The restaurant chain recently announced plans to implement dynamic pricing starting in 2025. At first glance, that seems like a non-starter. Imagine that you kindly let someone cut in front of you at Wendy’s at lunchtime because you are not sure what to order. A minute later, you look up at the digital menu board and see that your final choice – a Baconator Meal with a Frosty – suddenly costs $1 more.
Is that fair or are you suddenly eager to go across the street for a Big Mac?
But let’s take another glance at this idea, beyond the scary headlines about surge pricing. Wendy’s plan sounds more like a commitment to manage demand dynamically throughout the day. Ideally, they will balance prices across the portfolio – some higher, some lower – so that customers self-select and potentially spend more per visit without perceived or lingering unfairness.
Perceived fairness in this case is essential, and it will depend on how much control consumers still feel they have. Research by BCG’s Henderson Institute showed that random price changes with no perceived control can feel very unfair to customers. But as I wrote in 2022, consumers can tolerate price discrimination – even if it works against their self-interest – as long as they feel they have some control over the prices they pay. That can include choosing where to buy, when to buy, or whether to join a certain organization. Rob them of this perceived control, however, and they may vehemently resist higher prices.
In the spirit of the Choice Game, Wendy’s can protect perceived fairness by offering advantages to customers who are frequent buyers or loyalty club members. Even during peak periods, those customers could see personalized prices at the register that differ from the ones displayed on the digital menu board. Success in the Choice Game also depends on the seller’s ability to influence customers to trade up or down across a portfolio without feeling pressured or coerced. To accomplish that, Wendy’s initiative will test the limits of techniques from behavioral science – including the compromise effect, decoys, and anchoring – that help guide customers navigate through the range of offerings and self‐select.
Dynamic pricing for fast food will be a difficult and sensitive challenge, but not an insurmountable one. If Wendy’s can keep the dynamic price changes within small increments and can give consumers the feeling that they have control – perhaps by changing the time of their visit, ordering in advance, or becoming a loyalty member – they could make this pioneering effort a success after all.
Can Wendy’s make “surge pricing” a success?
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