What Happens When You Cut the Price of Something for New Customers?

I just hope Ara Hovnanian has talked to Steve Jobs.

You see, Ara builds big homes. Steve builds cool stuff.

Ara just announced he's cutting the price of those big homes by up to a hundred thousand bucks. Not too long after Steve cut the price of his iPhone by 200 bucks.

Ara hopes it will increase sales. Steve did too.

But what Ara might discover is what Steve already knows. When you cut the price of something for new customers, your old customers get upset.

You see, a lot of them had just paid up to 600 bucks for an iPhone, some waiting in lines for hours for the honor.

Then some schlubs who didn't wait in lines, couldn't be bothered with lines, end up waltzing into stores only weeks later — no crowds, no fuss, and no full price. In the case of Steve's customers, very upset.

200 clams off, just like that. And not surprisingly, just like that, those folks who did pay full price are going crazy.

So crazy, Steve had to give 'em a $100 gift certificate just to shut 'em up.

Now what's Ara going to do for the sucker who just paid full price in a development now advertising 20 percent off? How do you think that dude feels? Can you imagine his conversation with that new neighbor?

"Hey, pal," the new guy says, "Can you believe you and I have the same exact house, and I got mine for a hundred grand less?!"

It won't be pretty?

And as yet, I've heard there won't be refunds.

True, Ara doesn't owe them anything. Neither did Steve. But Steve did something.

I just hope for the sake of all those neighborhood block parties to come, Ara does too. Otherwise, the barbecues won't be the only thing burning!

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