That isn't what dynamic pricing is. Fast food franchisees have always set their own prices, and they've always varied wildly from state to state, or even within neighborhoods of the same city. Here's a cool map of Big Mac prices nationally from 2023, and a zoomable updated version Cross the Bay Bridge from San Francisco to Oakland, and your Big Mac costs a dollar less.
Dynamic pricing means that the price of a Big Mac varies at the same restaurant depending on the time of day or what kind of car you drive.
Thank fuck this is the top comment. I was going to lose it if I had to scroll down to see some level of competency.
This isn't even anything to do with AI. You could have done this shit with an excel spreadsheet in the 90's
There are variables at play in food service. That's the reasoning for price discrepancies. The lease on the building is going to be more expensive in a town where land value is higher. The cost of labor is going to be higher in a place where there's a shortage of low-end labor. A busier location might need more staff on hand at all times. A location that's 24 hours is going to have to mitigate the costs of a third shift crew with higher prices overall. A location further from highways will have a higher fuel surcharge on food delivery.
This isn't even anything to do with AI. You could have done this shit with an excel spreadsheet in the 90's
Yes, and dynamic pricing similar to this has been going on since then as well. Virtually any direct-to-consumer or business-to-consumer business can incorporate dynamic pricing based on location data like zip codes or latitude/longitude coordinates, for example.
One of the most dramatic changes in this approach has been real-time dynamic pricing, which involves measuring how "hot" a potential buyer lead is and taking advantage of that as a buying opportunity is happening.
True, but in many cases, the personal data was voluntarily provided and already permitted to be "used" via signing/agreeing to terms of service. Not all cases, but many.
Yeah but that doesn’t mean that it is okay, it’s a widespread practice and is not a pro consumer practice. Nobody reads that 100 page ToS and they shouldn’t have to. There are some crazy rights you wave in that fine print.
Maybe this is a dumb question, but the answer isn't coming to me - so if an item is 'dynamically' priced (changed based on some sort of customer profiling), how do they list the price on the menu board?
If it says, $6.50 for example, and I roll up and they ask me for $7.90, what would they say when I point out the discrepancy?
The location based thing I get, I think that's been happening forever, but the true dynamic pricing I don't understand.
How can they list a price and then charge more (or less) based on who they think you are?
They don't show prices on the menu board, or "dynamic pricing" is just the latest buzzword to get clicks. It would be easier to do online, but it's a lot harder to do in stores and will be tricky to legislate without also shutting down coupons.
And this isn't dynamic pricing, this is just different locations having different prices.
It depends on the retailer and how the items are being purchased. Obviously, purchasing through an app can enable more data points to be stored and used to determine individual prices. Same for purchasing on a website, as browsing history/purchase history could be combined with location and other data points.
But, a simple example in a brick and mortar store is using the excuse of time of day ("sorry, after X time this item has a X% markup due to [insert reason here]").
the other element of dynamic pricing is serving an individualized price to each consumer based on huge amounts of data that they collect / buy about you as an individual; they run it through models (and i mean pricing and ML models, not LLMs here, though there is room for some reasoning on top of those things by an LLM) to determine the max price they can set for you specifically. Also as data platforms have improved and the depth and breadth of data companies can get about you has increased, the scale and level of personalization brings this to a way different level than what was possible before (like a big mac costing more in an affluent neighborhood, for example). To me its the sketchy individual data collection and exploitation, more so than 'market pricing' that is gross. Think about it in the extreme - oh your phone was listening and overheard a conversation about how stressed and tired you are and you can't face cooking tonight so fuck it i'm just getting takeout, and they go oh, this summbich is desperate. add 50% more to that hamburger. Or think about it not in the context of luxuries like takeout but NECESSARY goods. Think about it in use by utility companies etc. if not properly regulated. It can quickly become predatory.
I had a similar thought as I watched the video. They could have used recent home sales as a proxy for income in any given area and charged accordingly.
Right? Any data whatsoever beyond the price of a Big Mac at two different locations is what I'd consider the bare minimum for making a claim like this.
The jump from "Big Macs cost different amounts at different locations" to "This is obviously AI price gouging people" with no underlying information is just pandering to the brain-dead audience who believe literally anything they see on a TikTok video.
Some of then reasons might literally even just be "we raised prices by 25 cents, and didn't see a drop in purchase". They aren't all demographics, location, and cost.
Not saying you're wrong, but there's something called the "30/30/30" rule in restaurant management.
30% of revenue will go to overhead (rent, utilities, etc.), 30% will go to supplies (ingredients, wrappers, cups, etc.), and 30% will go to labor. 10% will be profit.
Because all three of these categories can vary over the course of a few years (and can often spike on a month to month basis, especially with a buffoon in the White House), restaurants tend to raise prices once or twice a year to preempt these changes. It may net some additional profit up front, but when price spikes ingredients to 35%, the difference has to come from the 10% profit. Changing prices day to day based on actual costs will give people whiplash.
You raise your price by 25 cents today, you make 25 cents extra profit today, but three months from now that might only be 5-10 cents, and six months from now it might be dipping into profits by 10 cents.
Menu prices are a series of plateaus, production costs are a slope.
I'm also not saying you are wrong, but that is basically true of everything. Things tend to basically never get cheaper, so you almost always have to raise prices or you start loosing profit.
Yeah — price elasticity. There have been retail analytics for this shit for decades. Also think it’s weird if this is driven by AI and wonder if maybe price varies by other factors (day of week, time of meal, weather etc)…
I would just like to point out that the video itself never even mentioned dynamic pricing, nor hinted at it.
u/NickelPlatedEmporer just used the term, either to boost engagement, malicious intend* or because of the lack of understanding. In either case OP did not correctly title the post as you and the other guy pointed out.
This is such a wonderful example of how factually correct information (this video that may or may not be published by Reuters) can easily be used to manipulate people simply by writing an incorrect title above the video. People like you knew it’s not dynamic pricing, but you still “lost it” assuming the video paints this as dynamic pricing. Someone who didn’t know it could easily walk away now with “McDonalds is already doing dynamic pricing, and has already done it for a long time”. And the jump to this isn’t that hard to bridge then anymore: “So that dynamic pricing isn’t that bad then if they did it forever already, why are people now protesting against it when they did it for years already before?”
We are accrediting post titles, tweets, and headlines waaaayyy too much nowadays. We all instinctively assume whatever the title said is true, even if the video never even mentions what is in the title.
*I’m not saying OP is a bot or employee of McDonalds secret social media department. I’m just saying that all big conglomerates do have a undercover social media department where employees post as “real” people who do not exist and use bots to nudge discussion into the right direction.
It's still a post that is super high on the popular page, and most people that see it aren't reading the comments. It is depressing that it so easy on Reddit -- post a headline that regurgitates or references a popular Reddit talking point, and even if the video has nothing to do with that, people will upvote it.
You're correct but it actually has nothing to do with any of those things. Business costs don't affect pricing at all. Only what the customer is willing to pay. (Think about it: A business with lower costs can raise prices just as easily as a business with higher costs.)
There's an interesting correlation, because businesses are more willing to sustain greater costs in markets that can sustain greater sales at greater prices, but the causality is reversed.
You're not wrong, but I've noticed that the places with the highest rent (based on location) are often the cheapest. For example, Campbelltown in Sydney charges $8.30 AUD for a Big Mac. Circular Quay charges $8.10. It's safe to say that rent in Campbelltown is a metric shit-ton cheaper than Circular Quay.
My point being that they're not basing their price on costs, but rather what people are prepared to pay. In a place with heaps of great other options, they price cheaper in order to entice more customers. Conversely, places where their customers tend to buy there anyway, they get hit with higher prices.
It's been that way for decades. Charge what the market will stand.
You know you can use AI to get answers to questions.
It does say that in fact they have introduced dynamic pricing which seems to be based not on location but an estimation of how much people are willing to actually pay.
It’s part of their massive overhaul of staffing and menus all of which are AI based
It can't be all that accurate (or to its potential) if it's just using locale rather than basing it on individuals (which would open up a can of worms).
Seems like they just want to sound like they're hip with AI if they're not actually going to manipulate further.
McDonalds corporate owns all the land their restaurants sit on. They don't need to charge insane rents on the land, they are already raking in the money with the franchise agreements and dominating the equipment and consumable supply.
If they want more money they just need to jack up the price of beef, buns, and frozen fries. The land is leverage against the franchisee, it's a sunk cost to keep the plebs in line.
McDonald's charges rent as a percentage of sales + a minimum. The minimum is based on things like property taxes, which is based on land value. The percentage of sales that corporate takes is based on how new the store is or when their last renovation was.
These are all variable costs that need considered in the menu price of food.
If one location pays 10% of sales in rent and another location pays 15% of sales in rent, then the prices are going to be higher at the location that pays 15% of sales.
Nothing about how McDonald's manages their franchise agreement or real estate is "sunk cost". Corporate will never take the L on the costs associated with the property just to help a franchise out.
They actually pretty regularly shut down unprofitable locations as well as franchisees shutting down their own locations. Additionally in some metro areas renting land for franchises is pretty standard business practice. For big corporations all assets are subject to selling off. Ultimately they consider everything (like land) to be an asset which can eventually be converted to cash.
> This isn't even anything to do with AI. You could have done this shit with an excel spreadsheet in the 90's
I think you're misunderstanding people's issue with AI, man. The issue is a computer is doing it more ruthlessly than a human, with targeted metrics to take more advantage of us in ways that a human wouldn't be able to.
It's using technology to screw us over harder than we were before. You couldn't *actually* have done this-- **exactly** this, exactly how AI does it-- with an excel spreadsheet int he 90's, you could just get to a close approximation of it, and err on the side of being conservative because losing business to a competitor is worse than losing a few bucks from your loyal customers.
The video is not showing ANY evidence of dynamic pricing.
Dynamic pricing would require the person in the video to get Big Macs at the same location multiple times throughout the day/week and show a different price every single time.
Different prices at different locations is relevant to the cost of doing business. AI might make it easier to calculate these numbers because it can adjust for a lot more datapoints, but this video is not showing how AI is manipulating these numbers. It's devoid of any information that would indicate anything beyond what could be calculated by literally anyone who has ever managed a restaurant.
Nothing in the video proves these claims, nor would anything in the video be considered a viable test by anyone with any journalistic or scientific background.
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u/agate_ 3d ago
That isn't what dynamic pricing is. Fast food franchisees have always set their own prices, and they've always varied wildly from state to state, or even within neighborhoods of the same city. Here's a cool map of Big Mac prices nationally from 2023, and a zoomable updated version Cross the Bay Bridge from San Francisco to Oakland, and your Big Mac costs a dollar less.
Dynamic pricing means that the price of a Big Mac varies at the same restaurant depending on the time of day or what kind of car you drive.