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Why Restaurants Should Resist Surge Pricing? It's Inhospitable

restaurant surge pricing

Surge pricing is the last thing a restaurant brand needs.  

Yes, dynamic pricing models are increasingly prevalent, but the question of whether surge pricing belongs in the restaurant industry is one of both strategy and principle. Popcorn GTM believes that this model is at odds with the fundamental values of hospitality and dining, potentially eroding customer trust and brand authenticity.

The Cornerstone of Customer Loyalty

The bedrock of any successful restaurant is its ability to foster a sense of belonging and loyalty among its patrons. Surge pricing, with its inherent unpredictability, can jeopardize this, potentially alienating diners who may feel penalized for dining at peak times.

Do you want your loyal customer to feel like they're being penalized for buying your food? Pricing fairness is a real concern and the influence it has on customer behavior should not be ignored.


Consistency and Brand Promise

A restaurant’s brand is built on a promise of consistent experience and value. Surge pricing, by nature, introduces a variable that can compromise the consistent pricing customers expect, impacting the brand's perceived reliability and trustworthiness.

A brand promise is one you keep. Your customer is expecting a certain experience when they dine with you. When you mix in an unexpected surge price because they're hungry when lots of other people are hungry, to me, that's a broken promise.


Understanding the Diner's Mindset

Dining out is a cherished experience, often seen as a treat or celebration. Surge pricing can mar this experience, leaving customers feeling exploited. This feeling of exploitation can be the tipping point, turning a previously enjoyable experience into a source of frustration.

Imagine your customer taking the time to choose your restaurant to treat themselves, only to find that they're being "taxed" for their decision. How many additional fees do you want to add on? Between tips and convenience fees -- now a penalty for eating during "peak" times? How confident are you they will return next time?


Economic Theory vs. Restaurant Dynamics

The intent behind surge pricing is to optimize revenue, but the dynamics of the restaurant industry do not always follow predictable economic models. The perceived fairness of pricing plays a significant role in customer satisfaction and repeat business, factors that surge pricing could negatively impact.

While surge pricing might make short-term economic sense, the restaurant industry's dynamics do not align neatly with the simple supply-demand curve.

Dilution Economics: Popcorn GTM believes that peak-time surge pricing can deter customers, who might opt to dine at off-peak times or choose a competitor, thus diluting the peak-time demand that the pricing model intends to capitalize on.


popcornmarketing_greed_food_money_restaurant_1fa7d3a9-4e34-42dc-8fd6-abc571f89f10Cross-Industry Learnings

Airlines and hotels have long used surge pricing with mixed results. However, unlike a flight or hotel room - often seen as necessities for travel - dining out is a discretionary activity. The choice of where to eat is vast, and the competition is fierce. Restaurants lack the oligopoly advantage that allows airlines to implement surge pricing without significant customer attrition.

While surge pricing may have found success in industries like transport and accommodation, the restaurant sector's unique value proposition makes this practice more complex and potentially detrimental.

Customer-Centric Strategies Over Surge Pricing

At Popcorn GTM, we advocate for customer-centric approaches that enhance the dining experience without resorting to surge pricing. Options like loyalty programs, exclusive benefits, and off-peak incentives align better with the hospitality ethos. After all, restaurants are in the hospitality business, first.


The Imperative of Brand Authenticity

We're big on brand authenticity here. It's the glue that holds everything together.  If you're inauthentic, the consumer will sniff it out and look elsewhere. Brand authenticity acts as an anchor of trust between the consumer and the restaurant. It's a relationship that surge pricing can undermine by signaling a shift from hospitality-driven experiences to profit-driven transactions. This shift can dilute the authenticity of the brand, leading to a loss of consumer confidence.

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So, there's seven compelling reasons why surge pricing is not only short-sighted, but simply against the principles of being hospitable to your guests!

Restaurants play a unique role in people's lives, serving not just meals but memories. Surge pricing introduces a layer of complexity and potential distrust that is incompatible with the essence of the dining experience. Popcorn GTM believes in the value of transparency and consistency in pricing. We must ask ourselves what we value more: the extra revenue from surge pricing or the lifelong patronage of a loyal customer.

We invite you to join the conversation below. Do you believe surge pricing has a place in the restaurant industry? Have you encountered it before, and how did it affect your dining experience? Your insights are valuable as we continue to navigate the evolving landscape of restaurant economics.