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?"
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.
My site was free initially as well and when I was young and naive, I even intended to keep it free. Reality caught up and after years I announced that I gonne charge a lousy Euro.
80% of the users stuck and paid, but there are indeed a few that hold an utterly irrational resentment. It goes so far that they prefer to discuss this matter for hours and hours and use some crappy software, instead of just paying the damn 12 Euro a year.
Then I figured that a Euro was a bit too low. In Germany, VAT is usually included if you see a price as a private customer, unlike in the US, where you get the VAT added at the checkout. So, 19% VAT on a Euro is a substantial cut.
I increased prices to 2€, which worked alright, only a few people got upset, but again, many continued to use the service. Still, I feel like I'm now locked in at a relatively low price point and it gets tougher to justify another rise in price.
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.
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.
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.
"The problem isn't the price — $10 for a good turkey dinner might not be such a bad deal — but that you're being charged in the first place. It changes the relationship. For the veterans, the Red Cross went from being a little like Mom, to being the corner store."
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.
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."
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.
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."
>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.
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.
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.
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.
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?
I gave early members free membership to my site if they completed certain beta-testing requirements.
I think it was a net positive, though it's hard to measure. Statistically, these grandfathered members have outspent other members. However, it's hard to say whether or not they might have spent even more had they not been given free lifetime grandfathered access.
A lot of these members have gone out of their way to buy perks for themselves and memberships for other members.
I should mention my site was essentially a community site, so there was a strong connection with other members - they wanted their favorite members to remain on the site. Additionally these have been the most active members when it comes to referring new paying members to the site.
To additionally complicate things, by giving grandfathered memberships to excellent community members, I think that these "anchors to the community" attract members in ways that would be completely impossible to quantify - I don't know how to measure the number of people that joined the site simply because they saw it did have a core of dedicated members.
To sum it up, for a community-based site, grandfathered community members quite possibly do more than pay for their grandfathered membership status.
I'm sure the returns are far less for other types of online businesses. You might join a community because you see that it has dedicated members, but I wouldn't necessarily be more likely to order a sweater from an online retailer because a bunch of people have grandfathered free shipping upgrades or something.
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.
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.
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.
They don't charge the people that count. When I worked for an airline, we were told to just ignore complaints from customers who flew less than several thousand miles per year.
For me it's well behind the grudge about them rubbing my ballsack, but alas I can't swim home to my parents and I don't want to have to sit in "time out" for hours so I just keep my mouth shut in the airport until the awful experience is over.
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.
[+] [-] rdl|13 years ago|reply
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|13 years ago|reply
Imagine, in a minefield, under heavy machine gun and mortar fire - "Donuts anyone?".
[+] [-] cafard|13 years ago|reply
[+] [-] ams6110|13 years ago|reply
[+] [-] JohnBooty|13 years ago|reply
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.
[+] [-] WA|13 years ago|reply
80% of the users stuck and paid, but there are indeed a few that hold an utterly irrational resentment. It goes so far that they prefer to discuss this matter for hours and hours and use some crappy software, instead of just paying the damn 12 Euro a year.
Then I figured that a Euro was a bit too low. In Germany, VAT is usually included if you see a price as a private customer, unlike in the US, where you get the VAT added at the checkout. So, 19% VAT on a Euro is a substantial cut.
I increased prices to 2€, which worked alright, only a few people got upset, but again, many continued to use the service. Still, I feel like I'm now locked in at a relatively low price point and it gets tougher to justify another rise in price.
[+] [-] lilsunnybee|13 years ago|reply
or weren't able to
[+] [-] joezydeco|13 years ago|reply
http://www.npr.org/blogs/money/2012/07/13/156723516/episode-...
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|13 years ago|reply
http://www.npr.org/blogs/money/2012/11/15/165143816/why-coke...
[+] [-] moloch|13 years ago|reply
https://en.wikipedia.org/wiki/Predictably_irrational
http://www.youtube.com/watch?v=9X68dm92HVI
[+] [-] jfoster|13 years ago|reply
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.
[+] [-] vanderZwan|13 years ago|reply
Pretty much sums up why that is.
[+] [-] daeken|13 years ago|reply
[+] [-] stevewilhelm|13 years ago|reply
[+] [-] adamgravitis|13 years ago|reply
[+] [-] whatusername|13 years ago|reply
[+] [-] jonny_eh|13 years ago|reply
[+] [-] gcb0|13 years ago|reply
It was never advertised as dvd plus free trial steaming. if it was, was in small print.
[+] [-] dws|13 years ago|reply
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|13 years ago|reply
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|13 years ago|reply
[+] [-] niggler|13 years ago|reply
[+] [-] michaelfeathers|13 years ago|reply
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|13 years ago|reply
[+] [-] acanby|13 years ago|reply
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|13 years ago|reply
[+] [-] JohnBooty|13 years ago|reply
I think it was a net positive, though it's hard to measure. Statistically, these grandfathered members have outspent other members. However, it's hard to say whether or not they might have spent even more had they not been given free lifetime grandfathered access.
A lot of these members have gone out of their way to buy perks for themselves and memberships for other members.
I should mention my site was essentially a community site, so there was a strong connection with other members - they wanted their favorite members to remain on the site. Additionally these have been the most active members when it comes to referring new paying members to the site.
To additionally complicate things, by giving grandfathered memberships to excellent community members, I think that these "anchors to the community" attract members in ways that would be completely impossible to quantify - I don't know how to measure the number of people that joined the site simply because they saw it did have a core of dedicated members.
To sum it up, for a community-based site, grandfathered community members quite possibly do more than pay for their grandfathered membership status.
I'm sure the returns are far less for other types of online businesses. You might join a community because you see that it has dedicated members, but I wouldn't necessarily be more likely to order a sweater from an online retailer because a bunch of people have grandfathered free shipping upgrades or something.
[+] [-] davidw|13 years ago|reply
[+] [-] mikecane|13 years ago|reply
>>>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|13 years ago|reply
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.
[+] [-] archgoon|13 years ago|reply
http://www.youtube.com/watch?feature=player_embedded&v=k...
But tongue in cheek is only funny when it's _somewhat_ true.
[+] [-] geezer|13 years ago|reply
[+] [-] eurleif|13 years ago|reply
[+] [-] michaelhoffman|13 years ago|reply
[+] [-] peripetylabs|13 years ago|reply
[+] [-] neutronicus|13 years ago|reply
[+] [-] flyinRyan|13 years ago|reply
[+] [-] scott_s|13 years ago|reply
[+] [-] mikeash|13 years ago|reply
[+] [-] darkarmani|13 years ago|reply
[+] [-] js2|13 years ago|reply
[+] [-] kmfrk|13 years ago|reply
It used to be something like a dollar on launch. Wonder how it follows inflation, though.
[+] [-] snowwrestler|13 years ago|reply