The Hidden Impact of AppleCare+

The last week has been a roller coaster for the Apple community: the buildup, anticipation, initial letdown, technical problems, and then finally the strong finish of the “Let’s Talk iPhone” event and, of course, Steve Jobs’ passing. While we mourned Steve and analyzed the new iPhone 4S and all its great features, a more important indicator for the future of Apple may be the seemingly minor introduction of AppleCare+.

As we reported previously, AppleCare+ is the new warranty and “insurance” plan from Apple that covers new iPhone purchases. At first blush, it seems that AppleCare+ is a great new offering from Apple. Prior to last week’s announcement, “regular” AppleCare was offered for $69 on new iPhones. It covered the phone for two years from the purchase date and warrantied against all hardware defects. It did not cover accidental damage. 

However, Apple has long had an unwritten policy which gave Apple Genii the ability to replace a customer’s phone due to accidental damage one time at no charge. It was a great program that restored many customers’ faith in Apple and set the Apple Retail experience apart from its competitors.

Now, with AppleCare+, customers must pay an additional $30 up front to receive the same coverage period but with the addition of limited coverage for accidental damage. Those instances of accidental damage will require an additional $49 payment at the time of service and are limited to two replacements over the term of the coverage.

Sounds great, doesn’t it? $79 ($30+$49) for a replacement phone instead of $199 (the price Apple officially charges to replace a damaged phone at the Genius Bar). The problem is that this new policy has eliminated the Genii’s ability to offer customers a free replacement. So, for all of you out there who experienced a great Genius Bar appointment in which your phone was replaced for free, the party’s over.  Apple has just placed short-term profit over long-term customer experience, and it may lead to a less-than-magical experience at the Apple Store. 

On the other hand, this might signal a shift towards more openness and certainty. While the one time replacement policy was widespread, it was not always employed for all customers and the uncertainty and inconsistency that resulted may be cleared up by this new policy. Also, the new cost for AppleCare+ still falls well below that of most carriers’ insurance and phone replacement programs, which are usually tacked on as an additional monthly fee on users’ phone bills.

Why the change in Apple’s policy, especially one so unique and popular? Apple’s exponential growth, particularly in the accident-prone portable and phone markets, certainly has something to do with it. Even with the company pulling in billions in profits each quarter, replacing tens of millions of iPhones at no charge likely had a significant impact on the company’s bottom line. That impact would only grow as Apple continues to draw more of its business from phones and portables. 

What this means for consumers going forward is that everyone will receive a much more clear and consistent, albeit costly, support experience that lacks the “magic” that has come to be associated with many, if not most, experiences at the Genius Bar. This “magic” has long been a key ingredient of the successful recipe of the Apple Retail Stores. Will we soon discover that the new taste is a little bitter?