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Dynamic Pricing: The future of fast food? Or a fan failure?



Dynamic pricing is a strategy used by some companies to match price and demand in real time. Essentially, raising the prices when demand is high and lowering them when demand is low. This approach has been used by hotels and flights for quite a while. A more recent use of this would be surge pricing for delivery/ride services like Uber.


Wendy’s recently announced plans to experiment with dynamic pricing in their US stores within the next year. This means that you will pay more for a burger at 6 pm than at 3 pm. They’ve claimed the intention is to benefit both customers and crew.


In theory, customers looking to save money could dine at low-demand times as we know they are willing to modify their purchase timing to save. As for the crew, it can be assumed that dispersing the foot traffic and delivery orders more evenly throughout the day will make the workload more manageable. This also sounds appropriate given the rising burnout rates of employees in the food industry.


So why is this announcement being faced with such backlash from Wendy’s customers? From our perspective, there are three prominent considerations:


Predictability Has Been Compromised.


People are drawn to fast food for its predictability. The food you get will look, taste, and smell the same, regardless of which location you purchase from or how long ago you dined there. Disrupting this experience with fluctuating prices compromises consumer desire for predictability and forces them to consider the day or time they dine – something not traditionally associated with QSRs.


To many, this small change feels large because of the influx in unpredictable events over the past few years. People are already feeling a loss of control, so they grasp at any piece of predictability and comfort in their day-to-day lives to reclaim it.


We’ve All Become Skeptics.


Consumers feel as though they’re being fed an endless number of empty promises from brands. From profit margins to sustainability practices, the failures and deceit that are uncovered when the truth is revealed have led consumers to assume the worst.


So, when presented with news such as dynamic pricing, their backs are already up. Rather than listening to what a company has to say, they assume this is just about getting more money from an already stretched thin consumer. In fact, it has been framed as “Price Surging” or “Price Gouging” rather than “Dynamic Pricing” by some in the media and online. 


A Lack of Transparency Fuels the Fire.


Transparency is a top priority for consumers today. They want to know what’s going on behind closed doors so that they can understand what a business stands for and determine whether they want to support it.


The controversy surrounding Wendy’s announcement was due to the lack of detail or transparency in the plan. When details are vague, consumers will form their own opinions and assumptions around ‘the why’. Wendy’s was left scrambling after intense push-back from their customers, forcing them to reconsider their pricing plans.

 

Dynamic pricing is a model with pros and cons for both brands and consumers. Whether or not QSR is the place to implement this model is yet to be determined. Ultimately, consumers will decide with their wallets whether product is enough or if pricing dictates where they dine. Only time will tell. When implementing change, brands must remember to be transparent, communicate consistently and be prepared to adjust and refine based on customer feedback.

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