this post was submitted on 28 Feb 2024
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God damn this is ridiculous. People need to read the transcripts it's not surge pricing.
What are you talking about? Just because they aren't calling it "surge" doesn't mean it's not surge. Unless you're just saying you prefer the term "gouging"?
Lowering prices, also known as "discounts," and then restoring prices after the "discount" can be understood in reverse: prices go from "normal" to "increased".
Given the fact that they (like every other fast food company) always charge the absolute maximum the market will bear, then any price -- even a reduced one -- is still going to be what they calculate to be the maximum. The fact that the maximum is different at times of "increased demand" is exactly what surge pricing is.
You're 100 percent right and to go even further that dude must be naive if he thinks they won't use it to squeeze as much profit as they can.
Well dynamic pricing and surge pricing in practice are the opposite. Both raise prices.
Surge pricing raises it on peak times while dynamic does it throughout the day and usually during off-peak times to subsidize on peak times.
Surge pricing is vastly different than dynamic pricing. Surge pricing has not chance of working in retail when competition exists.
Dynamic pricing is done in retail already and no one bats an eye at it.
Tesla does dynamic pricing. Fuel stations do dynamic pricing.
Energy companies do surge pricing. Uber does surge pricing.
When there's a monopoly on a market you wouldn't do dynamic pricing.
But also it's why heavy regulation is done.
Uber broke this model because they get to operate as a monopoly while gouging their customers.
I'm not defending Wendy's but as someone in pricing this is a vastly different thing and is 100 times worse than dynamic pricing.
I get what you're saying, but it honestly sounds like kool aid drinking. "Surge" vs "dynamic" might be different in terms of back end calculation, but the external appearance is the same.
Again, you have to remember that prices are still maxed out. Think about it this way: if you normally wear 2000 calories a day, and every now and then you have an extra donut or burger and that puts you at 2500, that's only balanced if, on other days, you have only 1500 calories. If the only exceptions are in the "plus" direction, the average is up.
Don't mistake prior not knowing about it for people saying they think it's ok. If this is happening in retail, and people knew, they wouldn't be happy.
Surge pricing is toxic and needs to stop.
External appearance is not the same for both. Elasticity of demand during seasonal time of day and weekday seasonality proves it
People don't like surge pricing with Uber but they have no choice there's really no competition. Lyft is the only one so they both do it.
Dynamic pricing is done because of lack of pricing power and monopoly. Most restaurants are franchises. You can't get franchisees to exhibit monopoly power because they compete amongst themselves in the same brand and vs others. Aside from the fact that it's illegal.
I'm not saying it's good just totally not the same.
Dynamic pricing is sneaky and hard to pay attention to. Surge pricing isn't.
Dynamic pricing allows competition at certain times but screws over people that don't buy into loyalty cards rewards points or just doesn't go to the store when everyone else does.
I'm literally the customer that gets punished.
Companies don't care about customers unless elasticity is proven. They will test elasticity until net margin is maxed out at optimal volume. It's why Netflix doesn't give a shit about raising prices. When done in chunks and averaged over time people continue to pay.
Whereas when it's done in large quantities it has bigger effect on prompt demand.
Fuel stations will raise prices at odd peak times when people that don't "shop" for fuel get fuel. Then they ramp it down just before peak times.
If customers have loyalty or rewards they typically will be free of these issues because of timed promotions but mostly these prices are inelastic at those times. Which proves that those people don't care.
These things are like anything else. The loudest people make noise. consumers don't stop their habits easily unless they feel they don't have a choice. Hence why surge pricing wouldn't work in retail.
I've worked in retail operations, pricing, and manage/execute machine learning for these projects. You can try to explain it to me and why you think it's the same but respectfully you're just patently wrong.
If people actually knew the difference they could look for it but they won't if everyone just says it's all the same and mislabels it. People should be looking out for dynamic pricing. Surge pricing doesn't exist in retail and won't in the US market.
I haven't read the transcript of the earnings call, but I read the article(s) and the Wendy's blog post in response.
It seems like there was indeed some misunderstanding somewhere along the way, in that the "dynamic pricing" that was referenced was not to be construed as surge pricing in any way, and was intended to reflect decreased (ebb? discounted? receding?) pricing that would be presented during off-peak hours to drive business.
The practice in itself isn't inherently bad, but I can see this as an incremental move towards true surge pricing across the industry - which for the record I am against - and there isn't really a way to position it in such a way as to be seen as a benefit to the consumer.
As with everything else, customers will vote for this practice with their wallets, and by the state of several other industries in which similar models have been adopted and begrudgingly accepted as the norm, I'm not holding out a lot of hope for a positive outcome here.