AT&T botches iPhone 3G S upgrade price concession, says expert

Crisis communications guru gives AT&T an 'F' for further fueling the online fire

AT&T bungled its chance to make amends with angry customers today when it said it will reduce the price of the new iPhone 3G S for some, but not all, current subscribers, a crisis communications expert said Wednesday.

"At first glance, it appeared that AT&T listened to customers, but they seemed to have missed the point," said Dallas Lawrence, vice president of digital media at Washington, D.C.-based Levick Strategic Communications. "Rather than embrace a policy all across its subscriber base, AT&T chose a policy of picking winners and losers, separating the two in some cases by just weeks or pennies spent on monthly bills."

Lawrence was referring to the announcement earlier today by AT&T that it will let more iPhone 3G users buy a new iPhone 3G S at the least expensive prices.

Last Thursday, Lawrence said AT&T had 48 hours or less to change its tune, or risk alienating customers. It missed that deadline by days.

In a letter to customers posted on its Web site, AT&T said it had "listened to our customers" and would price the iPhone 3G S so that customers with last year's iPhone 3G would be eligible for the subsidized prices between June 20 and Sept. 30.

The move was in response to a growing chorus of complaints by customers furious that they would have to pay an extra $200 for an iPhone 3G S if they had not fulfilled most or all of their two-year contract with AT&T. More than 14,500 people, for example, have signed a Twitter petition demanding that AT&T sell them the iPhone 3G S at the same $199 (16GB) and $299 (32GB) prices new customers pay.

Although AT&T's change of heart may have satisfied some of the griping customers, Lawrence thought the telecommunications company stumbled badly. "I'd give them an 'A' for understanding that this was an online crisis, and responding to it in that medium, but I'd give them an 'F' for execution," said Lawrence. "They're going to see that they've only fueled further dissent by people who see themselves as losers in this equation."

By essentially separating customers clamoring for cheaper upgrades into two groups -- those who are now eligible for the cheaper iPhone 3G S prices, and those who are still out in the cold -- AT&T's made a big mistake. "The first rule in crisis communication is 'Do no harm'," said Lawrence. "But now it's reignited the issue by picking winners and losers."

Lawrence, who has managed crisis communications for a large number of public and government clients, and in 2003, served as the spokesman for Ambassador L. Paul Bremer and the Coalition Provisional Authority in Iraq immediately after the U.S. invasion, also took AT&T to task for confusing customers with its announcement today.

"They've muddied the waters," Lawrence said. "The letter raises more questions than it answers. Whatever it was going to do needed to be clear and concise, but now there's rampant confusion about who qualifies for the lower prices."

While AT&T trumpeted the price concession to some customers, it wasn't ready to confirm who was now eligible for the $199 and $299 prices. That information, said AT&T today, would not be available until Thursday. "The letter was also very confusing. I read it several times, and I still don't fully understand what they meant," said Lawrence, referring to mention of a line in the sand for customers who pay less than $99 per month for their iPhone service plan.

"That's probably increased customers' anxiety," Lawrence said. "The peak of customer concern is right before the solution is clearly identified. But iPhone customers can't go online today [to find out if they qualify] for the lower prices. It's the not knowing that's fueling the continued controversy."

Lawrence had his team at Levrick monitor the reaction to AT&T's letter, and claimed that by the end of the workday Eastern time, more than 5,000 blog posts had mentioned the price policy change, and Twitter was posting about 125 tweets each minute on the subject.

AT&T could recover from the blunder, Lawrence acknowledged. "It's not too late to embrace those people who now think they're losers," he said. "To be fair, you have to give them credit for understanding that this was an online issue and engaging in that media." Among AT&T's efforts, Lawrence cited Twitter posts by employees and a video posted on YouTube.

But even there he had to ding the company. "No one can find the YouTube video," he said, and noted that the clip had been viewed fewer than 600 times, a remarkably low number considering that customers were tweeting at the rate of 125 per minute.

"Most of the customers feel that they've been left out," said Lawrence. "AT&T [didn't] need to have something that picked winners and losers, because the latter will always remember that AT&T told them they were losers."

Apple and AT&T will sell the iPhone 3G S at their retail stores on Friday, starting at 7 a.m. local time. Customers can also order the new smartphone online at the companies' e-stores.

Copyright © 2009 IDG Communications, Inc.

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