{"id":208635,"date":"2024-02-28T07:55:09","date_gmt":"2024-02-28T07:55:09","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2024\/02\/28\/surge-pricing-has-come-to-wendys-heres-how-it-already-affects-your-purchases\/"},"modified":"2025-06-25T17:21:30","modified_gmt":"2025-06-25T17:21:30","slug":"surge-pricing-has-come-to-wendys-heres-how-it-already-affects-your-purchases","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2024\/02\/28\/surge-pricing-has-come-to-wendys-heres-how-it-already-affects-your-purchases\/","title":{"rendered":"Surge pricing has come to Wendy\u2019s. Here\u2019s how it already affects your purchases."},"content":{"rendered":"

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Surge pricing could be coming for your Wendy\u2019s chili order.<\/p>\n

The fast-food chain with a red-headed mascot is leaving some people red-faced after the news that it plans to test \u201cdynamic pricing\u201d starting as early as next year.<\/p>\n

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After the grilling, Wendy\u2019s issued a blog post Tuesday<\/a> saying it is not planning to raise prices in times of high demand.<\/p>\n

In its blog post, Wendy\u2019s said the digital menuboards getting added in company-owned restaurants \u201cwould give us more flexibility to change the display of featured items.\u201d<\/p>\n

\u201cThis was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants. We have no plans to do that and would not raise prices when our customers are visiting us most. Any features we may test in the future would be designed to benefit our customers and restaurant crew members,\u201d the company said.<\/p>\n

Still, the Wendy\u2019s
\n WEN,
\n -0.49%<\/bg-quote><\/a>
\n announcement is also raising questions about what \u201csurge pricing,\u201d also called \u201cdynamic pricing,\u201d even is in the first place.<\/p>\n

Answer: It\u2019s a pricing model that shifts prices higher when consumer demand grows \u2014 and it\u2019s already happening with your concert tickets, your ride-share trips, your airplane tickets and even your groceries.<\/p>\n

The move to fast food, however, is a newer area for the pricing strategy. It comes at a time when food inflation is still a sore spot for many people \u2014 especially when it comes to fast-food prices. <\/a><\/p>\n

Wendy\u2019s broke the news on a recent earnings call.<\/p>\n

\u201cBeginning 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,\u201d Wendy\u2019s Chief Executive Kirk Tanner told analysts on the call, according to an AlphaSense transcript.<\/p>\n

\u201cAs 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,\u201d he said.<\/p>\n

As the phrase suggests, dynamic pricing means prices shift instead of staying at one fixed point.<\/p>\n

\u201cIt describes real-time pricing that reflects change in supply and demand,\u201d said Kevin Williams, an economist at Yale University studying how companies make price decisions. For Williams, the label \u201csurge pricing\u201d and \u201cdynamic pricing\u201d mean the same thing.<\/p>\n

The cost hinges on an array of data points so that higher prices are there for higher demand or dwindling supply. You may have seen it in action when airfares surge as you\u2019re trying to book a plane ticket right before Thanksgiving.<\/p>\n

The pricing strategy can also adjust prices based on when someone starts shopping, like a fashionista willing to pay more for a new collection, versus a bargain-hunter, said Vivek Farias, a professor at the MIT Sloan School of Management who studies the science of dynamic pricing.<\/p>\n

Overall, surge pricing can maximize economic efficiency, because in theory, it matches a product with the person who values it the most, he said.<\/p>\n

But companies have to do it carefully, especially if their customers aren\u2019t used to it. \u201cOr else, when people see wild swings, it\u2019s perceived as price gouging,\u201d he said.<\/p>\n

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\n \u201c<\/span>Companies need to be careful when rolling out dynamic pricing, \u2018Or else, when people see wild swings, it\u2019s perceived as price gouging.\u2019 \u201d<\/span>\n <\/p>\n


\n \u2014 Vivek Farias, professor of operations management at MIT Sloan School of Management<\/span>
\n <\/small><\/p><\/div>\n<\/p><\/div>\n

Airlines were pioneers of dynamic pricing; they started tweaking fares based on demand back in the 1980s, Farias noted. At the time, the strategy drew angry reactions from the public.<\/p>\n

Now the pricing model has spread. \u201cThis happens in all sorts of goods and services markets,\u201d Williams said. But the Wendy\u2019s news might be hitting a new nerve. <\/p>\n

\u201cIn other areas, we just kind of accepted it,\u201d Williams said.<\/p>\n

But that acceptance has come after uproar in some cases.<\/p>\n

Bruce Springsteen fans raged in 2022<\/a> over concert tickets that were subject to dynamic pricing via Ticketmaster, surging as high as $5,000. And yet, Live Nation Entertainment Inc.
\n LYV,
\n +1.49%<\/bg-quote><\/a>,<\/span>
\n Ticketmaster\u2019s parent company, says it plans to do even more pricing based on demand <\/a>after two big rebound years for concerts.<\/p>\n

In a corporate earnings report last week, Live Nation\u2019s CEO Michael Rapino said promoters and artists all want better pricing to fill venues instead of leaving more tickets to scalpers.<\/p>\n

\u201cThere is nothing comparable to algorithmic surge pricing in concert ticketing,\u201d a Live Nation spokesperson \u00a0said. \u201cThe dynamic pricing in ticketing is a largely manual process of adjusting a small portion of the available inventory, typically the best seats in the house, to prices closer to the full market value revealed in resale markets. The vast majority of tickets are not dynamically priced.\u201d<\/p>\n

Will dynamic pricing work with food?<\/h2>\n

Actually, dynamic pricing is already part of the grocery shopping experience, according to Phil Lempert, editor of SupermarketGuru.com.<\/p>\n

The coding on \u201cshelf strips\u201d \u2014 that labels beneath products on stores shelves \u2014 can let grocery companies spot which products are selling, which are not, and then adjust accordingly, he told MarketWatch. This can allow stores to increase the price of avocados ahead of Super Bowl Sunday, for example.<\/p>\n

Dynamic pricing in grocery stores has \u201cbeen talked about for years but it really hasn\u2019t happened much until the technology allowed it to become instant,\u201d he said. <\/p>\n

Wendy\u2019s says its new pricing strategies could help some customers bite into a bargain.<\/p>\n

The company said its technology investments are going to make it easier to change its menus \u201cto offer discounts and value offers to our customers through innovations such as digital menuboards, which will roll out in some U.S. restaurants.\u201d<\/p>\n

\u201cWendy\u2019s has always been about providing high-quality food at a great value to our customers, and this recent investment will continue that by driving traffic and providing value during slower parts of the day,\u201d the company said in a follow-up email to MarketWatch.<\/p>\n

The AI-infused menu tweaks and selling suggestions that Wendy\u2019s will test in 2025 will be \u201cbased on factors such as weather that we think will provide great value and an improved customer and crew experience.\u201d<\/p>\n

But it could be that some people don\u2019t like the idea of scheduling the exact time of their fast-food run.<\/p>\n

\u201cThis could cause all sort of weird things where you can kind of have customers being strategic. It\u2019s a bit strange,\u201d Farias said.<\/p>\n

Who are the winners and losers with dynamic pricing?<\/h2>\n

\u201cUsually when firms implement dynamic pricing, there are some winners and some losers,\u201d Williams said. It\u2019s a consequence he studied when it comes to airline tickets<\/a>. <\/p>\n

Dynamic pricing is a win for passengers with flexible schedules who pay long in advance, but a loss for business travelers with few choices and late-breaking travel obligations.<\/p>\n

How about for someone searching for Wendy\u2019s and its menu, including Dave\u2019s Double and loaded nacho double cheeseburgers? <\/p>\n

\u201cI think the person who wins is the flexible, knowledgeable fast-food eater, because that person probably knows how price moves around,\u201d Williams said.<\/p>\n

On the other hand, \u201cthe person who is hurt is the person that is the inflexible lunchtime consumer who really wants to go to Wendy\u2019s and faces a higher price.\u201d<\/p>\n<\/p><\/div>\n

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