A few years ago I went to Dublin on a bleisure trip -before the term was even coined-. Had to go for a couple of days for work and my wife joined over the weekend.
We went out for a couple of pints to Temple Bar, and I was surprised to see that as the night went by, the prices of the pints kept increasing.
Dynamic prices on F&B? Cool, I thought. Finally!
Fast forward a few years and not much has happened on that front. Only a few companies are starting to develop the concept, partly helped by the digitization of menus and the ability to apply dynamic pricing to online menus accessed via QR codes.
It seems, however, that the public is not 100% ready for it, which is quite surprising, as we have had flexible pricing in many different segments within the tourism industry for quite a number of years. Let’s look into the positives on the implementation of dynamic pricing on these areas, seeing it as a win-win from the customer point of view:
Airline Industry: By implementing dynamic pricing, airlines can offer more affordable options to budget travelers while maximizing profits during high-demand periods.
Hospitality: Here, dynamic pricing allows accommodation providers to balance occupancy rates, maintain competitiveness, and adjust prices in real-time.
Ride-Sharing Services: In this case, dynamic pricing helps to ensure that riders can quickly secure a ride when they need it most while encouraging more drivers to be available during peak hours.
E-commerce and Retail: By adjusting prices in real-time, retailers can attract customers with personalized offers, optimize revenue during sales events, and dynamically respond to market fluctuations.
Entertainment and Events: Dynamic pricing allows event organizers to ensure that every seat is filled and that fans have a range of pricing options to choose from.
Why would it then be so challenging to implement them in the F&B arena? Let me list some of the current hurdles faced by the industry, and my insights on how to overcome them:
Traditional Pricing Model, which requires a significant shift in mindset. And that change needs to happen both on the customer’s mindset, but also -and more importantly- on the business side. The ones that have already tried the early bird, happy hour, etc… will feel more comfortable increasing the price of the dishes over the peak times. The rest might have to work hard on their own belief system.
Customer Perception and Experience, as sudden price fluctuations may be perceived as arbitrary or exploitative. This hurdle is relatively easy to tackle, as the same principle applies here than at hotels: the customer visiting your premises on a weekday for lunch is not the same (or at least has different reasons) than the one visiting you to enjoy a dinner over the weekend. Therefore, it will be more open to pay different prices at different times of the week/year moving forward.
Menu Complexity and Costs, as determining optimal pricing in real-time based on factors such as demand, food costs, and table turnover can be a complex task.
Here comes the technology to the rescue, so no more excuses on this one 😉
CompSet and brand image: dynamic pricing could also potentially impact a restaurant’s brand image if not managed carefully. Restaurants must strike a delicate balance between revenue optimization and maintaining a consistent and trusted brand perception.
Finally, on this point, I would say we should reverse that thought. What if applying dynamic pricing sets you positively apart from your compset? Some punters will be attracted by your discounted prices at quieter times, while those looking for an exclusive experience will be happy to pay a premium on certain occasions.
Great news is that despite the challenges still present, there is an increasing number of F&B outlets taking the dynamic pricing road. And then it will be time for hairdressers, beauticians, dentists, etc.. but we’ll leave that for another time.
Would be great to know your thoughts on this topic: do you foresee most of the F&B industry embracing dynamic pricing in the near future?
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