How much are you going to charge your customer next year? Charge to much and you get your customer go
somewhere else. Technology may help you determine who much to charge for any one
item but at the end of the it is the total bill with tip that will stick in the
mind of the consumers?
Are you asking your customers to tip at a drive-thru for a cup of
coffee? How is that working for you? According it Steven Johnson Grocerant Guru® the price,
value, service equilibrium at the end of the will be determined at the front
door by you customer. Ultimately, discounting and the level
or frequency is a brand decision. Below is an article on pricing we wanted to share
it is by, Mike Lukianoff and he is the CEO
of Extropy.
Restaurants have used differential pricing for decades—dynamic implementation
is new.
Funny thing about the English language, there’s a word for
just about everything. And when there isn’t we make one up to capture the
essence of what we’re trying to communicate. Every profession has jargon and
sometimes they turn into buzzwords.
These words originate as a well-intentioned way to
communicate technical stuff to a non-technical audience, but sometimes they
catch a hype-cycle and can quickly lose meaning or morph into whatever the hype
reshapes them into. Emerging technologies need to expand their lexicon when a
field is advancing rapidly.
When the new vernacular changes to make things more
relatable to those who will benefit from it then it’s a positive change. But
when the use of buzzwords obscures existing meaning without adding clarity, or
when the primary benefit of the jargon-sprawl is for companies to hitch their
products to the hype-train, it only adds confusion and accelerates potential
disillusionment of what might otherwise be a high-potential technology.
The Dynamic Price Hype-Train
When dynamic pricing solutions first rolled out in delivery
channels it was enough to make any data-nerd giddy. The possibilities seemed
boundless. Solving the technical hurdles of making real-time changes to prices
in multi-channel restaurant commerce and display systems should open the door
to dynamic tech that could enhance the whole customer experience. The
opportunity is much bigger than Dynamic Price alone.
However, if the technology companies themselves believe the
ultimate achievement of their core innovation is setting different prices at
different times or managing discounts rather than the technological achievement
of the speed and efficiency with which it can be executed—well, there was
already a name for that, and it’s “Differential Pricing”—and it
has been going on for a long time in the industry, albeit with varying degrees
of scientific discipline, strategic design and automation.
Dynamic Pricing
When something is “Dynamic” it means that it is
characterized by constant change: I didn’t decide that—the English language
did. It makes a lot of sense that Dynamic Pricing in Restaurants found its home
in third-party online systems where the experience is commoditized and less
personal than the on-premises experience.
Differential Pricing
Whether pricing the same product differently across
locations (i.e. pricing tiers), or in the same location at different times
(happy hour)- tactics for leaning into higher demand times & locations has
been happening since at least the 1890’s when the “Blue Plate Special” was
introduced by Harvey’s Restaurants. Since then, Happy Hour, off peak “Bounce
Back” coupons, Express Menus and Prix Fixe menus have all emerged as commonly
used differential pricing tactics. Restaurants have long found low-tech ways to
implement ‘differential pricing,’ however the technological advancement is the
ability to automate, personalize, target and simultaneously change them
rapidly. If those things are not actually changing with some meaningful
frequency, then it isn’t “Dynamic”. That’s not a statement of judgement—it’s a
statement of fact. Offers that are differentiated by customer group, geography
or other cohort are frequently used as another way of creating differential
promotional price opportunities.
This has been part of loyalty programs, e-clubs and digital
campaigns for at least two decades. Some are executed with “static” prices or
offers and others could be genuinely considered dynamic. Some restaurant
companies apply sophisticated scientific methods to differential pricing
decisions and other products, promotion, and marketing decisions with the same
sophistication as the best retailers, travel companies and CPG’s. That level of
analysis that can ‘super-size’ the profit opportunity and has historically only
been available to the largest chains. But even without sophisticated means of
execution or integration with a dynamic display system, differential pricing
strategy can be a significant opportunity for restaurants to drive traffic
while managing their brand value perception.
What About Dynamic Coupons?
As for automatic coupons—for the better part of the past
decade that’s been called marketing automation, and while most marketing
automation systems could benefit from a more sophisticated price optimization
approach, most ‘Dynamic Pricing’ solutions on the market are weighting the
recommended Price on high-demand periods rather than considering Price as one
attribute of the total campaign (creative + impressions + target audience + TRP
support + Price Point etc.). It’s important to consider that when you isolate
couponing from the rest of the marketing mix as the only lever, you’re
activating a Price discount alone to drive a purchase without visibility into
the comprehensive coinciding media mix. For brands that want to emphasize that
they are more than a number, it is a step backward from the marketing
automation systems that attempt to incorporate the ability to drive traffic
based on brand differentiation rather than joining the race to the bottom on
price discounting.
Ultimately, discounting and the level or frequency of it is
a brand decision. Fortunately, it can now be done in a more
targeted and discrete way than before. If discounting is part of your
brand—then doing it efficiently and dynamically makes sense—but marketing
automation systems designed to find non-price attributes that drive traffic are
also more likely to acquire customers who come for what differentiates the
brand. Brands would be encouraged to discern what consumers respond to and
many do not respond to discounts at all—in these instances you are just giving
away revenue.
More than Semantics
My point in writing this is not to ‘police’ the
language—but to reduce confusion and manage expectations. There are incredible
solutions making real impacts on restauranteurs and customers. However, it’s
important that restaurants choose a solution that is appropriate for their
brand and customer experience. Great tech fails when the use case doesn’t fit.
One restaurant may be ideal for a solution that changes prices (or product
features) with great frequency, another for strategically differentiated prices
that don’t change with much frequency—and another that just needs the right
everyday price strategy. When it’s all muddled into the buzzword of the moment
it’s harder for operators to make the right decision for their brand. Semantics
matter.
Are you looking for a new partnership
to drive sales? Are you ready for some fresh ideations? Do your food marketing
tactics look more like yesterday than tomorrow? Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may have the
clue you need to propel your continued success.
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