Wendy's new potentially $30 Hamburger

Marketing and Business in the World

Introduction

    Wendy's has announced that they will be spending roughly 20 million dollars on new electric menus to introduce new "Surge pricing" similar to Uber. Based on consumer demand they will increase prices of menu items as the day goes on. 

Can they pull it off?

    The CEO of Wendy's, Todd A. Penegor, states "For us, it was all about consumer reaction. The concern was if you're going to raise prices, you're going to sell less product, and it turns out that really wasn't the case." He basically said that their forecasts show that even with predatory pricing, their sales will actually not take that big of a dip. They are trying to follow in Uber's footsteps with their surge pricing and the success of that. However, there are key differences in the companies, products, and even the industry that these two companies are based in. While Uber uses surge pricing as an incentive for drivers, Wendy's is simply attempting to scrape more profit. Furthermore, users of Uber don't really have any choice when ordering a driver. For example, after a night out at the nightclubs or bars, many party-goers order an Uber to get home as the alternative is driving under the influence or walking. 

    Wendy's simply does not have the stranglehold on the fast food market that Uber has on the rideshare market. Consumers will simply see the increased prices and go down the street to another alternative for a cheaper, faster option. This could end catastrophically for Wendy's and if I was a shareholder of them I would personally be worried. However, this is not the first time that a relatively negative change actually benefitted a company. Netflix recently cracked down on password sharing with a change that many claimed would ruin Netflix. However, Netflix actually saw an increase in revenue and subscriber counts. It is not unprecedented for a poorly received change to actually increase revenue for a company. Again, the simple fact still remains, people are not as attached to Wendy's as they are Uber or Netflix. These other companies who dominate their industry have the room to make these anti-consumer moves for the sake of profit while Wendy's seems to be missing that market share. 

    

All eyes on Wendy's

    While this change is generally anti-consumer and bad for the average person. Every fast food company is watching the change like a hawk. If this change turns out to be beneficial and if their data is correct, we can expect every fast food chain to roll out "Surge Pricing" as soon as next year. So it is very important that consumers do not give in to their new pricing or it will become the new standard across the fast food industry. 

    Steven Suranovic, a professor at George Washington University said "If people feel like they're getting gouged, they're not going to take kindly to this dynamic pricing strategy." It will all come down to how they implement their new pricing. If the prices change will people are in line and the price is multiple dollars more by the time they get to the counter, this would cause a very negative experience for the consumer and I would like to assume that Wendy's would lose a substantial amount of money and goodwill with consumers.

Conclusion

    Overall, this change can go either way but initial online feedback has been very negative and highlighting the predatory strategy. This is also coming from the industry most effected by price increases in recent years as well. More people have complained about the increase in fast food costs than people who've complained about the cost of health care. It will be very interesting to see how this shakes out, but I hope it flops for the sake of the average consumer. The rest of the industry are keeping their eye on how it plays out and if it goes well, we can expect this "dynamic pricing" to spread like wildfire throughout the fast food industry.