TANSTAAFL
The Cost of Free Doughnuts: 70 Years of Regret
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Re: The Cost of Free Doughnuts: 70 Years of Regret
#12Once you lower the price of a product, you can never raise it again.
I heard that on/around HN at some point and I haven't seen it proven wrong yet. There's a reason why chip bags get smaller, why new versions that seem identical to the old come out, why Tommy Hilfiger will never be a prestige brand again. And it's because customers don't tolerate raising prices.
Re: The Cost of Free Doughnuts: 70 Years of Regret
#13I witnessed something like this when I worked at a Six Flags amusement park (wasn't 6F at the time) that had a decent size water park. They did exit surveys every night, asking as many people as they could if things were ok, and one year they also asked people "Would you pay extra for the water park", it was free as part of admission. So they wanted to know if people would pay extra. People said yes. Something like 9…
A park in Indiana, Holiday World, did something sorta the opposite.
They figured out how much the average guest paid for drinks, then raised the ticket prices that much but made all drinks free in the park.
It was a huge success. People expect ticket prices to go up occasionally and they expect to be gouged for drinks. By getting "free" drinks, it felt like a huge value. (At least for me when I visited.) I bet it made food sales increase too, because now people wouldn't have to pay for a drink too.
Not sure if they're still doing that, but at the time they also had free sunscreen all over the park. It's an amazing little park.
Re: The Cost of Free Doughnuts: 70 Years of Regret
#14NPR’s headline is misleading—the problem was not free doughnuts, it was charging (briefly) for doughnuts. In any case, fascinating; thanks for posting.
It's not misleading. Free doughnuts were part of the problem. The British soldiers were upset that they had to pay for their snacks while the American soldiers were receiving theirs for free, and it caused tensions. The free doughnuts helped to cause that imbalance and tension, which led to charging for the snacks.
Re: The Cost of Free Doughnuts: 70 Years of Regret
#15Once you lower the price of a product, you can never raise it again. I heard that on/around HN at some point and I haven't seen it proven wrong yet. There's a reason why chip bags get smaller, why new versions that seem identical to the old come out, why Tommy Hilfiger will never be a prestige brand again. And it's because customers don't tolerate raising prices.
That's not true. In the past, we raised the price of our physical products. It never put a dent in our sales. The question is what are you selling, and who are you selling it to. Also, there is a difference between selling a service or selling a product.
But no, we raise the price of our products, and never saw any issue from it.
Re: The Cost of Free Doughnuts: 70 Years of Regret
#16Interestingly enough I used to work at a company where the one any only benefit was occasional doughnuts on Friday (we did not get health insurance/dental/vision/retirement). And honestly we would all be pissed on the days when Doughnut Friday was cancelled.
Re: The Cost of Free Doughnuts: 70 Years of Regret
#17I didn't listen to the audio version of the posted link, but it's 5 minutes long and seems to be an excerpt of this 20 minute episode of Planet Money:
https://www.npr.org/2020/01/08/794592539/episode-386-the-cos...
Transcript: https://www.npr.org/transcripts/794592539
Re: The Cost of Free Doughnuts: 70 Years of Regret
#18Once you lower the price of a product, you can never raise it again. I heard that on/around HN at some point and I haven't seen it proven wrong yet. There's a reason why chip bags get smaller, why new versions that seem identical to the old come out, why Tommy Hilfiger will never be a prestige brand again. And it's because customers don't tolerate raising prices.
Cars are a major counter example. Over time the Honda Accord, Honda Civic, and Honda Fit all started at about the same size but the current Accord and Civic have grown significantly larger and thus more expensive. The idea is to let brands grow up with people, so someone who bought a civic at 30 can likely afford a slightly nicer civic at 35, and also needs an incentive to upgrade.
A few well received wine brands for example have had very rapid price increases. However, it’s more common to increase prices a little faster than inflation which quickly adds up, see Disneyland for example. What brands can’t do is lower cost and quality then try and quickly add it back.
PS: In 1964 Disneyland charged 25c/day for parking per day or about 2.08$ in today’s money. Except they currently charge 25$/day for parking.
Re: The Cost of Free Doughnuts: 70 Years of Regret
#19I witnessed something like this when I worked at a Six Flags amusement park (wasn't 6F at the time) that had a decent size water park. They did exit surveys every night, asking as many people as they could if things were ok, and one year they also asked people "Would you pay extra for the water park", it was free as part of admission. So they wanted to know if people would pay extra. People said yes. Something like 9…
A park in Indiana, Holiday World, did something sorta the opposite. They figured out how much the average guest paid for drinks, then raised the ticket prices that much but made all drinks free in the park. It was a huge success. People expect ticket prices to go up occasionally and they expect to be gouged for drinks. By getting "free" drinks, it felt like a huge value. (At least for me when I visited.) I bet it mad…
They are still doing both.
Re: The Cost of Free Doughnuts: 70 Years of Regret
#20Once you lower the price of a product, you can never raise it again. I heard that on/around HN at some point and I haven't seen it proven wrong yet. There's a reason why chip bags get smaller, why new versions that seem identical to the old come out, why Tommy Hilfiger will never be a prestige brand again. And it's because customers don't tolerate raising prices.
That's not true. In the past, we raised the price of our physical products. It never put a dent in our sales. The question is what are you selling, and who are you selling it to. Also, there is a difference between selling a service or selling a product. But no, we raise the price of our products, and never saw any issue from it.
But did you lower the price then raise it? That's the key differentiator in the customer/retailer relationship that I believe the parent comment made.