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Cook's Apology Part of China Brand Rehab

Cook's Apology Part of China Brand Rehab

For proof that Apple considers China to be an important growth market, look no further than Tim Cook's apology this week over consumer complaints about iPhone replacement policies in that country. With the stock taking a beating and Samsung and other Android competitors breathing down his neck, Cook looked to put out a publicity wildfire while remaining culturally relevant in the company's second largest market.

By Rachelle Dragani MacNewsWorld ECT News Network
04/02/13 11:49 AM PT

Apple CEO Tim Cook issued a public apology to customers in China this week following nationwide criticism over the way the company handles warranty and return policies in the country.

For the past two weeks, several media outlets in China have run stories claiming that Apple's customer service policies, particularly in regards to the iPhone, leave much to be desired. The controversy began on March 15, World Consumer Rights Day.

The state-owned China Central Television reported that Apple's warranties in China usually only allowed iPhone 4 and 4S customers to get a refurbished phone instead of a brand new model. Consumers were also allegedly told they either had to keep the backs of original phones or pay about $90 for a new back.

The criticism picked up steam as other news outlets continued to report on the claims. The People's Daily, the official publication of the Communist Party, called the company arrogant in an editorial. Chinese consumers and even celebrities took to Weibo, China's Twitter-like social media site, to echo the complaints. The celebrity tweets, however, raised suspicions of orchestration by state-run media when the timing of the posts was questioned. The Apple bashing also focused attention on consumer rights issues with Chinese companies.

The China Consumer's Association asked Apple to publicly respond to the claims, and on Monday, Apple's apology appeared. Cook posted a letter on Apple's Chinese website, saying the company was sorry about the "lack of communications" that led to the perception that the company was arrogant.

"Chinese critics likely perceived the warranty issue as exclusive to China, and as one of Apple's largest markets, the perceived slight may have been seen as not taking into consideration local sensitivities,"said Michael Stanat, global research executive at SIS International Research and author of "China's Generation Y."

Making Things Better

In response to the claims about Apple's warranty policies, Cook promised that Apple will add more thorough and clearer explanations on its website. It will also provide better training and monitoring of Apple retail partners in China and will make it easier for Chinese consumers to provide Apple with feedback about their purchases or complaints.

The biggest change is in regards to the iPhone 4 and iPhone 4S replacement policy. Going forward, Cook said that Apple will replace broken models with entirely new phones that have a one-year warranty. Previously, the company might have only replaced a single part of the phone. Since it wasn't a brand new phone, it did not receive the added warranty coverage.

He went on to say that the company had plenty to learn about operating in China, but stressed that Apple wanted to show the country the same quality service it did to the rest of the world.

Apple did not respond to our request to comment for this story.

Nailing Down a Key Market

A public apology is relatively rare for Apple. The last time it made a similar move was in 2012, when the company launched a Maps app full of wrong directions. In the global smartphone race, though, the stakes are high enough that Apple has to be willing to swallow its pride, said John Feland, CEO and founder of Argus Insights.

"Maintaining leadership in the smartphone market can be a bit like taking eight dates to your junior prom," he told MacNewsWorld. "It's a struggle to keep everyone happy and if you focus too much attention on one, the rest will leave you. Apple is in this situation with China. Samsung is stealing mindshare from Apple in the U.S. and Europe. Apple cannot afford to lose China as a date to the smartphone gala."

In addition to fierce competition from Android, BlackBerry and popular Chinese handsets, intellectual property law differences make it tough to fight the grey market vendors with cheaper, knockoff models of popular phones.

That means that Apple needs to act -- public apologies included -- so it can boost the company's brand image in the market, said Feland.

"Anything Apple can do to demonstrate more cultural relevance, and find the balance between the maverick brand image cultivated in the West and the humble servant of the people in the East, will aid their growth in China," he noted. "That means finding ways to communicate the value of an authentic Apple experience in a visible way that resonates with consumers."

A Little Apology Goes A Long Way

In many Eastern countries, that visible way is a public apology, said Stanat.

"An apology perceived in the U.S. will be perceived much differently in China," he said. "Being modest in an apology can soften the blow of criticism and has the potential to repair relations. It can open an avenue to more frank communication, show that they care and can even bring respect in some circumstances, which has the potential to reinforce Apple's brand image."

Given the nature of the criticism from China -- highly targeted and gaining steam -- Apple reacted in the most effective possible way, Stanat added.

"The apology was likely the best solution to show modesty amid criticism. Branding, product quality and customer experience remain important priorities for Apple as it faces rising cost and price competition in the highly competitive Chinese smartphone market."


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