Apple has been sued for allegedly breaking FaceTime on iOS 6 and iPhones running earlier versions of iOS in order to cut costs and force upgrades. If this turns out to be true, it will be far from the first time I’ve seen this strategy implemented. And it always has turned out badly. Let’s talk about why you never intentionally break a product in order to extort money out of a customer. (The word “extort” should be your first clue.)
Intentionally Cutting the Phone System
The first time I ran into this kind of behavior was at ROLM Systems. A large enterprise customer didn’t feel it needed a service contract and discontinued it because the ROLM telephone system never broke. Telephone systems tend to be pretty reliable. So, an enterprising tech remotely logged into the customer’s phone system and disabled all of the company’s trunks. This was before cell phones and the result was that the expensive phone system became an internal-only intercom. It turned out that our CEO sat on that company’s board. To suggest he wasn’t pleased by his enterprising employee is an understatement. I’ve only ever seen one guy fired more quickly than this tech was.
Making Customers Feel Mistreated
In the late 1990s, one of the biggest complaints Microsoft got was that its pricing was very hard to figure out. Steve Ballmer took fix this problem as a personal challenge but, in the process, it was discovered that a huge number of companies weren’t paying for the licenses they bought, with some companies responsible for millions of unpaid obligations. Even though it wasn’t Microsoft’s intent to extort money from these firms, that was how its collection efforts were seen. This formed one of the strongest foundations for efforts to divest from Microsoft and invest in Linux. It was also one of the major reasons Ballmer wasn’t successful as a CEO, and it wasn’t even intentional.
When a company intentionally harms a customer in order to force that customer to give it money, it not only is likely actionable, but it breaches trust. In addition, people do not want to do business with firms that do them harm and they tend to have a really long memory with regard to this kind of behavior.
A variant is called “planned obsolescence,” which is when premature product failure or an inability to make what otherwise would be easy repairs are built into the system. This practice only works if the customer is locked onto your platform and can’t easily move to something else, kind of like an Apple user. Apple has been accused of this before and this seems to be a recurring practice at Apple. It has even been sued for planned obsolescence, so it’s hardly new.
In the best case, this is customer abuse, in the worst case, it is basically extortion: Buy what we want you to buy when we want you to buy it or we break your device. Generally, with the exception of the new T-Mobile lady, customers don’t want to be abused, and they hate having vendors extort money from them, but if the switching cost is high enough, they will tolerate for a time. The really bad news for Apple is that if the customers eventually do switch, they will not easily switch back. That is something that IBM discovered in the 1980s when it figured it was a good idea to release buggy products and then charge customers to fix them. IBM went from the most powerful company in the tech market to having a fired CEO and being put on deathwatch in a very short few years.
Wrapping Up: Stop Abusing Customers
This kind of a practice doesn’t bode well for any company. Apple had already begun a process of massively cutting the cost out of its products and it is currently threatening to raise prices. Add to this the possibility that customers could come to believe that Apple is taking extreme advantage of them and you have the potential for a massive migration to something else. Right now, according to Consumer Reports, LG has a product in market better than the iPhone for $200 less. That is not a formula for success. Apple may become yet one more example of why you should never intentionally break the products you sell. Ever!
This also speaks to why I’ll never again use an Apple product.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+