This is not going to be well-received by their customers and is likely to send business to McDonald's and Burger King instead.
They also really shouldn't be doing "suggestive selling" whether with humans or machines. Just shut up and take the customer's order rather than trying to talk them into ordering something. Nobody likes when stores or restaurants do that even if it "increases metrics" because some people choose to buy the item being aggressively pushed. What you don't see are all of the people who go somewhere else to avoid having to deal with that.
Wendy’s is doing this in order to compete with McDonalds, which has been pushing up prices much faster than inflation for several years in a row… and McDonalds has publicly claimed it’s not hurting their business.
Lots and lots of people think like you, you’re definitely not alone. But there are so many people who still eat fast food at all times, and so many companies competing for fast food sales that yes, they can experiment with what the market will bear and not suffer serious consequences.
McDonalds has every incentive to insist to its shareholders that price increases do not impact business performance. any onlooker --even Wendy herself-- who thinks otherwise is deluded.
McDonalds is routinely lambasted on social media and in memes for its recently gilded pricing. the quality just is not there. I suspect actual sales are flat, or in decline as a response to the price increase.
The alternative to scalding a frog is a world where corporations occasionally have to suffer the consequences of inflation as well as consumers.
Because McDonalds is publicly traded, there’s no such thing as “insisting” that performance is fine when they’re not, the sales facts are made public. The company indeed has seen profits recently that were missing from 2014-2020. https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/reve...
It is entirely possible for the number of hamburgers sold to go down while the price goes us, and for MCD revenues to stay even or earn more money. That might lead to a hollowing out of their customer base, and could lead to eventual decline, but there’s no guarantee of that.
McDonalds also has a lot of incentives to try to escape the rock-bottom commodity pricing, if it can, and regardless of quality, some companies do charge “market rates”. Apple and Starbucks come to mind. Starbucks is a good example of a company that took a cheap commodity product and pushed the price up considerably without suffering decline; the primary consequences were mountains of profit.
If you're at the absolute bottom of the market in terms of price and quality then your sales are probably somewhat inelastic. Especially if people have to buy your product or a similar product.
It's the same reason why prices keep going up at the grocery store. Those companies know you're going to buy groceries anyway and most people are going to buy the name brand instead of the store brand.
Where McDonald's runs into trouble is if their prices get so high that you might as well just go to a sit down restaurant instead. Five Guys and Smashburger are getting pretty close to that territory especially with the tipflation added onto their already high prices.
The other risk for McDonald's is that somebody else will try to replace them as the replacement level[0] restaurant. If your customers are choosing you because you're the cheapest and fastest restaurant then you can't afford to have a competitor undercutting you on price or speed. That's why it's so surprising to me[1] that McDonald's would be raising their prices aggressively. Even if they improved the food quality dramatically, they're not going to be able to move their brand up market because their existing reputation is well established.
[1]: I virtually never eat at McDonald's so I was completely unaware that they've been jacking up their prices. I don't even know where my local McDonald's is without checking Google Maps.
> McDonalds is routinely lambasted on social media and in memes for its recently gilded pricing. the quality just is not there. I suspect actual sales are flat, or in decline as a response to the price increase.
so...you are assuming their sales are flat or declining based on your sense of the vibe and are assuming they lied in their SEC filings?
this is a fairly bold method to analyse the world with.
Might attract people who want to go there in off hours when the food is cheap and could be marketed that way. It’s interesting because they could definitely change the pricing algorithm dynamically as they see changes in customer behavior and impacts on revenue.
My pessimistic take is this wont drive significant business to competitors and will slowly become the new standard because of the profit potential. Basically, enshittification.
This has been described as similar to Uber/Lyft surging but it’s different in a few critical ways that I suspect consumers are less tolerant of.
When Uber/Lyft are surging it incentivise more drivers to go to the surge area. This raises supply and the surge rate decreases. Drivers are distributed automatically where they are needed. Overall trips taken should be higher compared with a no surging model. So it shifts both the demand (higher ride price) and the supply curves dynamically. That’s an easier model to market to customers as there is at least some logical sense behind it.
However in Wendys case dynamic pricing has no effect on supply. It just modifies the demand curve.
Fundamentally they are betting that their food demand is inelastic enough that they’ll make more money overall. That just feels more exploitative and is going to be harder to market.
> Fundamentally they are betting that their food demand is inelastic enough that they’ll make more money overall. That just feels more exploitative and is going to be harder to market.
Yeah, I have no idea how they can sell this to the consumer. I have to pay more for food at supper time? Why would I want to pay for that? You're asking me to eat earlier or later to soften the demand curve, but why am I choosing fast food if I don't want convenience?
>Fundamentally they are betting that their food demand is inelastic enough that they’ll make more money overall. That just feels more exploitative and is going to be harder to market.
To be fair I think it's less exploitive than Ubers prices surging during a terror attack..
This is a wild proposition.
Were taxis running directly after 9/11?
This is sort of a problem if a society depends on them as a piece of critical infrastructure. If a city owns a bus route and needs to evacuate a population, they can just do it by edict.
No one is considering this edge case and how it should be handled at Uber. A company or community that has pride in what they offer would probably provide rides for free during such an anomaly. This is a drawback on the scalability of technology as we currently implement it.
I actually think there is an important difference.
Happy hours are designed to increase demand.
Surge pricing is designed to capture some of the value that high demand loses to limited supply.
I agree with your framing, but 20 hours of happy hour is a tough sell for PR, but worth getting right.
I also disagree with everyone here saying people will just go to an alternative restaurant, when the entire point is that all the drive thru’s are already full during these periods.
During surge periods restaurants redirect customers all the time.
"We're sorry, there's a 15 minute delay for hamburgers; are you OK waiting or would you prefer to order something else".
Also:
"Happy hour pricing".
As long as they have a somewhat reasonable fixed maximum price I suspect consumers will accept this quite well. Then it wouldn't be much different than dynamic happy hour pricing or any of the many other types of sale pricing that other stores run.
And it's not much different from what McDonald's is doing. The pricing for walk in customers at McDonald's has gotten horrendous. Yet if you use their app you can pretty much always find a coupon to get a more reasonable price. McDonald's would get a good reception if those more reasonable prices were also available in store during off-peak hours.
Your two redirect scenarios isn't surge pricing though, and I think run counter to the very nature of surge pricing.
In the first scenario the restaurant is reducing stress on the kitchen and the client by offering an alternative with a good reason. If the restaurant instead said "you can pay an extra $2 or wait 15 minutes", then it's comparable but I haven't run into that yet.
In the Happy Hour scenario the restaurant offers specific discounts to increase sales volume
It is not the same. One is designed to incentivize a behavior (come around more/earlier), the other is designed to reduce the behavior by disincentivizing it (don't come around when we're busy).
While I actually like surge pricing in situations like a natural disaster or New Years Eve (e.g., gets more drivers/suppliers on the road), as proposed by Wendy's it's a very poor anti-pattern.
One is a loss-leader, the other is not.
Edit: This is exactly why I usually quote the person I'm responding to (I failed to do it here). Their current message is not what they originally posted, they edited it and pretty much repeated what I said.
Dynamic pricing has to do with actively fluctuating price point depending on varying criteria and can be an increase or decrease.
Surge pricing, as the definition of "surge" suggests (1), is a subcategory of dynamic pricing where the price is increased in response to higher demand.
Are they going to pay their employees more during surge? I worked food industry as a teenager with a stint in fast food- it can be crazy, you get physically and mentally tired, from both moving quickly but from the increased number of angry customers. Hazard pay!
I was watching a bit of youtube this morning, and there was a wendy's ad. It ended with "All this for $5!" as the final pitch for whatever meal it was. If they do dynamic pricing, they'll cut themselves off from that kind of ad entirely right?
You (generally?) can't advertise one price, and charge a different one when the customer actually shows up.
"Dynamic pricing can allow Wendy's to be competitive and flexible with pricing, motivate customers to visit and provide them with the food they love at a great value. We will test a number of features that we think will provide an enhanced customer and crew experience."
So I guess that means somethings things will cost most and sometimes things will cost less? I would hope there's something on those digital signs that calls out the pricing.
"THIS BURGER IS 25% MORE THAN NORMAL!" or "25% OFF YOUR FROSTY BECAUSE IT'S SNOWING!"
Hopefully there's some way to escape the line after you notice that your fries are going to cost $15 because there's a long line.
It’s not a new idea but i’ve always “wanted” to do something similar with beer at a long bar with many many kegs of craft beer. Idea is to make sure all the product ends up moving and nothing stays untouched. Massive train station style flipping letter/number signage behind the bar with updating prices every 15-30min or something if it’s busy. One of the laundry list of reasons this is just a pipe dream is alcohol pricing like this is definitely illegal where I live.
I could have sworn I've been to a place that does the letter flipping, but I might be misremembering. And yeah, lots of places where that wouldn't be legal.
The impression I get is that this is another case of someone impressed with a tech industry practice misapplying it outside of any sensible context. I see it a lot with people using kanban boards and "sprints" when doing something very predictable, repeatable, estimable, and plannable, and a Gantt chart could easily be created for the whole project. Because the cool kids in software are doing it. "We have an app now, how about surge pricing?"
One of my favorite alternative restaurants is Red Bowl.
They are a regional chain that offers a sit-down meal with service for about the same price as fast food nowadays. And it is far better from a health perspective.
price discrimination can go much further than surge pricing! i wonder if they'll also experiment with special discounts (or exemption from the surge pricing) for people who recently ate at mcdonald's, haven't eaten recently at wendy's, are carrying cheap brands of cellphone, have not recently taken uber, live in a poor neighborhood, or shop at discount stores? and if someone eats at wendy's more than twice a week or habitually orders especially addictive items, you could raise the prices you charge them. you could even disingenuously claim that you're trying to protect your customers' health by preventing them from overeating
here in buenos aires there's apparently a law requiring restaurants to post prices for all their menu items, so in additional to the 'digital menuboards' in all the fast food restaurants, there's always a laser-printer printout in 10-point type on the wall which lists many food items that rarely or never appear on the digital menuboards, such as hamburgers without fries and drinks. so, unless that law goes away, they would have to cloak such price discrimination as discounts, maybe discounts for coming in at off-peak hours ('happy hour', as several people have referred to in this thread—though if alcohol-induced impairment of your consciousness tends to make you happy, i think something is very wrong with the way you're living the rest of your life)
for the most part, privacy is a public good rather than a private one; the benefits to privacy flow to society in general rather than the individual whose privacy is protected. price discrimination is an exception to that general rule, but biometrics make it impossible to preserve your privacy in wendy's; you can't order food there without exposing your voiceprint, your irises, and usually your face
I think this is an act of desperation and will completely fail. Customers will see the higher prices during certain times and just not go there. These kinds of games are insulting to consumers and represent very narrow, bean counter mentality.
They’ll probably just put a disclaimer underneath in tiny font.
Eventually all ads will be like ads for drugs where you have a 1 minute ad and then 3 minutes of a grandparent playing with their grandkid while someone speed reads the fine print at you.
And consumers can experiment with eating elsewhere.
This is a good example of dystopian capitalism run amok.
Next logical step --- they track those that fall for this and start charging them "surge" prices all the time. Then some accountant gets the bright idea that they can sell their "sucker list" to other like minded establishments.
And soon these "suckers" will find themselves branded for life. Where ever they go, they will be charged more.
That app you've been using to buy this "food" that now tags you as a gullible surge friendly customer can/will be sold to other vendors who can then silently roll our their own surge pricing to those same customers. It's like a lame Black Mirror subplot
They're about to test demand elasticity and find out. People are going to go elsewhere. For demand-based pricing to work the price has to be allowed go to zero or near zero. They're not going to do that. This has to be another Ivy League graduate's idea that only took one economics course. This is going to really anger people. I think I might buy puts on WEN.
No, I got your point, I'm saying that partial mitigations for that are already in place. Every business on the planet also assumes there will be slow times and busy times, and the busy times will make up for the slow.
Surge pricing only really works when the demand and supply can be elastic, and a Wendy's restaurant is a bad example.
Wait until they realize that they can tie this AI into facial recognition at those big screen kiosks and they change the prices based on the appearance of the person ordering.
They also really shouldn't be doing "suggestive selling" whether with humans or machines. Just shut up and take the customer's order rather than trying to talk them into ordering something. Nobody likes when stores or restaurants do that even if it "increases metrics" because some people choose to buy the item being aggressively pushed. What you don't see are all of the people who go somewhere else to avoid having to deal with that.