

The Cost Of Free Doughnuts: 70 Years Of Regret - ComputerGuru
http://www.npr.org/blogs/money/2012/07/13/156737801/the-cost-of-free-doughnuts-70-years-of-regret

======
rdl
From the comments on that article: "My late uncle, Kenneth Hand, a captain of
the 111th combat engineers, wouldn’t tolerate criticism of Red Cross canteens
or their personnel.

In 1944, he led a recon mission to find a river crossing for our army in
southern France. He came under extremely heavy German machine gun and mortar
fire and was forced to advance through a minefield to get his men to cover. In
the process, he stepped on a mine and was severely wounded, losing his leg.
Their mission being vital, he ordered his men to leave him and find that
crossing, which they did. Although they sent a medic to recover their officer,
upon finding him the medic refused to give him morphine, saying that he didn’t
have enough to waste on a man who would die in a few minutes anyway. He was
then abandoned and listed as dead.

Some time later, a Red Cross doughnut wagon happened by. One of the two person
crew noticed Kenny laying unconscious in the minefield and went to check if he
was alive. Finding a pulse, they brought him to the doughnut wagon, which was
cleared out and converted to an emergency operating room. These two Red Cross
canteen workers performed major surgery on the spot and saved his life at the
risk of their own.

What’s a few cents for doughnuts compared to that?"

~~~
jamii
What was the donut wagon doing in a minefield?

Imagine, in a minefield, under heavy machine gun and mortar fire - "Donuts
anyone?".

~~~
nekojima
Everyone knew the Canadian combat military mission in Afghanistan was finally
going to end in 2011, when the Tim Hortons' outlet closed down. Donut
availability can have a predictive (or reactive) nature.

~~~
rdl
The KAF boardwalk Timmies was the first I'd ever had; it's surprisingly good.

------
JohnBooty
I had a largely positive experience when I began charging for a site I
created.

Initially, the site was free, but from day 1 I made it clear that we were
going to charge a membership fee at some point. That, I think, was the biggest
thing.

I also gave the first several thousand members - who had already become the
most vocal and most dedicated members - a chance to earn a free lifetime
membership if they completed certain goals that would help me to test the
site's functionality. Things like sending ten private messages, making ten
forum posts, things like that.

The business wasn't a smashing success, but this part of it was, I think. Some
members left once we went for-pay because they simply weren't willing to pay
for things online, basically. However, there was no rancor or anything.

~~~
lilsunnybee
> Some members left once we went for-pay because they simply weren't willing
> to pay for things online

or weren't able to

~~~
JohnBooty
You are right, of course. If it wasn't too late, I'd edit my initial reply.

------
joezydeco
The original Planet Money podcast episode is a bit longer and has some more
detail, by the way:

[http://www.npr.org/blogs/money/2012/07/13/156723516/episode-...](http://www.npr.org/blogs/money/2012/07/13/156723516/episode-386-the-
cost-of-free-doughnuts)

I've been listening to Planet Money since it started during the 2007 meltdown.
It's been a great resource for explaining some of the tougher financial
stories in an easier fashion while keeping it interesting. Definitely a
recommended podcast.

~~~
mmahemoff
The story reminded me of the Planet Money about coke being 5 cents for 70
years.

[http://www.npr.org/blogs/money/2012/11/15/165143816/why-
coke...](http://www.npr.org/blogs/money/2012/11/15/165143816/why-coke-cost-a-
nickel-for-70-years)

------
moloch
This touches on an interesting human behavior; the difference between $0.00
and $0.01 is huge, much larger than $0.01 to $0.02, or even $0.01 to $0.99 -
this is talked about (among other interesting topics) in the book "Predictably
Irrational" by Dan Ariely.

<https://en.wikipedia.org/wiki/Predictably_irrational>

<http://www.youtube.com/watch?v=9X68dm92HVI>

~~~
jfoster
I suspect the penny gap is more due to the process of paying for something.
That's not completely irrational. Unless you're paying in cash, you are either
cluttering up your bank statement, or having to endure an annoying series of
logins, confirmations, etc.

Where's the payment equivalent of a facebook "Like" button? Now that I mention
it, facebook are probably well positioned to introduce such a thing.

~~~
mhb
_I suspect the penny gap is more due to the process of paying for something_

That is not the point Ariely makes. Charging anything at all changes the
nature of the transaction from a social one to a market one and completely
changes the context in which people view it. It's worth reading.

------
daeken
One thing I learned early on in business is: it's always easier to lower your
prices than to raise them, so set your initial valuation high; you can always
drop it later if you need to.

~~~
stevewilhelm
In the enterprise space, I have learned that if you drop your price for one
customer, your other customers will quickly learn of the new "price floor."

~~~
daeken
While I don't deal with enterprise sales, I do security consulting for the
enterprise, and one thing I do is never lower my prices. Instead, I'll just
add additional value over top, e.g. an extra day of consulting. Yes, it has
the same effect for me, but it doesn't get my clients in the habit of paying
me less money.

~~~
chiph
Everyone likes getting something "for free". For an enterprise-level customer,
another day of consulting. For smaller customers, a free t-shirt or water
bottle. Goes back to the whole perceived-value thing.

------
adamgravitis
I seriously thought this was going to be about diabetes or sugar addiction or
something :-)

------
whatusername
Predictably Irrational has a good take on this (Social Norms vs Market Norms).
One of it's key points -- once you've changed from a Social Norm to a Market
Norm, it's really hard to change back.

------
jonny_eh
And that is why Netflix customers freaked out when it was announced that they
had to start paying for Netflix Streaming.

~~~
gcb0
not really. i signed up because the product was dvd + steaming at the time.
then it became one or the other (or paying twice).

It was never advertised as dvd plus free trial steaming. if it was, was in
small print.

------
dws
Interesting historically (particularly that the U.S. Secretary of War bowed to
a British request to have the Red Cross charge), but the parallels between
holding a grudge for the perception of being treated poorly coming out of
combat, and being asked in peacetime to pay for a previously free service, are
weak.

My Dad, a (peacetime) Marine Lieutenant, had a Sergeant who was livid about
being asked by the Red Cross volunteers to pay for coffee on his return trip
from the Korean war in the early 50s. That left a lasting impression my Dad,
who's saying on that was, "A Marine Never forgets." He never supported the Red
Cross, though he was hardly stingy when it came to paying for things he
thought deserved to be paid for, and that included accepting raised prices.

There's an element of moral indignation in the story that's missing from "Oh,
snap, this used to be free and now I have to pay for it. That sucks."

~~~
Nav_Panel
>the parallels between holding a grudge for the perception of being treated
poorly coming out of combat, and being asked in peacetime to pay for a
previously free service, are weak

That was my thought exactly.

I think the main difference between the two scenarios is competition. There is
only one Red Cross, but for most apps out there, there are likely a few others
that do almost exactly the same thing. So, if one starts charging, you can
decide to either switch to a different, free alternative, or you can decide to
pay for the app.

Being able to even make that decision is empowering (so what if donuts cost
money? muffins are still free!). In the Red Cross's case, there was no choice;
the soldiers had no power: you either pay for a donut, or you get nothing.

------
jonmc12
More facts from Red Cross:
<http://www.hcredcross.org/pdffiles/Donut%20story.pdf>

------
niggler
100% spot on. It's much easier to go from $1/mo to $10/mo than to go from
$0/mo to $1/mo

------
michaelfeathers
There's a bigger thing around this too. One thing I've noticed visiting a lot
of companies is that memories of good times can negatively impact assessments
of the present.

People with very good work conditions may always long for that time when their
favorite manager was there, or when the company was riding a wave of success.
Their conditions may be objectively better than many other companies but
because they had a great situation at one point, everything else pales in
comparison. It can take years for that to change.

~~~
Evbn
It is important to look down as well as up when assessing one's position.
However, such behavior is not natural, since our animal survival chances are
general higher when we always strive for more, than if we grow complacent.

------
acanby
I think this stems from the memory these people hold that the item (whatever
it is, doughnut, site access etc) was once free. People will wonder "why did
this change?". It could be many things, but people will most likely jump to
the easiest conclusion, the seller is greedy.

Using the doughnuts analogy, I wonder how things would have worked out if they
continued to give away the plain doughnuts for nothing, but added a new line
of premium iced doughnuts which attracted a charge? Personally I wouldn't
mind, and I think that a lot of people would be ok with this.

Stemming from this, you really need to have a good reason to charge people for
something they were previously using for free.

Personally, I don't think you can start charging for something that was
previously free (without significant value add). By all means offer a paid
upgrade with particular value add, but never do the wrong thing by your (thus
far) loyal users.

------
te_chris
Does anyone have any resources pertaining to how people react to generous
grandfathering? Like say you release a free service, then make it paid, but
give everyone who signed up while it was free a 1 year loyalty bonus, can
anyone give their experiences or link to others who have
successfully/unsuccessfully tried this?

~~~
davidw
I did just that with LiberWriter.com (people who got in at an earlier set of
prices got to keep them) and people were generally very happy and positive
about it.

~~~
StavrosK
Well, of course. The question is "did you make more money with that than if
you hadn't grandfathered?"

~~~
davidw
Who knows: there are too many variables at play, and it's not worth doing
experiments with lest people raise a stink.

~~~
StavrosK
Yep, but that's why data would be valuable (although I don't think anyone will
have any, due to the reasons you mentioned).

~~~
davidw
Due to the many variables, I think even rigorous data for one application
might not apply to others. LiberWriter's customers are different from
customers of other web businesses...

------
mikecane
This really doesn't seem analogous to me.

>>>For the veterans, the Red Cross went from being a little like Mom, to being
the corner store.

Who really thinks of Google, for example, as Mom?

~~~
dictum
For lack of a better word, geeks.

Edit: People tend to have feelings regarding companies and institutions.
People who are interested in tech and computers have stronger feelings about
companies like Google, Apple and Microsoft. At least in Google's early years,
people had a tendency to see Google as a figurative Mom, more interested in
providing the best search engine and some nice free services than making money
at any cost.

~~~
smoyer
I'm a geek ... and I think of Google as (my) "big brother".

~~~
javert
I'm a geek, and I increasingly think of Google as Big Brother.

~~~
officemonkey
In "Nineteen Eighty-Four" they talked about telescreens with cameras and
microphones spying on you in your home.

In 2013, we willingly have webcams and mobile phones which can conceivably
monitor us the same way, and governments that are willing to do so.

Google ain't the only Big Brother.

~~~
mikecane
See? I rest my case.

I think even people who love Apple to the point of slavishness think of them
as a company, not as a Mom.

~~~
smoyer
I have Apple products, but I think of them as "Fahrenheit 451" (Telling me
what I can and can't have).

------
geezer
So where is the grudge against airlines charging for checked bags?

~~~
michaelhoffman
Many frequent travelers don't check bags anyway. The most frequent travelers
have elite status on an airline that might allow them to check bags for free.

~~~
joezydeco
There's two angles I see:

1) Business travelers can expense the checked bag fee, so they don't care.

2) Other travelers still have a free option: the carry-on bag.

I always board my flights last for various reasons, and I've noticed how
people are literally hanging over the ropes to get in the boarding line when
their section is called. It started making sense when the staff would announce
that ALL overheads were now full. People were packing even more into those
carryons.

~~~
ams6110
Which is why the checked bag fee never made any sense to me. They should be
charging a carry-on fee instead. Carry-ons are a PITA for the airlines, with
all the time the stowage adds to the boarding process.

~~~
prakashk
> _They should be charging a carry-on fee instead._

At least one airline, Spirit Air, already does. I am sure more will follow
this practice.

------
js2
Previously <https://news.ycombinator.com/item?id=4244314>

------
kmfrk
pinboard.in is always an interesting example. It started at a really low one-
time sign-up fee, which grows as more users sign up:
<https://news.ycombinator.com/item?id=702914>.

It used to be something like a dollar on launch. Wonder how it follows
inflation, though.

------
snowwrestler
This is why micropayments for individual pieces of content have never taken
off, and never will.

