Is ‘dynamic pricing’ the wave of the future?

Wendy’s fast food restaurant put itself in the middle of a social media frenzy recently when it announced it was going to experiment with “dynamic pricing,” which was instantly taken to mean “surge pricing,” which landed Wendy’s in the crosshairs of the outraged masses online.
Basically, people assumed what Wendy’s meant was that it would start to be like ride share companies—when demand is the highest, the price goes up. If you have ever tried to hail an Uber after the bar closes you are more than familiar with this tactic. In the case of Wendy’s, if dynamic pricing was the equivalent of surge price (which Wendy’s brass quickly said was not the case) it would mean that Baconater you get at lunch would likely cost a few dollars more. Why? Because it’s lunchtime and that’s when most people go to the restaurant. You don’t say? Charging people more money simply because they are hungry at lunchtime would be price gouging at its finest.
Rather, Wendy’s said dynamic pricing would mean “AI-enabled menu changes and suggestive selling based on factors such as weather that we think will provide great value and an improved customer and crew experience.” It would also apparently mean the chain offers discounted food at slower times of the day.
This isn’t exactly groundbreaking either way. How many bars do you know that have happy hours in an attempt to get people in there during slower times of the day? How many of you have been to a professional sports game, where a 12 ounce beer for some reason costs $16, or to the Sturgis Motorcycle Rally, where a corn dog magically costs $15 if you get it from one of the roadside vendors. Dynamic pricing and price gouging are already well-established. It just hasn’t really been tried at fast food restaurants (although they do have a discount menu) so people were aghast at what they thought it meant.
The restaurant business is much more competitive than ride share, airplanes, etc., so it remains to be seen whether this tactic would ever work. Judging by the backlash (whether Wendy’s meant price gouging, er, surging or not) it’s not something that will be implemented anytime soon. But, it would not surprise us to see it down the road. You want a burger when we are busiest? You’re going to have to pay extra. If not, come back at 3 p.m. and chew your fingernails until then.
Businesses are always looking for ways to make more money, whether it’s bringing people in during downtimes or unnecessarily raising prices. We expect these are trends that will only continue as companies battle for the almighty dollar.

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