Like Wendy’s, Coke tried dynamic pricing but got backlash

Last week, Wendy’s set off a bit of a social media sh–tstorm when it confirmed that, beginning in 2025 they would be testing out a dynamic pricing model. The dynamic pricing module is what Uber follows, with surge pricing going into effect based on demand, time of day, or location. Naturally, everyone dragged the hell outta their greedy corporate asses. Wendy’s quickly backtracked, claiming that they were planning on using the ”other” definition of dynamic pricing! You know, the one where companies charge customers less money during off-hours, not more money during busier hours. Silly us for not realizing they were using that lesser-known definition that companies are always known for using.

As it turns out, this isn’t the first time that a company within the food industry has had the idea to implement dynamic pricing. 25 years ago, Coca-Cola thought they could get away with a little bit of blatant price-gouging of their own. Back in 1999, Coke toyed with the idea of vending machines that would automatically raise the price of their products on hot days. Their chairman at the time even justified charging more because the demand for a cold drink goes up when the weather is hotter, literally saying, “So, it is fair that it should be more expensive.” And let’s see just how that worked out for them.

Burger chain Wendy’s is in damage-control mode following reports that it would be testing surge pricing — a mostly reviled strategy of raising prices during busy times made famous by Uber. The whole debacle seems very of-the-moment, but actually mirrors another PR crisis from 25 years ago at the Coca-Cola Company.

Back then Coke considered raising vending machine prices when the temperature rose:

People thirst for a cold drink on a hot day, “so it is fair that it should be more expensive,” the company’s then-chairman said. People hated the idea. The word “gouging” came up a lot, wrote the NYT’s David Leonhardt more than five years later. Pepsi quickly took the opportunity to say it would never do such a thing — and Coke walked it back.

Coke framed dynamic pricing in a way that was certain to get backlash, says Vicki Morwitz, a professor at Columbia Business School who teaches the episode as a case study.

The semantics make a big difference — you don’t want to highlight the idea of raising prices. The best practice is to set your highest price as a base price in an algorithm and offer discounts from there. Many private colleges and universities employ this sticker-price strategy, as Ron Lieber details in his book “The Price You Pay for College” — though parents and kids trying to make choices don’t love it.

The bottom line: People don’t like when prices are high or seem unfair or capricious. Companies should tread carefully.

[From Axios]

I mean, framing it as being entitled to charge more for a cold soda simply because more people drink more cold sodas when it’s hot out is certainly a strategy, all right. And most companies do that thing where they set their base prices high to offer discounts. I feel like every single time I buy clothes at a store that isn’t Costco, my 20% off coupon is merely bringing my sweater back down to what they’d charge anyway. All together now, let’s give a collective, “Meh.”

Also, LMAO at Pepsi for taking advantage of that to troll their longtime rival. I wonder if they’d do that today or if they’d sit quietly and see if the strategy ends up working out so they can implement it themselves. I saw Burger King and Arizona Iced Tea had sassy Tweets about Wendy’s controversy. Burger King also offered free Whoppers to taunt Wendy’s, too. It would have been hilarious if more companies’ social media accounts had gotten in on the roasting. It’s always fun watching companies gang up on other ones for terrible PR moves. Let’s call it “surge trolling.”

the only thing surging at BK is the 🔥. we don't believe in charging people more when they're hungry.

FREE Whopper or Impossible Whopper with $3+ purchase in the BK App through Friday at part U.S. rest. terms apply: https://t.co/HblzQ1uRIq

— Burger King (@BurgerKing) February 28, 2024

AriZona Iced Tea has been 99 cents for 30 years https://t.co/ZYFUeTXvUX

— AriZona Iced Tea (@DrinkAriZona) February 27, 2024

photos are screenshots of Jared Leto in a 1991 Coke commercial, video above