All of this continues to reinforce deep consumer cynicism and doubts about new technology adoption, and the services and support provided by leading manufacturers and retailers. As the premise of MIT’s Glen Urban’s book (Don’t Just Relate – Advocate) suggests….smart (and successful) companies are

"....pioneering an entirely new route to higher margins and sustainable competitive advantage: customer advocacy….unprecedented trust among customers who have more information, options, and sophistication than ever....”

Are the margin benefits on extended warranties really worth the loss of customer confidence and support? If the warranties are expensive because of claims costs, shouldn't consumers know that when they evaluate the reliability of investing in an Apple device?

Why is Apple spoiling long-term PR gains from their product and retailing home runs by dropping the ball on service and trust?

My guess is that someone with a title like Warranty Product Manager, is making sub-optimal decisions in some euphoric drive to report exciting short-term financial results. Let's hope that astute members of the senior Marketing team at Apple reign in the warranty snafu before it goes too far.


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