What Small Business Owners Should Know About Wendy’s and Dynamic Pricing
Wendy’s is feeling the heat, and it’s not coming from the grill. The fast food chain’s CEO Kirk Tanner endorsed dynamic pricing on a call with investors in February, saying they could start testing the feature in 2025.
But then came significant internet backlash, including a U.S. Senator who deemed the plan price-gouging. In response, Wendy’s called it a big misunderstanding, saying they never intended to raise prices based on demand, and in fact wanted to try dynamic pricing as a way of offering more discounts to customers during slower parts of the day.
What Is Dynamic Pricing?
Dynamic pricing, also known as surge pricing, involves increasing or decreasing prices based on the level of demand. Rideshare apps like Lyft use dynamic pricing all the time. For instance, a ride home from the bar on Friday night could cost you twice as much as a ride there, because Lyft’s algorithm knows everyone is trying to get home at the same time.
Airlines also engage in this. You’ve probably noticed that a flight home on December 23rd costs a lot more than a flight home, on, say, a random day in February.
Why Surge Pricing Is Unpopular With Customers
If you’re a small business owner, you no doubt want to maximize your profits. But if you do it through dynamic pricing, customers may feel like you’re jerking them around to try to make a buck. In the Wendy’s scenario, consumers got angry, in part, because they imagined watching food prices increase as they waited in line, even though Wendy’s didn’t specify if that would actually happen.
To many people, that feels unfair and greedy, especially when food prices have recently increased significantly for a variety of reasons.
Making a Profit While Maintaining Customer Trust
If you offer a good product at a fair price, customers will generally be willing to pay for it. But you have to be careful about how you present your price changes. For instance, if you’re running a restaurant and need to raise prices to remain afloat, then do so. But maybe it’s also time to introduce happy hour specials where customers can get a discount on select items for a couple hours each day.
Happy hour specials are a form of dynamic pricing, but they’re a lot more popular because everyone loves to get a deal. There’s a reason Wendy’s began saying they wanted dynamic pricing to benefit customers instead of shareholders. The way you communicate with consumers about pricing changes will impact how they respond, and you don’t want to ding your reputation because you failed to roll out the changes properly.
When you lose the trust of the customer, you risk seeing them run to a competitor. That’s especially true in the restaurant business, where unhappy Wendy’s customers can go right next door to McDonald’s, Jack in the Box, or Burger King. In fact, Burger King is already capitalizing on Wendy’s bad press by offering free Whoppers with an in-app purchase. “We don’t believe in charging people more when they’re hungry,” Burger King said in a social media post alongside the fire emoji.
For now, dynamic pricing is more popular in industries where customers don’t have a lot of other options.
With Northwest, You Pay the Same Price Every Year
At Northwest Registered Agent, we don’t like raising prices. That’s why when you sign up for our registered agent service, you’ll pay the same price next year and every year after that.
We don’t do hidden fees, either. If we’re going to charge you for something, we’ll tell you upfront. Consistent pricing is one of our trademarks, and we do it because we believe in building and maintaining good relationships with the people who hire us.
We cannot, however, offer you a piping hot cheeseburger or freshly salted fries. But if you’d like to open your own burger joint, Northwest can help you start your business.
