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Wendy’s Still Ploughing Ahead With ‘Dynamic Pricing’

Wendy’s is still planning to implement dynamic pricing. In spite of the monumental consumer backlash against the plan in recent days. New surveys indicate it’s a bad idea. But it’s to late to minimize the damage. How will Wendy’s reputation fare, under the circumstances?

Future Concept - 2022 Wendy's‘The Wendy’s of the Future’: Will it include ‘surge pricing’?

The history…

A couple of weeks back, Wendy’s new CEO, Kirk Tanner, told a quarterly earnings conference call audience that the chain was going to move to ‘dynamic pricing’ over the next year or so. The way he described it, fans and the media immediately thought he was talking about ‘surge pricing’. That’s raising prices at peak times. And that triggered outrage both on social media and in the mainstream news was universal.

A couple of days later, the chain issued a terse, unsigned, clinically worded ‘clarification’ denying that was its plan. And blamed the media for creating a fundamental misperception among the masses. I’ve already made it clear that I find Wendy’s media bashing deplorable. But they couldn’t be expected to lay responsibility for the ‘misperception’ where it obviously belongs, on their new CEO. He’s too new. And his appointment was an event over which Wendy’s made big promotional hay.

A bad decision?

Now Wendy’s says it’s going ahead with the ‘dynamic pricing’ plan. It’s a huge undertaking, which will see new digital menuboards added to all the chain’s locations. And massive behind-the-scenes data system updates to capture and analyse every aspect of your Fast Food purchase.

But that might not be such a good idea. The fans haven’t forgotten the whole earnings call kerfuffle. And I forsee another huge backlash when the new menuboards begin top make their appearance.

Surveys confirm opposition…

And a 2023 consumer survey confirms my suspicions. Food & Wine reports, “Dynamic pricing, even meant as a good thing, can be a trigger to consumers, who are already experiencing inflation fatigue.”

And that’s not all.

The New York Times pointed to a January 2023 survey by Capterra that showed that 52 percent of consumers surveyed equate dynamic pricing to ‘price gouging’. [… ] A similar 2023 study by CivicScience found an even stronger majority, with 62 percent of its respondents calling dynamic pricing ‘akin to price-gouging’.”

The Capterra survey also yielded some additional, poignant points: “We found that consumer sentiment on dynamic pricing is overwhelmingly negative and that most people are unlikely to use dynamic pricing in a way that benefits restaurants,” Capterra shared in its findings.

The pollster also noted that 42 percent of respondents said they would order out ‘less often or not at all’ from a restaurant that adopted dynamic pricing. And that dynamic pricing could add ‘friction’ to the consumer experience. Some 63 percent of respondents said it would ‘make it harder to budget their spending on restaurants’.

Some observations…

I have to note that Wendy’s has stated that it will never institute a policy of raising prices during peak hours. But that’s here and now. How often have we seen governments promise ‘no new taxes’, and go out and raise taxes a year or two later? Corporations are just as notorious for breaking their promises.

And the new menuboard and background data processing systems will have the power and capability to institute ‘surge pricing’ on a moment’s notice. If and when Wendy’s decides to do so, in future. More insidiously, any individual Wendy’s franchise operator could institute surge pricing for their own location anytime they decided it was a good idea.

On the other hand… Food & Wine notes, “Consumers have accepted the dynamic pricing models of airlines, ride shares, and hotels.” But it seems consumers draw a hard line when it comes to applying surge pricing to a fundamental commodity such as food.

My take

Don’t expect Wendy’s to just drop the whole idea of ‘dynamic pricing’. Even in the face of prevailing negative consumer sentiment and bad press.

Taking into account business realities… I suspect the chain has already signed huge contracts with menuboard makers and data system providers to provide and install the new systems. And cancelling those commitments would cost the chain a ruinously huge amount of cash. In fact, they probably started making their plans and implementing some changes behind the scenea a year or two ago. We’re talking about an industry that can take a year or more just  to tool up for adding a new permanent menu item.

No, Wendy’s isn’t going to abandon ‘dynamic pricing’, no matter how harsh the criticism, or how bleak the consumer polls maybe. Their only hope is that consumers soften their stance, and go sheep-like to the dynamic pricing slaughter when the system kicks in. That’ll be over a year and half from now. The key question is: How long are consumers’ memories?

~ Maggie J.