By Roger Carlton, Guest Columnist
A week and few days ago, Wendy’s CEO announced that they were going to spend $20 million to upgrade their menu boards and signs at their 7,000 plus restaurants to improve the customer relationship.
This was fast-food speak for implementing menu changes and price increases electronically. The national media grabbed on to this story, and Wendy’s 30 million customers began to choke on their 960-calorie $7.39 Baconators.
To be fair, artificial intelligence can improve the customer experience. A computer can take an order from a drive-through customer and quickly report it. My aging ears and dwindling visual acuity often make it hard to order. The order repeated on the screen is very helpful. I might even succumb to the AI-generated upsell with a larger size or a dessert.
As usual, new technology is fraught with risk. Hidden in the benefits is a lurking danger. Dynamic pricing aka surge pricing allows “new or improved product” pricing to be adjusted without having to replace the graphics.
When I was 70 years younger, the local A&P changed prices by using a solvent to remove the old price, and a rubber stamp to put the new price on the item. The stamps were carried on a cart and looked like 6-inch broom handles with a rubber stamp on one end.
This archaic process morphed to an adjustable stamp, where you turned a dial to change the price. The bar code introduced the age of electronic pricing, and today we see AI powering variable or surge pricing increases during peak demand periods.
Price increases were not invented by the Federal Reserve or incumbent presidents, contrary to political rhetoric. The robber barons like George Vanderbilt, who built the Biltmore Estate in Asheville, made his fortune in steamships and railroads. His price-setting philosophy was known as “what the traffic will bear.”
Raise prices until right before your customers go elsewhere. The U.S. Post Office invented the Forever Stamp. Customers can use the stamps at their purchase cost and don’t have to buy small denomination stamps when prices increase.
Utility companies raise rates when their demand is low or try to time the weather, as Duke Energy just mistakenly found out when an unexpectedly cold December/January occurred. People cringed at their higher bills based on increased quantity and price per kilowatt hour.
Water companies raise rates in the wet season. UBER charges more for a ride during peak times. Airlines do the same.
My first new car, a 1970 Formula 400 Firebird, cost $4,100. The average new car today runs around $42,000. Is the 10-fold increase justified or just the cost of gimcrack that no one needs or uses?
But wait! Heave a sigh of gastronomic relief. The new CEO of Wendy’s just stepped back the possibility of using surge pricing enabled by the use of AI and electronic signs. I feel better about his potential $8 million compensation package because he is a very smart executive.
The bad PR from Baconator lovers and loyal Wendy’s customers would have been more than what the chain’s traffic could bear. This would have been a Whopper of a mistake or a Big Smack in the face.
The writer is a resident of Lake Santeetlah.