Apple Inc – A Case of Effective Communication

On June 25, 2010 Apple released the iPhone 4. With its sleek, new, stainless steel frame design, thousands of people rushed to buy Apple’s latest gadget. Apple and its partner carriers received 600,000 pre-orders for the iPhone 4s in the first 24 hours, making it the largest number of pre-orders Apple had received in a single day for any device up to that time. By the end of the month, Apple had sold over 1.7 million iPhone 4s’.

Not long after the release, customers began to report antenna issues with the phone. They said that if they touched the antenna located on the outside of the phone or gripped the phone too hard, they would lose reception and their phone calls would drop. With such high demand for the iPhone 4, one would think that Apple would have ensured their product was as up to standard as possible before making the big release. Unfortunately, this was not the case and they were not prepared for such a large retaliation from the iPhone 4s users.

Apple was then faced with the challenge of having to address the issue to the public. From the result of the public address that Apple issued, two things are certain:

1. Apple was not prepared to deal with such negative feedback from their customers 2. Apple’s public relations or communications team did not handle the situation correctly.

They lacked some very basic communication skills and therefore failed to please their customers. Apple ignored the technical problem in their product. Then, after receiving thousands of complaints from their customers, they failed to fix the problem immediately. Lastly, they put very little effort in trying to regain their customers’ satisfaction after the initial
disappointment in the iPhone 4s.

Main Issue at Hand:

The biggest issue with this problem was not necessarily the technical glitch, but rather Apple’s poor approach in addressing the issue. Instead of taking responsibility for the phones poor design, they tried washing their hands by saying “antenna problems were common and simply a ‘fact of life.’” First of all, this was clearly a problem that was unique to the iPhone 4s, making it an untrue statement. Secondly, Apple should not have ignored the problem the way they did.

By communicating to their consumers that they were essentially going to do nothing about the problem, they risked losing existing customers and future potential customers, alike. Furthermore, upon being given a second opportunity to address the issue with the public at a press conference, Apple failed, once again, to please their customers. Rather than stating that they would do their best to find a solution to the problem or replace the problematic phones, they tried relieving themselves of any blame by saying, “We’re not perfect. Phones are not perfect. We all know that. But we want to make our users happy.” Not providing their customers with a clear-cut answer or solution was not the way to go about making them happy.

By ignoring the problem and using poor tactics to communicate the issue to its users, Apple was risking losing a lot of money. The first thing the company would lose is its credibility. Apple has worked so hard to build a strong reputation of having some of the best technologies and designs within its industry. It would be a shame if the company threw all of that away, because of some poor external communication issue. Furthermore, unsatisfied iPhone 4s users were very likely switch to a different phone and let their family and friends know about the poor quality of the iPhone. This could have led to a great loss of the market share for Apple.

Public Uses Some Humor to Mock Antenna Problem:

The visuals below show some of the consumers’ and other companies’ reaction to the antenna problem situation. Visuals 1 and 2 are simply a humorous take on the iPhone 4s’ poor antenna location. Visual 3 is actually another company’s ingenuity in providing iPhone 4s users with a solution for their faulty phones. Intentional or not, though, the concept of having to buy a bumper for a so-called “state of the art” phone is still somewhat comical.
Stakeholders:

Some of the main stakeholders in this case include shareholders, Apple employees, and the iPhone 4s buyers. The biggest stakeholders in this case are the shareholders. If Apple lost its credibility and part of its market share because of its approach to the external communication issue, their shareholders would take the biggest hit. Naturally, if Apple lost customers, the company would lose money and market share, and shareholders would lose value in their stock.

Apple employees are also part of the stakeholders in this situation, because they are the ones who have to deal directly with the unsatisfied customers. Apple heightened their customers’ dissatisfaction with their product by communicating to the public they way they did. Unfortunately for their employees, they have to suffer the repercussions of their top management’s decisions. Furthermore, this could also have another negative effect on Apple employees in the long-term. With high dissatisfaction rates, customers are bound to lose their customer loyalty to Apple and buy the competitor’s product. This would lead to company losses, which eventually leads to job losses, as well.

Lastly, there is the iPhone 4s buyer. The buyer’s biggest loss is the money they paid for the brand new phone. If Apple is not able to fix the technical problem, the buyer just wasted all that money on a phone that doesn’t even work. Even if the buyer tried returning the phone, they would still be at a
loss because of the restocking fee that Apple was charging customers who wanted to return their defective phone.

Company Decisions:

Initially, Apple decided to dodge the problem. They made two statements to the public in which they attempted to blame the issue on technology in general, and not their own technology or design. This upset many customers and created a large upheaval on their part. Dissatisfied customers threatened to switch phones or speak poorly of the company.

Apple also decided to issue a public address in regards to the iPhone 4s’ antenna. In their address, they stated that the iPhone 4s was not the only phone that had antenna issues and dropped calls. They also made suggestions to the public on ways they could solve this issue. One of Apple’s solutions was to buy a bumper for your phones. The bumper would prevent you from touching the antenna, and not having your calls drop. Unfortunately, this is not what customers wanted to hear. Nobody wants to have to spend even more money on a bumper when they have already spent more than $600 on the phone itself.

Upon much retaliation from the new iPhone 4s users, Apple finally decided to give their customers a 30-day period to return their newly purchased iPhone 4s. Unfortunately, for the customer, they had to pay a 10% restocking fee if they did try to return it. Not surprisingly, this caused another ruckus amongst the users. Users felt it was unfair for them to have to pay for wanting to return a defective item.

Recommendations:

In order to avoid tainting their reputation, apple should have done the following things:

1. Accepted the problem at hand and taken full responsibility for the glitch in the phone 2. Reacted quickly to the users complaints and provided them
with a solution 3. Communicated future action that would be taken to fix the glitch in the phone

Rather than saying, “antenna problems are a fact of life,” Apple should have apologized to the new iPhone 4 users. A statement along the lines of, “We are deeply sorry for the troubles that your new phone might be causing you,” would have been more appropriate. This takes the fault off of the user’s shoulders and allows them to see that Apple recognizes that they have disappointed their customers. The next step would now be to react to the user’s complaints.

After addressing to the public their deepest regrets on the matter, Apple should have gone above and beyond to retain all of its customers. Some ways they could have accomplished this include:

Reimbursing the buyer without charging a restocking fee
Guaranteeing a free or discounted upgrade for the next iPhone, once the glitch is fixed Giving customers some kind of gift card or coupon – e.g. iTunes gift card

All of these forms of monetary reimbursement show the customer that Apple truly values them as a customer and will satisfy the customer’s need in return for their brand loyalty to the product. A short-term loss like this would eventually lead to a long-term gain for Apple. In satisfying their customers, the customers are left with nothing bad to say about the company. Thereby, increasing the brand’s credibility, revenues, and market share.

Lastly, Apple should have addressed their plan of action to the public in order to boost the user’s confidence in the company, again. By ensuring the customer that Apple is actively pursuing a solution for the antenna problem, more customers are likely to stick around and wait for the solution. Where as, by not addressing the pursuit of a solution, customers are likely to lose faith in the company and switch over to a different phone. Affirmation that Apple will take care of the customer’s needs increases the customer’s loyalty and their willingness to buy an Apple product again in the future.

Conclusion:

More than releasing a product with a defective antenna, Apple’s biggest failure in the iPhone 4s release was not communicating effectively with the public. Apple made a poor decision in releasing a defective product, but an even poorer decision in not making it up to their customers immediately. Rather than placing the blame on technology, Apple should have apologized to the public, gone above and beyond to regain their customers’ satisfaction, and ensured them that a solution for the problem was on its way. Many companies suffer from poor communication skills, which lead them to make poor corporate decisions. Communication is one of the most important factors in today’s business world, so companies need to be diligent about how they address sensitive issues like the one presented in this case. Good communication skills lead to a good corporate image, which results in happy stakeholders all around.