Everybody loves a good deal. Conversely, people hate it when they feel like they're getting screwed over.
That's why inflation has been so infuriating for people, especially on food prices. Regardless of whether there's a reason that's easy to understand — such as supply-chain disruption during the pandemic — or no discernible reason whatsoever, consumers feel like they're getting the raw end of the deal on a necessity. Who hasn't gone to the grocery store, even a budget-friendly one, and been shocked by how much food costs now?
That's why there was so much backlash over the news that fast-food favorite Wendy's intended to test dynamic pricing. However, it looks like the company is backtracking from that, the Wall Street Journal reports.
The outrage started two weeks after the company's latest earnings call, during which CEO Kirk Tanner said Wendy's would "begin testing more enhanced features like dynamic pricing” as soon as 2025. The company was investing roughly $20 million for artificial intelligence-enabled digital menu boards in the U.S. and $10 million for international locations.
Hoteliers are familiar with the concept of dynamic pricing, certainly. The industry has talked about it for years, figuring out how to further entrench it in its revenue-management strategies.
Consumers are familiar with it as well, but they know it best through ride-share services, such as Uber and Lyft. When drivers are busy with lots of riders, the price per trip goes up. When demand is low, the price goes down to induce demand.
When news about Wendy's plan spread, people quickly assumed the worst. They pictured themselves waiting in a long line, watching the price of burgers, fries and the Frosty go up until they could put in their order.
Is that how it would actually work? Probably not. I mean, I certainly hope not.
But can you blame anyone for jumping to this conclusion? We've all grown so accustomed to companies trying to get as much of our money in exchange for as little as they can give that it's not that far a leap. We've seen prices of food go up and bags and boxes shrink. Why wouldn't we expect this to mean that the price of some spicy chicken nuggets will rise with each car that joins the drive-thru?
As stated earlier, Wendy's is walking this back. The company said it wouldn't raise prices when the restaurant was busy, and it wanted to use the new digital menus to change menu items during the day and offer discounts, especially when demand was slow.
Wendy's specifically denied plans to use surge pricing, the Wall Street Journal reports.
“We didn’t use that phrase, nor do we plan to implement that practice,” Wendy’s said.
OK, that's fair. The CEO talked about dynamic pricing, not surge pricing. But also, that's kind of a joke, since surge pricing is a type of dynamic pricing. The average consumer isn't familiar enough with the way to split the hair here to define the two terms.
For consumers, though, it doesn't really matter if they fully understand the differences between dynamic pricing and surge pricing. They see the possibility that prices will change faster than normal, and past experience tells them those changes are just as likely — if not more likely — to increase than decrease.
There was a brief period of time over the past few years when people could put up with increased prices, for whatever reason, because they were able to build up savings through stimulus payments, less spending and pauses in student loan payments, among other factors. We're past those days. Inflation is slowing down, but people are still wary of companies that play with pricing models, especially if it looks more like greed driving those decisions.
You can reach me at bwroten@hotelnewsnow.com as well as LinkedIn.
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