Current:Home > FinanceIs Uber-style surge pricing coming to fast food? Wendy's latest move offers a clue.-LoTradeCoin
Is Uber-style surge pricing coming to fast food? Wendy's latest move offers a clue.
View Date:2024-12-25 11:12:33
Hit the bar during happy hour or your favorite restaurant for that early bird special and save money on drinks and food. Slash the cost of that Hawaiian or European vacation by booking a flight or a hotel room early or during the off-season.
But the same supply-and-demand principle can work against you. You pay more for electricity during peak hours, for Bruce Springsteen concert tickets or even a parking spot when there's a sporting event. And, of course, there’s the infamous Uber surge pricing.
While not new, surge pricing – or dynamic or variable pricing as it’s typically called in the business world – is fast becoming the norm.
What is surge pricing?
More fast-food joints, restaurant chains and brick-and-mortar retailers are taking advantage of technological advances to tap into real-time trends and swiftly adjust prices, sometimes in seconds.
It’s a tempting proposition for big businesses that can dramatically increase revenue with slight pricing changes.
Wendy’s is the latest to say it will fluctuate prices of chicken nuggets or a classic chocolate frosty based on demand.
Is shrinkflation on this rise?Paying more at the grocery store for less? Sen. Bob Casey takes aim at 'shrinkflation'
During a conference call earlier this month, Wendy’s CEO Kirk Tanner said the fast-food chain would experiment with dynamic pricing as early as next year.
Wendy's surge pricing
“Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and daypart offerings, along with AI-enabled menu changes and suggestive selling,” he said. “As we continue to show the benefit of this technology in our company-operated restaurants, franchisee interest in digital menu boards should increase, further supporting sales and profit growth across the system.”
The response on social media has been mixed.
“If I ate at Wendy’s, I’d sit in the drive thru waiting for the surge pricing period to end,” commented one consumer on the social media platform Threads.
Not everyone is mad at Wendy’s. “Lots of other businesses adjust prices based on demand,” commented another.
What’s clear: The days of fixed prices that began in 1876 when a Quaker merchant introduced price tags at his department store in Philadelphia may soon be behind us.
Research and advisory firm Gartner predicts that by 2025, the top 10 global retailers will use dynamic pricing to take advantage of mismatches between supply and demand.
Prices seesaw all the time on the sites of online retailers like Amazon that use algorithms and artificial intelligence to monitor competitors and glean insights into individual shoppers, adjusting prices depending on interest in the product or in the brand, said Timothy Webb, an assistant professor at the University of Delaware’s hospitality and sport business management program.
Coupons and other offers are also routinely dangled in mobile apps to encourage people to make purchases.
“A lot of this stuff is already happening even if you don’t realize that it is happening. If you have the Starbucks app and I have the Starbucks app, we probably have different offers,” Webb said. “We might not be in the drive-through and they just increased the prices, but we are already paying different prices for the same products.”
But, he says, Wendy’s fans will likely see moderate, not massive, price swings during periods of peak demand.
“It’s not like $200 or $300 on a flight. This is a hypercompetitive industry. If Wendy’s goes up $2 to $3 on a burger at dinner time, I would be shocked. People have too many options. They will just walk down the street and eat at Burger King instead,” Webb said. “There will just be little price changes here.”
While consumers have been accustomed to hotels and airlines modulating prices depending on demand since the 1980s, they tend to view sharp pricing increases as predatory.
“Consumers, by and large, understand that companies need to make a profit. But, when a company appears to be sticking it to a consumer in a moment of need, the customer resents it,” said John Dinsmore, a marketing professor at Wright State University in Dayton, Ohio, who researches dynamic pricing.
Some 52% of consumers surveyed by software company Capterra last year said dynamic pricing in restaurants is the equivalent of price gouging.
A good example is Coca-Cola, according to Dinsmore. “Around the turn of the century, they experimented with vending machines that raised the cost of drinks based on the outside temperature. The hotter the weather, the more expensive the soda. Consumers hated it. They understandably felt exploited. It violated consumers’ sense of price fairness,” he said. “I think you are going to see a similar response to Wendy’s dynamic pricing.”
Dynamic pricing aims to influence consumer behavior − and price-sensitive consumers can work the system, Webb said.
“If you are trying to save a couple bucks, it’s worthwhile seeing if you go to Wendy’s at 4, you are going to save a little bit of money,” he said. “There will be opportunities to find deals and pricing that are beneficial to you.”
People who study dynamic pricing say it won't work in all facets of American life.
"Dynamic pricing is here to stay but I believe only in certain contexts. Surge or dynamic pricing works for Uber because they are often the only option," Dinsmore said. "For consumer staples like food and clothing, I have a hard time seeing it take hold. There are too many options. Consumers will adjust and competitors will undercut prices."
veryGood! (6974)
Related
- Kansas basketball vs Michigan State live score updates, highlights, how to watch Champions Classic
- New Jersey man pleads guilty to involuntary manslaughter in Pennsylvania cold case
- Blinken brings US push on post-war Gaza planning and stopping conflict to UAE and Saudi Arabia
- Kylie Jenner Seemingly Says I Love You to Timothée Chalamet at Golden Globes 2024
- Watch as dust storm that caused 20-car pileup whips through central California
- Robert De Niro Thought His Name Was Called at the Golden Globes When Robert Downey Jr. Won
- Judges in England and Wales are given cautious approval to use AI in writing legal opinions
- Keltie Knight Lost Her 4-Carat Diamond on the 2024 Golden Globes Red Carpet and Could Use a Little Help
- Olivia Munn Randomly Drug Tests John Mulaney After Mini-Intervention
- Rams vs. Lions playoff preview: Matthew Stafford, Jared Goff face former teams in wild-card round
Ranking
- All Social Security retirees should do this by Nov. 20
- Falcons coach Arthur Smith erupts at Saints' Dennis Allen after late TD in lopsided loss
- Dolphins vs. Chiefs playoff preview: Tyreek Hill makes anticipated return to Arrowhead Stadium
- See Timothée Chalamet and Kylie Jenner Share Kiss During Golden Globes Date Night
- Ariana Grande's Brunette Hair Transformation Is a Callback to Her Roots
- Tearful Derek Hough Dedicates Emmy Win to Beautiful Wife Hayley Erbert After Skull Surgery
- Michigan woman eyes retirement after winning over $925,000 from lottery game
- Eagles rock LA homecoming for Long Goodbye tour, knock nearby 'spaceship' SoFi Stadium
Recommendation
-
California voters reject measure that would have banned forced prison labor
-
WWII heroics of 'Bazooka Charlie' doubted until daughter sets record straight
-
Dua Lipa's Bone Dress Just Might Be the Most Polarizing Golden Globes Look
-
CBS News poll on Jan. 6 attack 3 years later: Though most still condemn, Republican disapproval continues to wane
-
Ben Affleck and His Son Samuel, 12, Enjoy a Rare Night Out Together
-
Jennifer Lawrence and Lenny Kravitz’s Hunger Games Reunion Proves the Odds Are in Our Favor
-
North Korea’s Kim turns 40. But there are no public celebrations of his birthday
-
Selena Gomez Declares Herself the Real Winner for Post Golden Globes PDA With Benny Blanco