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The Cost of Free Doughnuts: 70 Years of Regret

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

#101
post #57

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 char…

In general for SaaS, does it make sense to let customers choose between two (or more) pricing models, depending on their needs? Does this cause too much complication for the business? Curious why I haven't noticed schemes like this, other than at "enterprise" tiers where the customer is paying a lot for something closer to a custom solution and prices are negotiated.

I am quite curious why business plans themselves are not generally subject to a/b testing....

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

#102
post #73
post #36

Earlier quoted context omitted.

I've heard about people paying for booze on planes. But for some reason in all the dozens of times I've flown. Never paid to get drunk on a plane? Think the last flight I took was 3 years ago, so don't know what has changed. I do only fly on the west coast though.

I think there's free alcohol on international flights, but you pay for it in domestic flights.

Generally in my experience with international, you get one or two alcoholic beverages served with each meal (even Spirit airlines will give you a glass of red/white which I thought was impressive considering how stingy they are), and I think the flight attendants are allowed considerably more leeway on handing out free drinks. I've only paid for drinks on international a handful of times.

International flights are also significantly more profitable than short haul, so that might have some impact too.

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

#103

Earlier quoted context omitted.

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…

By what metric was it a success? Drinks, even non alcoholic ones, have phenomenal margins, and if you're stuck in a theme park or sports stadium, for hours, you basically have to purchase one. I'm a bit surprised this makes financial sense unless they really went for it. For similar reasons, restaurants are hurting extra hard right now because people don't order drinks as often with delivery or takeout.

Well this is based on average visitor, so it certainly makes sense—the revenue is more reliable and they can simplify vendors and improve the quality of life, too.

If they were hoping to increase per capita profit year over year without increasing ticket prices, yes, that was a mistake.

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

#104

I didn't know about the Red Cross and its donuts. The example I've always used for this is helping a friend move. If the friend asks "hey, will you help me move? I'm buying pizza and beer afterwards!" I will more than likely say yes, even though I can buy my own pizza and beer. If they instead say "hey, will you help me move? I'll pay you $21.58 for your time," I'd probably bristle. Even though that might be the equi…

You got weird friends, no one's ever had to ask or bribe me, I would just offer to help. In turn I'd also be uncomfortable asking others to do manual labor for me, if they didn't offer when I said I was moving I wouldn't ask. Buying them supper after would be a given, no bribe required.

“I’ll buy you pizza for helping me move” is an extremely common social interaction, to the point of being a trope. It’s not a bribe, it’s an acknowledgement that helping somebody move is a huge amount of work and some token of appreciation is wise.

GP doesn’t have weird friends.

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

#105

Earlier quoted context omitted.

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…

By what metric was it a success? Drinks, even non alcoholic ones, have phenomenal margins, and if you're stuck in a theme park or sports stadium, for hours, you basically have to purchase one. I'm a bit surprised this makes financial sense unless they really went for it. For similar reasons, restaurants are hurting extra hard right now because people don't order drinks as often with delivery or takeout.

It greatly increased guest satisfaction and I would bet it helped their bottom line a little too.

There will always be people that stick to free water or don't drink anything. By building the drink price into the ticket price, you're essentially getting everyone to pay for a drink.

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

#106
post #74
post #16

Interestingly 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.

My company did this once a month on new hire day. It was cancelled and people were very angry. This was a few years before i started. 10 years later people are still angry, and some never had that benefit!

It's like the monkey banana thing.

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

#107

Earlier quoted context omitted.

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…

Ive been saying for years that airlines should do this. Add the price of an alcoholic beverage to everyone's ticket and then give those who want one a "free" drink. I never understood why they opted to go with ruthless cuts and declining customer experience.

> Ive been saying for years that airlines should do this

Alcoholic drinks are free on every one of the ~100 long-haul international flights I've ever taken, even in cattle class.

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

#109
This is something I have thought a whole lot about. I blog and I want that information freely available, but I also need an income. I don't have a problem with the fact that people on HN actively find ways around paywalls which I think people on HN tend to find surprising because I spend so much time criticizing the idea that "You people want good writing and you want it all for free, so you basically expect writers to be slave labor for you."

What I'm saying is that this is not an easy problem to solve because in any business, some of the things you provide will be provided for free. For example, businesses that serve food have bathrooms available for free.

In busy downtown areas or areas with a lot of homelessness, you will see local establishments with signs saying the bathroom is for customers only and some even have security codes so you can't just walk in off the street and head to the bathroom. But they don't charge for use of the bathroom.

If you are a small shop, figuring out what to do for free and what to do for pay is a thorny issue because time is money and it's easy to end up in a situation where you are de facto slave labor.

For some businesses on the internet, your members who are there because it is free can be part of the value you are bringing to the table and if you try to charge and you drive those people away, you may kill the business because now your paying customers have no reason to pay you. The membership base was part of your value position and you've just thrown the baby out with the bath water.

So before you go acting like businesses who give stuff away for free are somehow nefarious actors, stop and realize that successful businesses have to pursue models that are viable and those models have real world factors. This is not just something decision makers at companies can arbitrarily decide willy nilly. You need to be taking the landscape of your marketplace into account when trying to figure out what piece of your product is the piece you charge for or monetize and what piece is something you give away for free.

Historically, TV was free to viewers. You just needed to own a TV, but subscription channels came later. It got monetized with advertising and having a large audience helped you monetize it. That large audience was valuable to your advertisers, so giving it away for free to viewers was part of how you made your money.

So this model wasn't born with the internet. It existed before the internet. And there are valid arguments to be made concerning things like "If you aren't paying for it, you are the product, not the customer" and lots of different angles to look at such questions.

But at the end of the day, there is no free lunch. You somehow need to pay the bills. And sometimes the method that actually works effectively isn't as straight forward as "Well, just charge people for using the darn thing." Sometimes that doesn't work at all and in other cases it may work, but will limit your growth. Sometimes giving part of it away for free is how you grow to the point of being able to make serious money.

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

#110
post #57

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 char…

In general for SaaS, does it make sense to let customers choose between two (or more) pricing models, depending on their needs? Does this cause too much complication for the business? Curious why I haven't noticed schemes like this, other than at "enterprise" tiers where the customer is paying a lot for something closer to a custom solution and prices are negotiated.

Sometimes it makes to have a super complicated pricing algorithm so (usually very technical) users can tweak exactly what they do and don't want. Remember the early Heroku pricing page?

99% of the time if your pricing page doesn't have a list of prices along the top, that will be a nonstarter for a non-technical business oriented person.

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