Rideshares, plane tickets, and now spicy chicken sandwiches? Why Wendy’s is bringing AI-powered surge pricing to fast food
Many consumers have gotten used to paying extra for Uber rides at peak times. But what about for a Baconator?
Wendy’s, which is aiming for $2 billion in digital sales by the end of the year, plans to roll out by 2025 a broader strategy that includes fluctuating menu prices.
“We will begin testing more enhanced features like dynamic pricing and day-part offerings, along with AI-enabled menu changes and suggestive selling,” CEO Kirk Tanner said during the company’s latest earnings call.
Surge pricing—i.e. Uber rides cost more when it’s pouring rain—gained notoriety among consumers as rideshare apps proliferated, and the concept isn’t anything new when it comes to booking a plane ticket or a hotel room. But, Tanner argued, when coupled with additional technological improvements, such as digital menu boards, customers should see an improved experience.
A recent paper by Vanderbilt University professor Kelly Haws and then-doctoral student William Bearden showed that most consumers perceived fluctuating prices to be unfair, but also that “motives, company reputation, and previous customer satisfaction have all been shown to affect consumers’ perceptions of the fairness of price increases.”
And although, the researchers found, “there is a strong relationship between price fairness and consumer satisfaction” that affects one’s willingness to buy a given product or service, many individuals over time become more accepting of, at at least more tolerant of, dynamic pricing. For example, frequent travelers have come to expect it with airlines and hotels.
How quickly Wendy’s customers grow accustomed to it remains to be seen. The company rolled out AI chatbots at drive-thrus last year, and it’s committed to spending some $20 million to upgrade customer-facing tech by the end of 2025.
“We have partnered with like-minded, innovative companies to help us implement new, fresh approaches and groundbreaking technology to truly enhance the Wendy’s experience,” CIO Matt Spessard said at the time Wendy’s FreshAI debuted, thanks to a partnership with Google Cloud.
That said, restaurants charging different prices at different times isn’t an entirely new idea. Many offer similar items for both lunch and dinner, and prices in the evening for similar, if not identical, dishes tend to be higher. Wendy’s is framing its tech push as creating value for loyal customers.
“In addition to evolving our loyalty program, one of the other benefits of these investments will be the flexibility to change the menu more easily and to offer discounts and value offers to our customers,” a company spokesperson said in an email to Fortune. “Wendy’s 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.”
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