Poor Wendy’s. In February, the CEO announced in an earnings call that dynamic pricing would be tested. The media immediately ran wild with this nugget, comparing it to surge pricing that Uber implements during periods of high demand.
First, I want to acknowledge that I understand the economics of dynamic pricing, and many businesses do it. Look at the hospitality industry as an example. When demand for hotel rooms is higher, say, for peak travel season or a conference, room rates go up. Conversely, room rates decrease during off-peak times.
In addition, some restaurants offer early-bird or happy-hour pricing to entice customers during non-traditional eating times.
However, I wonder how much analysis Wendy’s performed on the competitive landscape. Did it think it would set the standard for the quick service industry in terms of pricing, meaning others would eventually follow suit? Did it receive intel that other restaurants were considering the idea, and Wendy’s wanted to be the first?
Also, did Wendy’s not correctly calculate the potential pitfalls of announcing dynamic pricing?
In the aftermath, Wendy’s had to issue a statement, clarifying that “We have no plans to do that (raise prices when demand is highest) and would not raise prices when our customers are visiting us most.”
Instead, Wendy’s plans to “offer discounts and value offers to our customers more easily, particularly in the slower times of day.”
That should have been the lead message. In other words, Wendy’s would have been better off saying, “One of the benefits of our new digital menu boards is that we will be able to offer discounts to our customers more easily.”
Honestly, it seems like if they had used this message, the announcement would have pretty much gone unnoticed, or at least it would have garnered far less attention. Plus, Wendy’s may have been able to sneak price increases across the board so that the discounts didn’t affect their bottom line as much.
This is another lesson in marketing in which the right way of presenting a new idea is very important to its adoption. Plus, understanding potential consequences in advance and figuring out how to avoid or minimize those consequences is crucial.
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