Two-Cent Doughnuts Breed Decades Of Bad Blood: It's Not So Easy Going From Free To Paid

Economics

from the tough-to-shake-it dept

One of the things we regularly hear from people who are apparently allergic to any business model that leverages free to make more money elsewhere, is that content creators have to change their business model, stop giving stuff away for free, and start charging. This is seen in lots of places, including the mad dash by many newspapers to try putting up paywalls on their news. We’ve long argued that doing so can really piss off readers, not just because of the cost, but because taking something that was once free and making it now cost money often changes how people look at the product itself.

The folks over at Planet Money have yet another brilliant podcast where they give an amazing example of this, showing how the impact can be incredibly long lasting as well. It’s the story of why so many US veterans hate the Red Cross. Apparently, for a period of time during World War II, the Red Cross stopped giving doughnuts away to service members for free, and started charging $0.02 per doughnut. And, to this day — seventy years later, many WWII veterans (and many who came after them) have a distaste for the Red Cross, and nothing will shake it.

The whole podcast is worth listening to, as it actually explains why the Red Cross did this (apparently, it didn’t want to, but officials put pressure on them when the US entered WWII, because Allied soldiers paid for their snacks, and were annoyed that the Americans were getting free doughnuts). And for decades now, the Red Cross has tried to make up for this — often showing up at places where veterans are with tons of free doughnuts — but to little avail.

The program works through a few theories on why this simple change has resulted in so much animosity. They conclude that it was much more than just a “price” change, but a “category change.”

Chalk it up to something called categorical change, says Uri Simonsohn, a University of Pennsylvania business professor. Price changes, people can adjust to. But this was different.

“Imagine, for Thanksgiving, you go to your parents’ for dinner and after a nice dinner they say, ‘That’s going to be $10 per person,’ ” Simonsohn says. “You would be upset.”

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

That is, these are things that people, inherently, don’t think they should be charged for. Switching those things from free to fee isn’t just about the price, but about the concept itself. Now, some will argue that this doesn’t necessarily apply to things like newspaper paywalls, since people are already used to paying for newspapers. But, I do wonder if that’s really true — especially for the younger generation. They’re not defining a newspaper website as a newspaper website, but rather as “information online.” And, to them, that information is free. Period. It’s going to be pretty damn difficult to get over that “category shift.”

Filed Under: doughnuts, economics, free, red cross, veterans