The Cost of Free Doughnuts

http://www.npr.org/blogs/money/2012/07/13/156737801/the-cost-of-free-doughnuts-70-years-of-regret

by kariatx • 14 years ago

95 34 14 years ago

Perhaps a way to prevent the reaction from a change in category is to discontinue and rebrand the product.

If the Red Cross had shut down the donut stations and then came back some time later with comfort food in a modified form, the soldiers would see the new stations independent of their anchor to the previously free stations.

philwelch6• 14 years ago

I think that idea might be a wee bit insulting of the troops' intelligence.

stretchwithme• 14 years ago

The troops probably have the same range of intelligence as everybody else. And the PR problem is mainly with those on one end of the continuum, not the other.

cperciva2• 14 years ago

Do you really think that the American troops were that much smarter than the average American?

kalleboo• 14 years ago

Well the troops are the ones holding a decades long grudge against the Red Cross for a decision made not by them but by the Secretary of War...

delinka• 14 years ago

I think there's also a bit of entitlement. I don't intend to imply the negative connotations. However, these soldiers are putting their lives on the line, so is a free doughnut so much to ask?

Indeed, the fault lies with SecDef for the change. And the change affected a certain aspect of morale. But the suggested change would most certainly have been noticed. If Red Cross was the only place to get this item, then it dried up, then someone else made them available, even at a pittance, the entitlement sentiment exists and colors the experience.

brk• 14 years ago

I certainly see the point they are trying to convey, but this is a bad analogy.

The Red Cross receives funding through donations and/or government subsidies. The donuts really are not their core product, if anything they would be more akin to a retail 'loss leader'.

The average web startup only has one core product, at least it gets to the Facebook scale of having thread its way into multiple aspects of your life. These startups are only getting their money through venture investors, who most certainly do not view their checks as 'donations'. So, there is a basic requirement to transition from free to revenue generation in some fashion.

The troops most likely saw the donuts as a small token offering from the Red Cross, and also felt they had done something to earn these free donuts. While there is a lot of feelings of entitlement among some customers of free services, I think the bulk of the users understand the company has to make money somehow.

In many cases the 'freemium' model appears to work well, as long as the paid versions offer obvious value. I wouldn't recommend for most people to not offer some free version of the product, but I also wouldnt warn them against charging for their products via a story about Red Cross donuts.

shinratdr• 14 years ago

> I think the bulk of the users understand the company has to make money somehow.

Understanding and caring are two completely different things.

hkmurakami• 14 years ago

If I remember correctly, one of Dan Ariely's first two books covers this kind of human behavior.

https://en.wikipedia.org/wiki/Dan_Ariely#Books

chimeracoder• 14 years ago

Predictably Irrational covers the case of an Israeli day care center, though it's actually a slightly different story - in that case, the parents felt an implicit moral duty not to pick their kids up late, which vanished once the cost was quantified (in terms of a 'late pickup fee'), causing more parents to pick up their kids late, even though it was technically free before.

More importantly, when the fee was removed again, parents continued late pickups at the higher (with-fee) rate. That's the real point of both stories - once the terms of the agreement have been moved from the social to the monetary realm, it's very hard to get people's brains to switch back to the social terms.

einhverfr• 14 years ago

yeah, quantifying the costs says "It's fine, as long as you pay extra." If it's $10/hr extra, hey, that's an extra hour of day care for $10.....

Then when you remove the price you are sending another signal, which is "oh it used to cost money but now we offer this for free!

It's worth really thinking through the whole social signal thing first....

with the Red Cross, one option might have been a donation box right next to the donuts with a note saying what they had been asked to do and why.... and soliciting additional donations, to be used to provide donuts to the British soldiers, perhaps! That avoids changing the relationship.....

jonny_eh2• 14 years ago

This reminded me a lot of what happened to Netflix last year when they spun off the streaming service into its own $8/month product. Existing customers who were already receiving it for "free" were totally livid, despite the fact that people in Canada, who didn't have the DVD service, and could only buy the $8 streaming service had no problem at all.

morsch• 14 years ago

Well, I'm not sure if my emotional attachment to Google is comparable to that of wartime soldiers to free doughnuts. What's left is the fact that a free service is very different from a paid service, and that pulling the rug under your customers is going to leave them very disgruntled. I am not sure this is a novel insight. I guess the historical analogy is still neat.

SatvikBeri• 14 years ago

This is why "underpromise, overdeliver" is so important in managing customers. People develop expectations very quickly, and then are delighted or disappointed depending on how things turn out relevant to their expectations.

kinleyd• 14 years ago

"A lot of the online services you probably use are free. Gmail is free. Facebook is free. Yahoo News and NPR are free"

Are these services really free? We may not pay cash to use these services but we certainly are paying something.

NegativeK• 14 years ago

So were the soldiers. They paid taxes, so they were funding the donuts via the US government.

But that's not the point. The soldiers perceived the donuts as free, and people perceive Facebook as free. Charging for donuts or access to your wall will change that perception.

The Cost of Free Doughnuts

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