Opinion: The backlash against Wendy’s offers a lesson
Opinion by Jeff Yang
(CNN) — When Kirk Tanner, the CEO of Wendy’s — the fast food chain known for its sassy pig-tailed mascot and square beef patties — announced in its most recent earnings call that it was testing a new digital menu technology, it should have been a passing blip on Wall Street analysts’ radar. Instead, it sparked a burger-business media blaze that’s inflaming the socials two weeks later.
That’s because on Wednesday, sharp-eyed financial reporters noted that Tanner’s presentation included a reference to using the menus to introduce “dynamic pricing” — menu costs that would fluctuate during the day.
That’s a pricing strategy we’ve all come to know and despise in transportation, where express lanes have long featured “congestion” toll rates during the rush-hour crush and plane ticket prices skyrocket as demand soars around holidays.
The most enraging modern variant of this is the rideshare industry’s use of surge pricing, which automatically sends the cost of a pickup from services like Uber and Lyft soaring when the number of exhausted people trying to get home exceeds the number of frustrated drivers trying to meet frenzied demand.
This often means paying double or triple the usual tab during popular landing times (which is just the icing on your poop cake if you’ve just gotten off a hideously delayed Thanksgiving flight with your luggage headed to a different city entirely).
Tanner’s mention of dynamic pricing led observers to imagine the chain jacking up the cost of ice-cold Frostys on parched summer afternoons, or boosting Baconator bills during the lunch rush.
As backlash built, Wendy’s was forced to issue a statement, saying that the media had misconstrued the intent of its dynamic pricing plans as focused on raising prices during peak demand times. Instead, the chain maintained, the digital menuboards would allow it to “offer discounts and value offers to our customers more easily, particularly in the slower times of day.”
That may have soothed the masses a little. But the reality is that implementing “dynamic discounts,” as one might refer to them, instead of surge pricing, is simply another way for a business to engage in price discrimination — the economic term for charging different costs to people who have different demand profiles in order to extract maximum profit.
Yes, the stray customer who wants a Loaded Nacho Chicken Sandwich at 11 a.m. might benefit from a few cents off. But realistically, such dynamic discounts could just be used to soften the impact of future price increases.
And it’s easy to imagine how that might backfire, given how fluidly people can shift gears from chain to chain if they feel like they’re not getting their money’s worth. Discounts at odd hours might pull in some marginal customers, but not knowing how much of a hit your wallet might take when you’re craving a Dave’s Double adds a layer of unnecessary anxiety to a world that already frequently feels like it’s on the brink of the existential abyss, which could push away customers more generally.
(Then again, that could also be Wendy’s hidden bottom-line lifting strategy: making fast-food ordering so stressful that you end up snacking your feelings.)
After all, our consumer desire for cost certainty is a powerful force. It’s why pay-one-price, all-you-can-eat offerings are so popular (case in point, Red Lobster and its Ultimate Endless Shrimp, to the infinite carbo-load of Olive Garden’s Never-Ending Pasta Bowl, and the belly-up-to-the-bar bounty of buffets across America). In fact, fixed pricing is so alluring that more than a few restaurants have instituted Netflix-style fast food subscriptions — like Taco Bell’s $10 Taco Lover’s Pass and Panera’s $120-a-year unlimited bevvies membership.
If truth be told, however, the furor over dynamic pricing has probably been a little overblown. It’s the other half of Wendy’s new high-tech offerings that might end up as more of a head-shaker.
As Tanner said, its new menu will also allow it to experiment with “AI-enabled menu changes and suggestive selling.” A six-fingered, AI-generated Chance the Rapper in red pigtails tempting you with a seductive, voice-synthesized-and-customer-personalized add-on of Spicy Chicken Nuggets?
Talk about staring into the existential abyss.
The-CNN-Wire
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