As Canadians continue to face inflation and the possibility of a recession, many restaurants are looking to recoup costs without abruptly raising menu prices. Dynamic pricing could be the answer.
What is dynamic pricing? In simple terms, it’s the idea that prices fluctuate across the board on a schedule several times a year. While this still means a rise in consumer costs, it tends to be better accepted by consumers because it’s promoted and expected.
How can you implement dynamic pricing?
Even though airlines and hotels seem to be able to adjust their pricing based on demand, consumers seem to resist this approach when it applies to restaurants. If it’s framed as a discount or benefit, consumers tend to be accepting of price changes during off-peak hours or on certain days of the week. For example, raising prices minimally and promoting them as “paying less on Mondays” sounds better to customers than “pay more Tuesday through Saturday”, so how you market this endeavour may well affect your success.
Here are a few things to consider before implementing dynamic pricing:
- If you’re nervous about going all-in, test it out to gauge customer reaction and success with a happy hour or daily special. You could also offer a seasonal menu with higher prices, attributing the cost difference to the limited time the ingredients are available. If customers respond well, you can experiment with more pricing fluctuation.
- While this may seem counterintuitive, loyalty programs can help by offering perks or discounts as part of the program. As customers work to earn rewards, they are spending time and money at your restaurant. Also, this presents the opportunity to raise your prices, allowing loyalty members to take advantage of the discounted (previous) pricing.
- Can you still deliver great value and an excellent experience to your customers if your prices fluctuate? Some POS systems have a hard time supporting so many changes, so be sure you can execute well. Don’t forget to thoroughly train your team, too, so customers aren’t turned off with longer wait times or uninformed staff.
Dynamic pricing is something that exists in other industries, having experienced limited success with restaurants in the past. However, if you can get your customers on board by continuing to provide value, then you just might be able to adjust your pricing, keep your customers, and make the most of your margins at the same time.