The Cost of Free Doughnuts: 70 Years of Regret • Hacker News Board

Re: The Cost of Free Doughnuts: 70 Years of Regret

#51

Post by _bxg1 » Thu, May 07, 2020, 6:53 PM UTC

MaxBarraclough wrote: post #49

dperfect wrote: post #26

It's true - charging for something that was once free can be risky, but it isn't always bad as some might believe. I have great respect for businesses that charge for a service that provides real value - even if it was once free. Often times (especially in the startup world), companies start out offering a free product (operating at a loss) to gain market share. It's not often the best strategy, but in some markets i…

A similar thing happens in the podcasting space. It's a pity it's still quite inconvenient to make micropayments. If I could make a single click to pay a penny for access to a single article, I imagine I'd do so frequently.

This is what the Brave browser is attempting to do, with mixed success

Re: The Cost of Free Doughnuts: 70 Years of Regret

#52

Post by symmitchry » Thu, May 07, 2020, 6:55 PM UTC

Retric wrote: post #18

hammock wrote: post #12

Once 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…

Coincidentally, I was thinking of Kia as a great counter example. Admittedly I don't know much, but haven't they started offering much nicer cars over time, as the brand as grown?

Re: The Cost of Free Doughnuts: 70 Years of Regret

#53

Post by MattGaiser » Thu, May 07, 2020, 6:55 PM UTC

Retric wrote: post #18

hammock wrote: post #12

Once 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…

You don't generally buy cars frequently enough to know the price offhand.

The price also gets bundled in with all sorts of options, 50 different configurations, different financing rates and terms, etc.

Re: The Cost of Free Doughnuts: 70 Years of Regret

#54

Post by ProAm » Thu, May 07, 2020, 6:56 PM UTC

dperfect wrote: post #26

It's true - charging for something that was once free can be risky, but it isn't always bad as some might believe. I have great respect for businesses that charge for a service that provides real value - even if it was once free. Often times (especially in the startup world), companies start out offering a free product (operating at a loss) to gain market share. It's not often the best strategy, but in some markets i…

> Unfortunately, a lot of tech companies have (perhaps unintentionally) conditioned consumers to expect software to be free

I think Apple started this movement with the App Store and the .99 cent app. I think it coincided with the shift from on-prem software to cloud, but that really shifted what people can charge for software. We've seen a bit of a shift back the last ~5 years maybe? But I still think it the App store started the current epoch.

Re: The Cost of Free Doughnuts: 70 Years of Regret

#55

Post by WalterBright » Thu, May 07, 2020, 6:56 PM UTC

Pricing things can be strange.

Back in the old Zortech days, we included full library source for free with the compiler. Library source wasn't even available for other compilers. Nobody particularly cared that we did that, and it was never mentioned in compiler reviews in the press. One day, Borland decided to package partial (not including floating point) library source for their compiler as a separate product. The press went ape over it with headline articles about how great this was. (Philippe Kahn was a marketing genius.) Naturally, we at Zortech found this annoying.

What we did was separate out the free library source into a separate package, and put a price on it. When people called up to buy the compiler, we'd ask "do you want the library source package, too, for an additional $XX?" They almost always said yes. So we made an extra $XX on each sale, leveraging the expectations Borland had set in the market.

Of course, these days expectations have changed again. We give D all away for free.

Re: The Cost of Free Doughnuts: 70 Years of Regret

#56

Post by ellard » Thu, May 07, 2020, 6:57 PM UTC

hammock wrote: post #12

Once 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.

Reduce the quality/quantity of the existing product to keep the same price over time. Release another similar 'product', possibly under a different product name and/or brand with the original quality/quantity but at a higher price.

Re: The Cost of Free Doughnuts: 70 Years of Regret

#57

Post by 013a » Thu, May 07, 2020, 6:57 PM UTC

I can call out one example of a poorly executed price raise: Apollo Engine (https://www.apollographql.com/pricing)

There was a time when they charged for data points/performance traces ingested into the system. At our scale, we were paying around $100/month. We were prepared to scale that to their, I think it was, $550/month plan when our usage got that high.

They relatively recently changed their structure to charge per registered user. This would have raised our bill to around $1500/month at our current scale, to get all of of the stakeholders in there.

This is a cost incongruent with the value we were getting out of it. Even a ~$500/month price tag does not correlate with the value received, at our scale. It would one day (its a great product), but not today. So, today, we have two employees who have access to that, keeping our spend the same.

Here's the key component of this pricing change though: They will, no longer, be able to grow revenue with us. A pricing change forced us to make organizational changes. Those organizational changes mean that fewer people are seeing any value the product could deliver. When fewer people see the value, then the product has fewer advocates within the organization; its fungible utility will eventually be rolled into a competing product we already pay for, like Datadog, even if the experience is worse, because when we discuss Engine its always prefaced with "Oh, I think Dave in ops uses that, no one else does".

Re: The Cost of Free Doughnuts: 70 Years of Regret

#58

Post by WalterBright » Thu, May 07, 2020, 6:58 PM UTC

ProAm wrote: post #54

dperfect wrote: post #26

It's true - charging for something that was once free can be risky, but it isn't always bad as some might believe. I have great respect for businesses that charge for a service that provides real value - even if it was once free. Often times (especially in the startup world), companies start out offering a free product (operating at a loss) to gain market share. It's not often the best strategy, but in some markets i…

> Unfortunately, a lot of tech companies have (perhaps unintentionally) conditioned consumers to expect software to be free I think Apple started this movement with the App Store and the .99 cent app. I think it coincided with the shift from on-prem software to cloud, but that really shifted what people can charge for software. We've seen a bit of a shift back the last ~5 years maybe? But I still think it the App sto…

It was the internet that made software free, starting with the browser, and continuing with the adoption of Linux with its free tools.

Re: The Cost of Free Doughnuts: 70 Years of Regret

#59

Post by NikolaeVarius » Thu, May 07, 2020, 6:59 PM UTC

dmckeon wrote: post #28

adventured wrote: post #14

Earlier quoted context omitted.

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.

One wonders what the alternative-history narrative would be if the US had offered to pay the Brits for their soldiers’ snacks? Perhaps the common UK complaint about US soldiers in WWII would have been: overpaid, oversexed, overweight , and over here. :-)

With lend-lease, I can imagine at least some of it was already subsided

Re: The Cost of Free Doughnuts: 70 Years of Regret

#60

Post by throwaway3999 » Thu, May 07, 2020, 7:00 PM UTC

dperfect wrote: post #26

It's true - charging for something that was once free can be risky, but it isn't always bad as some might believe. I have great respect for businesses that charge for a service that provides real value - even if it was once free. Often times (especially in the startup world), companies start out offering a free product (operating at a loss) to gain market share. It's not often the best strategy, but in some markets i…

There's a common theme on HN that it's all the fault of consumers for wanting free stuff. The truth is, budgets are limited, and if you start charging for stuff you will soon find out how much consumers actually value it - with respect with other stuff they can buy. I'm not talking about the average HN user making six figures in a cushy software job - of course you'd pay for a product like Gmail. But think about most people who don't care that much about technology, to whom it's just a tool and not an art, a craft or a hobby. Do you really think your product is that valuable? Do you really think people are willing to buy your content - enough that you can stay afloat?

It's not that consumers want free stuff, it's just that most people do not have extra money laying around.

I'll also add that "charging a fair price" has never deterred companies from engaging in unethical and privacy-violating practices in addition to taking your money. See: Microsoft, Amazon, etc.