Dynamic surge pricing for Wendy’s

https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html

by Tyler Cowen February 28, 2024 at 2:17 pm in Economics Food and Drink

“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.”

Here is one story of many, remember USA Today? (Should they not be the go-to source for a Wendy’s story?)

https://www.usatoday.com/story/money/2024/02/27/wendys-menu-surge-pricing/72761277007/

I predict this will fail. For one thing, “we will have discounts for Tuesdays at 3 p.m.” would have been better marketing. Furthermore, many Wendy’s buyers are not wealthy, and they care a good deal about predictable prices. Perhaps the higher prices will stick in their memories more? The pitch: “I know I can go to Wendy’s and get my favorite meal there for xxxx” is a powerful meme. I don’t even know what those numbers for “xxxx” should be! Which I guess is part of the point.

Update from Ryan Bourne: Wendy’s already has backed down.

https://gizmodo.com/wendys-surge-pricing-is-off-menu-after-internet-beef-1851292911?utm_source=vip

Wendy’s Surge Pricing Is Off the Menu After Internet Beef

After days of backlash, Wendy's says it has "no plans" for surge pricing on burgers in 2025.

"The internet had its own never-frozen beef with Wendy’s when it discovered the fast food chain was planning surge pricing for 2025. Wendy’s clarified in an updated statement on Tuesday night that it has “no plans” for surge pricing.

“We said these menu boards would give us more flexibility to change the display of featured items. This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants,” said Wendy’s in an updated official statement. “We have no plans to do that and would not raise prices when our customers are visiting us most.”

To be clear, Wendy’s CEO told shareholders it would “begin testing more enhanced features like dynamic pricing,” less than two weeks ago on its earnings call. Dynamic pricing is a strategy used by Uber, Ticketmaster, and other internet-native businesses to offer fluid prices. As anyone who has used these services understands, the surge in prices during increased demand is a key element of this practice. However, Wendy’s now claims that was never part of their version of dynamic pricing.

Several mainstream outlets, including Gizmodo, The Washington Post, and the Associated Press, ran stories about Wendy’s plans for surge pricing. Customers expressed outrage about Wendy’s new pricing strategy in the last two days on social media, including memes that suggest ordering from Wendy’s would be like trading on the stock market.

“Imagine standing in line and watching the price of a Frostee increase by $2 as soon as you get to the register,” said one user on X.

“When you short Wendy’s before the lunch rush,” said another.

“Dynamic pricing is basically price gauging, and consumers are fed up,” said one user.

In an earlier statement, Wendy’s noted that menu items would get cheaper during slow times of the day. This is another feature of dynamic pricing, like when hotel prices drop during the middle of the week. However, the company did not clarify that surge pricing would not occur in this earlier statement to Gizmodo.

Business.com notes that dynamic pricing “can cause a customer revolt.” It’s the reason Taylor Swift fans were outraged when concert tickets reached unthinkable prices during The Eras Tour. “If customers are confused or feel taken advantage of by fluctuating prices, they may opt to purchase from a competitor with fixed pricing.”

Though dynamic pricing is a common feature in many internet businesses, many consumers consider it to be an unfair practice. Thankfully, it appears Wendy’s will not be charging extra for Baconators during the lunch rush..."

GM wrote:

> Dynamic surge pricing for Wendy’s

> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html

I read this earlier today and like everyone commenting on this stupidity
online I can't see it succeeding and they will fail. There's too many
other fast-food places to choose from without being gouged because of
the time of day you order.

Just now saw a short report on the national news about this idiocy.
Wendy's is backtracking and saying the CEO's comments about jacking
up prices at different times of the day is not true. What they are
now saying, depending on the time of the day, food items will be
cheaper and not more expensive.

🙄

On 2/28/2024 6:57 PM, ItsJoanNotJoAnn wrote:
> GM wrote:
>
>> Dynamic surge pricing for Wendy’s
>
>> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html
>
> I read this earlier today and like everyone commenting on this stupidity
> online I can't see it succeeding and they will fail.  There's too many
> other fast-food places to choose from without being gouged because of
> the time of day you order.
>
> Just now saw a short report on the national news about this idiocy.
> Wendy's is backtracking and saying the CEO's comments about jacking
> up prices at different times of the day is not true.  What they are
> now saying, depending on the time of the day, food items will be
> cheaper and not more expensive.
>
> 🙄
That would be much more appealing. They started off wrong and everyone
assumes higher prices but they should say "discount times"

Done that way, some people may shift their lunch break from the peak
times.

Ed P wrote:

> On 2/28/2024 6:57 PM, ItsJoanNotJoAnn wrote:
>>
>> Just now saw a short report on the national news about this idiocy.
>> Wendy's is backtracking and saying the CEO's comments about jacking
>> up prices at different times of the day is not true.  What they are
>> now saying, depending on the time of the day, food items will be
>> cheaper and not more expensive.
>>
>> 🙄
>>
> That would be much more appealing. They started off wrong and everyone
> assumes higher prices but they should say "discount times"

> Done that way, some people may shift their lunch break from the peak
> times.
>
True. I can't believe they thought they'd say hamburgers or chili or
fries will be $2 during the times of 2 to 5 p.m. when at other times
they same items are $1, and people would be rushing in to order. (I'm
just throwing out a price as an example as well as a time of day.)

On 2024-02-28 6:57 p.m., ItsJoanNotJoAnn wrote:
> GM wrote:
>
>> Dynamic surge pricing for Wendy’s
>
>> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html
>
> I read this earlier today and like everyone commenting on this stupidity
> online I can't see it succeeding and they will fail.  There's too many
> other fast-food places to choose from without being gouged because of
> the time of day you order.
>
> Just now saw a short report on the national news about this idiocy.
> Wendy's is backtracking and saying the CEO's comments about jacking
> up prices at different times of the day is not true.  What they are
> now saying, depending on the time of the day, food items will be
> cheaper and not more expensive.
>

I can't imagine them launching something like that without having their
public relations department crafting an announcement that was so well
worded that even the stupidest journalist could misunderstand it.
Somebody dropped the ball.

On 2/28/2024 9:58 PM, Dave Smith wrote:
> On 2024-02-28 6:57 p.m., ItsJoanNotJoAnn wrote:
>> GM wrote:
>>
>>> Dynamic surge pricing for Wendy’s
>>
>>> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html
>>
>> I read this earlier today and like everyone commenting on this stupidity
>> online I can't see it succeeding and they will fail.  There's too many
>> other fast-food places to choose from without being gouged because of
>> the time of day you order.
>>
>> Just now saw a short report on the national news about this idiocy.
>> Wendy's is backtracking and saying the CEO's comments about jacking
>> up prices at different times of the day is not true.  What they are
>> now saying, depending on the time of the day, food items will be
>> cheaper and not more expensive.
>>
>
>
> I can't  imagine them launching something like that without having their
> public relations department crafting an announcement that was so well
> worded that even the stupidest journalist could misunderstand it.
> Somebody dropped the ball.
>
It's all over different news sites. It doesn't make a lot of sense but
apparently someone thought it would be a good idea. The problem with
that is what they're proposing is basically price-gauging. Charge less
during peak hours but raise the prices someone else orders something a
few minutes or an hour later. It's ridiculous.

Jill

On 2/28/2024 10:23 PM, jmcquown wrote:
> On 2/28/2024 9:58 PM, Dave Smith wrote:
>> On 2024-02-28 6:57 p.m., ItsJoanNotJoAnn wrote:
>>> GM wrote:
>>>
>>>> Dynamic surge pricing for Wendy’s
>>>
>>>> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html
>>>
>>> I read this earlier today and like everyone commenting on this stupidity
>>> online I can't see it succeeding and they will fail.  There's too
>>> many other fast-food places to choose from without being gouged
>>> because of the time of day you order.
>>>
>>> Just now saw a short report on the national news about this idiocy.
>>> Wendy's is backtracking and saying the CEO's comments about jacking
>>> up prices at different times of the day is not true.  What they are
>>> now saying, depending on the time of the day, food items will be
>>> cheaper and not more expensive.
>>>
>>
>>
>> I can't  imagine them launching something like that without having
>> their public relations department crafting an announcement that was so
>> well worded that even the stupidest journalist could misunderstand it.
>> Somebody dropped the ball.
>>
> It's all over different news sites.  It doesn't make a lot of sense but
> apparently someone thought it would be a good idea.  The problem with
> that is what they're proposing is basically price-gauging.  Charge less
> during peak hours but raise the prices someone else orders something a
> few minutes or an hour later.  It's ridiculous.
>
> Jill

Similar things are done very day. Happy Hour? Early Bird Special? The
only difference is the approach. Wendy's should have said it is a mid
afternoon discount or similar.

On 2024-02-29, jmcquown <j_mcquown@comcast.net> wrote:
> On 2/28/2024 9:58 PM, Dave Smith wrote:
>> On 2024-02-28 6:57 p.m., ItsJoanNotJoAnn wrote:
>>> GM wrote:
>>>
>>>> Dynamic surge pricing for Wendy’s
>>>
>>>> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html
>>>
>>> I read this earlier today and like everyone commenting on this stupidity
>>> online I can't see it succeeding and they will fail.  There's too many
>>> other fast-food places to choose from without being gouged because of
>>> the time of day you order.
>>>
>>> Just now saw a short report on the national news about this idiocy.
>>> Wendy's is backtracking and saying the CEO's comments about jacking
>>> up prices at different times of the day is not true.  What they are
>>> now saying, depending on the time of the day, food items will be
>>> cheaper and not more expensive.
>>>
>>
>>
>> I can't  imagine them launching something like that without having their
>> public relations department crafting an announcement that was so well
>> worded that even the stupidest journalist could misunderstand it.
>> Somebody dropped the ball.
>>
> It's all over different news sites. It doesn't make a lot of sense but
> apparently someone thought it would be a good idea. The problem with
> that is what they're proposing is basically price-gauging. Charge less
> during peak hours but raise the prices someone else orders something a
> few minutes or an hour later. It's ridiculous.

It may be ridiculous, but it's become more and more common. Airlines
have been doing it for a long time. Uber, Amazon, electric utilities,
Disneyland and other theme parks, gas stations. Haven't you noticed
an increase in gas prices around holidays?

--
Cindy Hamilton

On 2/29/2024 5:08 AM, Cindy Hamilton wrote:
> On 2024-02-29, jmcquown <j_mcquown@comcast.net> wrote:
>> On 2/28/2024 9:58 PM, Dave Smith wrote:
>>> On 2024-02-28 6:57 p.m., ItsJoanNotJoAnn wrote:
>>>> GM wrote:
>>>>
>>>>> Dynamic surge pricing for Wendy’s
>>>>
>>>>> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html
>>>>
>>>> I read this earlier today and like everyone commenting on this stupidity
>>>> online I can't see it succeeding and they will fail.  There's too many
>>>> other fast-food places to choose from without being gouged because of
>>>> the time of day you order.
>>>>
>>>> Just now saw a short report on the national news about this idiocy.
>>>> Wendy's is backtracking and saying the CEO's comments about jacking
>>>> up prices at different times of the day is not true.  What they are
>>>> now saying, depending on the time of the day, food items will be
>>>> cheaper and not more expensive.
>>>>
>>>
>>>
>>> I can't  imagine them launching something like that without having their
>>> public relations department crafting an announcement that was so well
>>> worded that even the stupidest journalist could misunderstand it.
>>> Somebody dropped the ball.
>>>
>> It's all over different news sites. It doesn't make a lot of sense but
>> apparently someone thought it would be a good idea. The problem with
>> that is what they're proposing is basically price-gauging. Charge less
>> during peak hours but raise the prices someone else orders something a
>> few minutes or an hour later. It's ridiculous.
>
> It may be ridiculous, but it's become more and more common. Airlines
> have been doing it for a long time. Uber, Amazon, electric utilities,
> Disneyland and other theme parks, gas stations. Haven't you noticed
> an increase in gas prices around holidays?
>
Actually the gas prices around here haven't fluctuated much around
holidays lately, which is odd since this seems to have become something
of a tourist mecca.

Jill

On 2024-02-29 7:23 a.m., jmcquown wrote:
> On 2/29/2024 5:08 AM, Cindy Hamilton wrote:
>
>> It may be ridiculous, but it's become more and more common.  Airlines
>> have been doing it for a long time.  Uber, Amazon, electric utilities,
>> Disneyland and other theme parks, gas stations.  Haven't you noticed
>> an increase in gas prices around holidays?
>>
> Actually the gas prices around here haven't fluctuated much around
> holidays lately, which is odd since this seems to have become something
> of a tourist mecca.

There were so many complaints about it up here the government was forced
to look into it and concluded there was no collusion. Yeah, right.

On 2024-02-29, Cindy Hamilton wrote:

> It may be ridiculous, but it's become more and more common. Airlines
> have been doing it for a long time. Uber, Amazon, electric utilities,
> Disneyland and other theme parks, gas stations. Haven't you noticed
> an increase in gas prices around holidays?

Legal as long as there exists no evidence of communication; otherwise
a form of collusion fraud. They joke(?) about it in TV commercials
when the gas station operators are seen using binoculars to check
out the competition and then just pretend they were peeking at hooters.

Last year, grocery chains here were fined millions for fixing bread.

To pay it, they agreed to simultaneously fix the price of bread
for a certain time period, which I see as somewhat paradoxical.

GM wrote :

> “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.

He is Wendys CEO Kirk Tanner in the on Feb. 15 earnings call.

Reportedly at the same earnings call, he said, "Under the test,
burgers, Frosties, and other menu items will have dynamic prices,
costing more during times of increased demand."

No matter how publicity wonks try to back away, the CEO drives the
corporate ship and the course has been revealed.

So, what is "dynamic pricing"?
https://www.business.com/articles/what-is-dynamic-pricing-and-how-does-it-affect-ecommerce/

'mericans are not used to negotiating for a better price, except when
buying a car. Wonder how Wendy's is going to feel about consumers
negotiating for the price of a Frosty?

--
We demand diversity in all aspects of life - except thought.
If you don't follow groupthink, you must be silenced.

On 2024-02-29 10:08 a.m., Mike Duffy wrote:

> Legal as long as there exists no evidence of communication; otherwise
> a form of collusion fraud. They joke(?) about it in TV commercials
> when the gas station operators are seen using binoculars to check
> out the competition and then just pretend they were peeking at hooters.
>
> Last year, grocery chains here were fined millions for fixing bread.
>
> To pay it, they agreed to simultaneously fix the price of bread
> for a certain time period, which I see as somewhat paradoxical.
>

I had to dog out an old comedy bit about pricing paint like airline tickets.

Customer: Hi. How much is your paint?

Clerk: Well, sir, that all depends on quite a lot of things.

Customer: Can you give me a guess? Is there an average price?

Clerk: Our lowest price is $12 a gallon, and we have 60 different prices
up to $200 a gallon.

Customer: What's the difference in the paint?

Clerk: Oh, there isn't any difference; it's all the same paint.

Customer: Well, then I'd like some of that $12 paint.

Clerk: When do you intend to use the paint?

Customer: I want to paint tomorrow. It's my day off.

Clerk: Sir, the paint for tomorrow is the $200 paint.

Customer: When would I have to paint to get the $12 paint?

Clerk: You would have to start very late at night in 21 days, or about 3
weeks. But you will have to agree to start painting before Friday of
that week and continue painting until at least Sunday.

Customer: You've got to be *&%^#@* kidding!

Clerk: I'll check and see if we have any paint available.

Customer: You have shelves FULL of paint! I can see it!

Clerk: But it doesn't mean that we have paint available. We sell only a
certain number of gallons on any given weekend. Oh, and by the way, the
price per gallon just went to $16. We don't have any more $12 paint.

Customer: The price went up as we were talking?

Clerk: Yes, sir. We change the prices and rules hundreds of times a day,
and since you haven't actually walked out of the store with your paint
yet, we just decided to change. I suggest you purchase your paint as
soon as possible. How many gallons do you want?

Customer: Well, maybe five gallons. Make that six, so I'll have enough.

Clerk: Oh no, sir, you can't do that. If you buy paint and don't use it,
there are penalties and possible confiscation of the paint you already
have. If you change any colors there is a $50.00 change fee, even if it
is the same brand. Also, no refunds.

Customer: WHAT?

Clerk: We can sell enough paint to do your kitchen, bathroom, hall and
north bedroom, but if you stop painting before you do the bedroom, you
will lose your remaining gallons of paint.

Customer: What does it matter whether I use all the paint? I already
paid you for it!

Clerk: We make plans based upon the idea that all our paint is used,
every drop. If you don't, it causes us all sorts of problems.

Customer: This is crazy!! I suppose something terrible happens if I
don't keep painting until after Saturday night!

Clerk: Oh yes! Every gallon you bought automatically becomes the $200 paint.

Customer: But what are all these, "Paint on sale from $12 a gallon", signs?

Clerk: Well that's for our budget paint. It only comes in half-gallons.
One $6 half-gallon will do half a room. The second half-gallon to
complete the room is $20. None of the cans have labels,
some are empty and there are no refunds, even on the empty cans.

Customer: To hell with this! I'll buy what I need somewhere else!

Clerk: I don't think so, sir. You may be able to buy paint for your
bathroom and bedrooms, and your kitchen and dining room from someone
else, but you won't be able to paint your connecting hall and stairway
from anyone but us. And I should point out, sir, that if you paint in
only one direction, it will be $300 a gallon.

Customer: I thought your most expensive paint was $200!

Clerk: That's if you paint around the room to the point at which you
started. A hallway is different.

Customer: And if I buy $200 paint for the hall, but only paint in one
direction, you'll confiscate the remaining paint.

Clerk: Yes, and we'll charge you an extra use fee plus the difference on
your next gallon of paint. But I believe you're getting it now, sir.

Customer: You're insane!

Clerk: Thanks for painting with United!

~ Author Unknown ~

On 2/28/2024 10:03 PM, Ed P wrote:
> On 2/28/2024 10:23 PM, jmcquown wrote:
>> On 2/28/2024 9:58 PM, Dave Smith wrote:
>>> On 2024-02-28 6:57 p.m., ItsJoanNotJoAnn wrote:
>>>> GM wrote:
>>>>
>>>>> Dynamic surge pricing for Wendy’s
>>>>
>>>>> https://marginalrevolution.com/marginalrevolution/2024/02/dynamic-surge-pricing-for-wendys.html
>>>>
>>>> I read this earlier today and like everyone commenting on this
>>>> stupidity
>>>> online I can't see it succeeding and they will fail.  There's too
>>>> many other fast-food places to choose from without being gouged
>>>> because of the time of day you order.
>>>>
>>>> Just now saw a short report on the national news about this idiocy.
>>>> Wendy's is backtracking and saying the CEO's comments about jacking
>>>> up prices at different times of the day is not true.  What they are
>>>> now saying, depending on the time of the day, food items will be
>>>> cheaper and not more expensive.
>>>>
>>>
>>>
>>> I can't  imagine them launching something like that without having
>>> their public relations department crafting an announcement that was
>>> so well worded that even the stupidest journalist could misunderstand
>>> it. Somebody dropped the ball.
>>>
>> It's all over different news sites.  It doesn't make a lot of sense
>> but apparently someone thought it would be a good idea.  The problem
>> with that is what they're proposing is basically price-gauging.
>> Charge less during peak hours but raise the prices someone else orders
>> something a few minutes or an hour later.  It's ridiculous.
>>
>> Jill
>
> Similar things are done very day.  Happy Hour?  Early Bird Special?  The
> only difference is the approach.  Wendy's should have said it is a mid
> afternoon discount or similar.
>
Exactly. Mid afternoon discount, and make it random, with notifications
for folks who download the app. McDonald's has free fries Friday for
those who order through the app.

--
--Bryan
For your safety and protection, this sig. has been thoroughly
tested on laboratory animals.

"Most of the food described here is nauseating.
We're just too courteous to say so."
-- Cindy Hamilton

On 2/29/2024 10:08 AM, Mike Duffy wrote:
> On 2024-02-29, Cindy Hamilton wrote:
>
>> It may be ridiculous, but it's become more and more common. Airlines
>> have been doing it for a long time. Uber, Amazon, electric utilities,
>> Disneyland and other theme parks, gas stations. Haven't you noticed
>> an increase in gas prices around holidays?
>
> Legal as long as there exists no evidence of communication; otherwise
> a form of collusion fraud. They joke(?) about it in TV commercials
> when the gas station operators are seen using binoculars to check
> out the competition and then just pretend they were peeking at hooters.
>

That may make good TV but not how it works. They all use a similar
system and it is all computerized. The base price of crude is
monitored, of course and it filters down to one person at the HQ office.
There are other factors, of course, they are all plugged in. Then the
individual stations are notified.

H ow do I know this? I know the person that does it for one of the oil
companies.