But how much of that comes from misinterpretations of dynamic pricing? <\/p>\n\n\n\n
Or from thinking that dynamic pricing is the same as the pandemic price gouging we all saw? <\/p>\n\n\n\n
Or even from not believing that dynamic pricing can be responsible, ethical, and<\/em> effective?<\/p>\n\n\n\n If you ask us\u2026 a lot<\/em> of it does.<\/p>\n\n\n\n There are tons of restaurants already implementing dynamic pricing in ethical, responsible, and<\/em> profitable ways \u2014 we just don\u2019t talk about them as much as we do the \u201cbad\u201d examples. <\/p>\n\n\n\n So, in this blog \u2014 which is part 2 of our dynamic pricing series, by the way \u2014 we\u2019ll be shifting the spotlight to the \u201cgood\u201d guys, focusing our discussion on: <\/p>\n\n\n\n Before we dive into any new <\/em>dynamic pricing concepts, a quick refresher on what we covered in part 1 wouldn\u2019t hurt, right? <\/p>\n\n\n\n Here\u2019s your TL;DR on what we covered in part 1<\/a>. <\/p>\n\n\n\n Dynamic pricing: <\/strong>a strategy where businesses increase or decrease their prices based on factors like customer interest and market demand.<\/p>\n\n\n\n 3 commonly used dynamic pricing strategies<\/strong><\/p>\n\n\n\n For a more general overview of dynamic pricing in restaurants \u2013 including definitions of different strategies and a pros and cons list \u2013 check out <\/em>the first part of our dynamic pricing series<\/span><\/em><\/a>! <\/em><\/p>\n\n\n\n Based on some of the quotes you read at the beginning of this blog, it\u2019s pretty safe to say there are some strong<\/em> negative opinions on dynamic pricing. <\/p>\n\n\n\n But that dynamic distaste isn\u2019t just <\/em>about \u201coutrageously high\u201d fast food prices; it\u2019s a much more nuanced issue than that. The (mostly) negative customer stance on dynamic pricing is the result of several different factors, like: <\/p>\n\n\n\n So, do those stats mean dynamic pricing is a lost cause for the restaurant industry, then?<\/p>\n\n\n\n Yes. If you\u2019re not doing it the \u201cright\u201d way, that is. <\/p>\n\n\n\n Luckily, implementing an ethical and responsible dynamic pricing strategy is so much easier<\/em> than the \u201cbad\u201d examples make it seem \u2014 because it\u2019s as easy as 1-2-3.<\/p>\n\n\n\n Contrary to popular belief, not everyone<\/em> likes surprises\u2026 especially when the surprising thing is their dinner bill. <\/p>\n\n\n\n As soon as you know the effective date of your dynamic pricing strategy, tell your customers. Then tell them a second time. And maybe a third or fourth time after that, too. By the time your dynamic pricing rolls out, there shouldn\u2019t be anyone surprised about the date it\u2019s happening. <\/p>\n\n\n\n You\u2019ll also want to be candid about the \u201cwhy\u201d and the \u201cwhat\u201d behind your dynamic pricing.<\/p>\n\n\n\n Your customers will want to know two things: 1) Why you\u2019re changing the prices, and 2) What difference it\u2019s going to make for them. Can they expect better food quality or stronger customer service? Maybe an increase in new offerings? Either way, your \u201cwhy\u201d and your \u201cwhat\u201d should both be transparently shared with your customers. <\/p>\n\n\n\n Remember: no surprises.<\/p>\n\n\n\n According to a 2023 Capterra survey<\/span><\/a>, three in 10 customers are willing to pay peak prices \u2014 A.K.A. elevated prices at the busiest times \u2014 from restaurants they already order from. <\/p>\n\n\n\n But, of those three customers, only a single person<\/em> would be willing to pay 10% over the regular price. Combine that hard stop at 10% with the general inflexibility of customer food budgets, and you\u2019ve just revealed a golden nugget of wisdom \u2014 the specific, narrow margin you need to use to inform your dynamic pricing. <\/p>\n\n\n\n Now, at first glance, it sounds like you\u2019re losing customers\u2026 but think about it this way.<\/p>\n\n\n\n You\u2019re raising your prices at times when you\u2019re already<\/em> busy. So, the people who do<\/em> stay are willing to pay a bit more, and the people who don\u2019t<\/em> stay won\u2019t affect your bottom line too much, because you\u2019re already lined up out the door.<\/p>\n\n\n\n The same is true for lowering your prices during slow times, too. The folks who show up for the discount give you business you wouldn\u2019t have gotten otherwise, and the folks who don\u2019t show up? Well, you wouldn\u2019t have seen them anyway! <\/p>\n\n\n\n And, one of the nicest things about keeping your margins narrow? It\u2019s good for your customers. They feel respected \u2013 because you adhered to the margins they\u2019re comfortable with \u2013 and they\u2019re getting a unique experience (whether it\u2019s a meal during a super busy time, or a discount during a lull).<\/p>\n\n\n\n The truest version of a win-win. <\/p>\n\n\n\n In part 1 of our dynamic pricing series<\/span><\/a>, we shared the success Applebee\u2019s has found through twice-daily happy hours and 50% off apps. <\/p>\n\n\n\n But, if your <\/em>restaurant were to try out twice-daily happy hours and Dollaritas, there\u2019s no guarantee you\u2019d see the same 7.7% sales increase<\/span><\/a> that Applebee\u2019s did. And that\u2019s because very few things in the restaurant industry \u2014 or any industry, really \u2014 are one-size-fits-all. <\/p>\n\n\n\n Including dynamic pricing. <\/p>\n\n\n\n So, if your happy hour numbers make you less-than-happy,<\/em> consider what that means for your dynamic pricing strategy. Maybe your customers aren\u2019t big on alcohol, or they\u2019re busy during your happy hours. Look at what your customers are telling you through their purchases, and don\u2019t be afraid to give something else a try. <\/p>\n\n\n\n That\u2019s why the most <\/em>ethical and responsible way to approach dynamic pricing is with flexibility, open-mindedness, and a willingness to pivot based on your specific data. <\/p>\n\n\n\n Because your customers’ happiness should always <\/em>come first. <\/p>\n\n\n\n Now that we know ethical, responsible dynamic pricing can<\/em> be done (in 3 easy steps, might I add) let\u2019s take a look at a restaurant that\u2019s already been doing it. <\/p>\n\n\n\n TGI Fridays is a bar and grill chain, offering \u201cauthentic American food and legendary drinks, served with genuine personal service<\/span><\/a>.\u201d <\/p>\n\n\n\n Created to celebrate the \u201cliberating spirit of \u2018Friday<\/span><\/a>\u2019\u201d all week long, TGI Fridays has become a global name, with 850 restaurants in over 55 countries, and a reputation for stellar dynamic pricing strategies.<\/p>\n\n\n\n TGI Fridays offers a ton of different \u201cdynamically priced\u201d options<\/span><\/a>, including:<\/p>\n\n\n\n Profit-wise, TGI Fridays\u2019 dynamic pricing options have definitely been successful; profits rose by 4% in December 2023<\/span><\/a>, just one month after their \u201cClause for Celebration\u201d menu went live.<\/p>\n\n\n\n Ethics- and responsibility-wise, we think they\u2019ve been successful, too. <\/p>\n\n\n\n TGI Fridays\u2019 dynamic pricing is: <\/p>\n\n\n\n And, the brand\u2019s commitment to strong, responsible dynamic pricing has paid off in other, more growth-focused ways, too.<\/p>\n\n\n\n Recently, TGI Fridays announced<\/span><\/a> a nationwide reorganization, aimed at improving customer experience through newly optimized and streamlined operations. <\/p>\n\n\n\n\n
A Crash Course of Dynamic Pricing in Restaurants <\/h2>\n\n\n\n
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Dynamic pricing \u2260 price gouging<\/li>\n<\/ul>\n\n\n\nConsumer Perspective on Dynamic Pricing<\/h2>\n\n\n\n
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3 Ways to Ethically and Responsibly Implement Dynamic Pricing<\/h2>\n\n\n\n
1. Be transparent and direct about your dynamic pricing <\/h3>\n\n\n\n
Action Items:<\/h4>\n\n\n\n
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2. Be specific and narrow with your price changes <\/h3>\n\n\n\n
Action Items:<\/h4>\n\n\n\n
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3. Be flexible, open, and ready to pivot<\/h3>\n\n\n\n
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Ethical, Responsible Dynamic Pricing at TGI Fridays: A Mini Case Study<\/h2>\n\n\n\n
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