Fast food restaurants are venturing deeper into the digital realm, adopting strategies ranging from dynamic pricing to drive-thru voice robots and weather-based menu boards.
Experts say cutting-edge sales tactics have the potential to streamline service, attract new customers and fill labor shortages amid high employee turnover, but they also warn that the public could be discouraged by poor communication and confidentiality concerns.
News of a Wendy’s plan to implement “dynamic pricing” sparked backlash after CEO Kirk Tanner told financial analysts on a Feb. 15 conference call that the 7-year-old burger chain 000 points of sale would introduce it next year.
Wendy’s clarified in an email Wednesday that price fluctuations would result in lower prices during quieter times of the day, rather than higher prices during peak periods.
Initial confusion over whether the 55-year-old establishment would adopt upward and downward pricing tactics similar to those of tech-savvy ticket sellers and ride-hailing companies marked the latest shift for a service industry fast that is increasingly shaped by digital technology and artificial intelligence.
Chains including Canadian-based Popeyes, as well as Taco Bell, Panera Bread and Chipotle, have tested AI-driven virtual assistants behind the wheel.
Next year, Wendy’s plans to test menu boards in all U.S. locations that can offer AI-driven changes and “suggestive selling” based on the weather – “a fresh Frosty on a hot summer day.” summer,” said spokeswoman Marcy McMillan. McDonald’s has been doing the same for about eight years, acquiring Israeli AI company Dynamic Yield in 2019 in a $300 million deal before selling it two years later.
As early as 2017, KFC offered its customers in Beijing recommendations based on their apparent gender, age and mood via facial recognition technology embedded in a menu screen.
“Over the last five or seven years, in the restaurant segment, technology has been so adopted through your third-party aggregators, through your loyalty apps, through your online ordering through your website – you can collect all this data you can collect your pricing strategies from competitors. And it all comes together and starts to be analyzed in real time,” said Robert Carter, managing partner of StratonHunter Group.
“The result is a much more competitive pricing strategy.”
However, food costs are a sensitive topic after nearly two years of high inflation, and companies need to be careful in how they deploy and promote dynamic pricing and other technologies, said Bruce Winder, a trade analyst at detail.
“What Wendy’s is trying to do is smooth out the demand so their customers aren’t coming exclusively at noon and exclusively at 5 or 6 p.m.,” he said. Lower prices at off-peak times could also attract more customers overall.
“But you’re kind of asking the customer to break with a tradition that’s been around for a few hundred, maybe several thousand years.”
It is also essential to preserve consumers’ sense of privacy, at least for now.
“If I pull up to a drive-thru and they say, ‘Hey, Bruce, how are you?’ “I might feel a little surprised by that,” Winder said. But experts also say younger shoppers tend to be more jaded about collecting personalized data.
Dynamic pricing already plays a role across a range of industries, not just those led by digital disruptors. Airlines, hotels, big box retailers, and sports venues all rely on sophisticated algorithms to continually fluctuate prices based on demand, supply, and consumer behavior, as do companies like Uber and Amazon.
Changes can attract attention: “Send a social media blast and you get a flash sale to drive traffic during these slower times,” Carter said.
They can also be subtle, involving several price adjustments per day on hundreds of flights or millions of products – or dozens of fast food items in thousands of locations. “This is going to translate into millions of dollars of increased revenue from very small changes,” he said.
Fast drive-thru service and a seamless digital experience are more essential than ever for fast food chains, where restaurant customers represent a shrinking share of revenue.
Delivery apps, curbside pickups and drive-thrus accounted for 73% of fast food orders in Canada in the 12 months between March 2022 and February last year, according to the market research company Circana.
The transition has not been flawless. In the United States, some customers have taken to social media to complain about their experience with voice-enabled drive-thru robots, which critics say have pushed upsells and confused customer orders. neighboring road with theirs. Drive-thrus can be noisy environments, while virtual assistants can struggle with accents, experts note.
None of this is stopping Wendy’s.
“We are investing significantly in technology to accelerate our digital business” – US$30 million for digital menus over the next two years alone – McMillan said.
There is no timeline for the rollout of AI-enriched menus or dynamic pricing in Canada, she said.
This report by The Canadian Press was first published February 28, 2024.
Christopher Reynolds, The Canadian Press
