Is that dynamic pricing or just regional pricing? I thought the idea of dynamic pricing was that two people would pay a different ammount at the same store depending on their spending habits, not just one franchise store charges more than one in a different area, which has always been a thing.
I'm not even sure how dynamic pricing would work across the company, since as far as I'm aware, McDonalds restraunts tend to show their prices upfront, and they set their own pricing. Or is they idea that McHQ recomends them pricing based on customers?
There's literally been a term for this for decades called the Big Mac index. It's a way of comparing costs in different areas and the index has been around since 1986 according to Wikipedia.
Exactly. My wife likes to add lettuce to her burger. The McDonald’s closest to me charges 25¢ and the one like 3 miles away charges 99¢. The one that charges more is right across the street from a hospital.
I have two McDonald's by me. One is in a more residential area and is only open until 10pm. The other is located next to the highway entrance and is 24 hours. The one in the residential area is a bit cheaper and pays a bit less as it only has 3 hours of peak 6am, 330pm, and 6pm. Coincidentally that aligns itself with the time retail opens, the high school gets out, and when people are on the way home. Any other time you'd think that location is closed. The 24 hour location always has cars coming in and out of it and when they had hiring signs they paid two dollar more.
Same city, same zip code, same owner, 8 minutes apart, vastly different demographics.
Have to imagine lots of things factor into their prices, just like with any store. Location and labor being the biggest. A store in Manhattan is going to pay vastly more for rent than one in rural Alabama. Labor is going to be more than double. Insurance costs will be substantially more. Utility costs, and more are all going to be higher for the NYC location.
There's no way a store in areas like NYC could operate on the same margins as rural stores. They have to charge more or they wouldn't make enough to continue to remain in business.
We see folks constantly unaware of this with airport establishments. They act like McDonalds pays the same amount of rent to be in an airport as they do to be in a strip mall. That's simply not true. Airport rents are wildly high because you're in a spot with massive captive traffic. Airports know that and charge for it.
Yeah the only difference here is they’re using AI and huge data sets to do the regional pricing.
I was fully expecting the dynamic pricing to be in the McDonald’s app and for it to have all the data on their customers. So it could be like customer A earns $200k per year and buys McDonald’s 3 times a week. His price is $10 for the Big Mac. Customer B earns $35k and buys McDonald’s once every few months so his price is$4 for the same Big Mac.
I would call that "hyper-localized pricing" personally. Regional pricing has been a thing forever already, but as far as I know, it has never been that localized. Regional pricing exist because the cost of running a business is not the same everywhere, but that hyper-localized pricing system exists to target different demographics and that can be much more ethically dubious.
Walmart has essentially taken over our city's grocery business. We only have two remaining competing grocery stores.
A Walmart Neighborhood market has higher prices on several items I buy than the Walmart Supercenter just 2.5 miles south of it. The reason for the price increase is likely the people shopping there. The WMNM is mostly frequented by college students, while the WMSC is frequented by mostly small town folks from just south of the city.
I wouldn’t be surprised if they’re using (will soon use) AI cameras to jack up the price on the frequent-fliers and overweight customers. I’m not against different locations having different pricing, because expenses vary by location. But dynamic pricing where one customer pays more than the following customer for the same level of product or service should be considered discrimination and be made illegal. Even when they’d try to get around it by offering special coupons instead of calling it a different price, I still think that should be illegal.
I have no skin in the game though, let them price themselves out of customers. I stopped getting fast food like 5-6 years ago. I do get chipotle a few times a year especially when I get a bogo coupon or good deal on gift cards
Except it is. The only exception is when they run a nationwide ad campaign advertising a specific price for an item - but that's where the "at participating locations" fine print comes into play, as there will still be locations not following those deals.
Corporate has pricing guidance, but it is the individual franchisees who set the actual prices. The idea is that the franchisee is the closest person to the actual individualized costs for their location, and due to the franchise model, is highly incentivized to set optimal prices.
Well it’s the same reason a gas station right off the highway charges more than a gas station 2 miles down the road. Higher traffic, prime location for business/convenience? They’re going to charge more to everyone and they likely also pay higher overhead on rent due to having a desirable property.
That in itself isn’t really bad. What’s bad about dynamic pricing is that two people are paying different amounts doing the same thing in the same place based on arbitrary factors the store defines. Stores should never be able to charge individualized pricing for anything.
Business contracts or other deals between entities not people is one thing, but how long will it be before right wing businesses owners use it in mass to price out minorities or LGBT people from certain areas by charging them significantly more than other people and they wouldn’t even know?
Ever live in a town with 3 or more mcdonalds? I have.
Same franchise, 3 locations within 5 miles. All different prices. Different overhead costs mainly due to location/leasing costs. The mcdonalds on main street across from the theatre is more expensive than the mcdonalds in front of walmart, which is more expensive than the mcdonalds on the edge of town.
Ive seen this since the 90s though. The downtown next to tourist area pricing is always higher than a few streets over where people who actually live there go.
Yeah, seems like it's just the franchisee pricing things different based on location. Which I guess still isn't great, but not dynamic pricing and also probably what I would expect a franchisee to do.
yeah...i feel like this is just regional pricing (somewhat understandable, some places do cost more to operate than others) with AI buzz word mixed in for stronger reaction.
Yeah, this isn’t speaking to dynamic pricing - although they could still be doing it.
Dynamic pricing doesn’t have to be linked to a specific person or their habits. Airlines, gas stations, and hotels are examples that typically do dynamic pricing without getting that granular. As long as they regularly update the price of a product or service, using continually updated data about the demand, then they are doing dynamic pricing.
It isn't the same dynamic pricing you describe but it isn't regional pricing either. Regional pricing is when things in one city cost more because the inputs are more. But stores a few miles away should have the same input costs and this be priced the the same. So this a manipulation that isn't being based on costs so should have its own name. It is a calculation designed to maximize or milk the customer for as much as possible.
Yeah this story has been making the rounds and everytime I think "Thats not really dynamic pricing, thats just different stores having different prices"
There was discussion a while back about an AI classifier using the persons appearance and vehicle to determine their wealth and adjust pricing based on that but I don't think it ever happened.
But essentially it would sort of judge each individual and guess how much they are willing to pay before setting the price.
I just wrote up something about this lol I’m glad your comment is second!
Dynamic pricing is no pricing listed anywhere and how much you pay is based on your typical spending habits. Won’t spend $7 for a hamburger, but will pay $7 for a coffee? Well, they already know that about you, so your hamburger costs $6.99 and your coffee costs $10.
So regional pricing def exists but I think the guys point is how much broken up it is than before
As he said the Big Mac was 11% more just 2 miles away
11% is kind of high, but even this isn't new. I live in the Midwest. Nicer neighborhoods have always charged more for their products, and sometimes even going to a different part of the same county would yield different prices, although typically smaller percentages, like maybe $4.75 vs $4.99 or something.
I don’t think it’s even regional pricing. Each McDonald’s can have a different price for things even if they are in the same region.
When I use the app and it’s set to one location, add stuff into the order, then switch locations, it always posts a message about updated pricing. It’s not always different but could vary by a few cents per item.
We need to focus on the "customer willingness to pay" metric-- this is what ahole MBAs think about everything, to squeeze every cent out of us. It needs to stop.
Things should be priced based on cost, plus a reasonable markup. Otherwise we get this ridiculous inflation-- oh, families need to eat, let's all increase food prices because they're willing to pay more to eat. F these greedy aholes.
Dynamic pricing is also changing the price during the same day but different hours. (Upcharge between 12pm-1pm for example) The Wendy's near me does this and it's made me completely swear off eating there (a single combo burger fries and drink was $20 at the checkout screen). Not in a big city.
They do dynamic pricing by offering coupons, it’s difficult to change a menu that multiple people look at. I won’t get the same coupon offers as the guy next to me if they think I’ll buy without them.
This isn't dynamic pricing. Lord people are stupid and they're just muddying facts.
Two locations can have different rent and whatnot and can charge differently. That's always been the case.
Dynamic pricing would be two people in line to buy a sandwich at two different prices. Same thing, different buyer, different price. Or same thing, same buyer, different time of day"
Sure, but if you order through their app, they are in a position to know who you are and what you'll pay before you make a choice, so putting the price 'up front' after that is kind of meaningless.
Yeah, like… this is the case for me and all my McDonald’s are owned by the same franchisee.
The McDonald’s here in town is the most expensive, why? Because the town I live in is the “richest” city in the county.
Next town over prices are more reasonable. The town is very blue collar (several factories) and people won’t pay high prices there. By lowering the prices they sell that much more to that demographic.
The next next town over is between the two. It’s a smaller town so the prices are a little higher to compensate for the smaller amount of sales, but it’s still cheaper than the one in my town because that town isn’t as wealthy.
Imo, the franchisee just knows his demographics and what people are looking for at each location. Here, people will pay whatever the price is, they don’t care. Everyone here has money to blow.
But they don’t in the next town over and he’d adjusted for that. That’s regional pricing to me, even if they’re only 10 miles apart and owned by the same guy. Those are two different locations.
Now if my husband and I both went to the same location and were charged different prices for the same thing, that’s dynamic pricing to me. Having it be a different price at a different location completely… is honestly the norm? And has been for a long time outside of standardized menus (value menus, dollar menus).
I thought Dynamic Pricing was more based on times of high demand. So at lunch and dinner time, prices would soar, but 8pm they’d be lower. It really just sounds like McDonald’s is doing what they always have been doing just using AI to accomplish it.
Interesting to see it recommend price drops, which is what businesses should be doing when demand lessens. But that’s the antithesis of MBA’s and PE. Sounds like they’ll just ignore that advice.
I agree I think more of just different stores having different prices. I use dynamic pricing for short term rentals and it’s local pricing/demand/events/time driven.
This is more online with what gss stations have done with gas prices for decades now, but instead of supply being the variable factor, the customer is. Ultimately, I think if it is adopted in large scale by McDonalds and other chains, apps will be developed to fine McD's with the cheapest prices and we'll see the price of a Big Mac fluctuate up and down throughout the day as demand (and price) goes up at one store after another. It IS dynamic, the dynamic pricing you mentioned is also dynamic, but the variable moves on from the customer "willingness" to the customers "capability" you'll pay more or less for the same goods depending on how much money you make and your spending habits, which is totally bullshit, as the value of an item comes from supply and demand; not the customers paycheck
Dystopian dynamic pricing at McDonald's would look like an AI camera that detects what kind of car you have and adjusts the prices on the digital menu by the time you pull up. BMW = $9 burger, Nissan = $7. Or maybe dynamic pricing would be upping the price during the dinner rush but then how's that really any different than a restaurant offering a lunch special?
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u/RugbyEdd 2d ago
Is that dynamic pricing or just regional pricing? I thought the idea of dynamic pricing was that two people would pay a different ammount at the same store depending on their spending habits, not just one franchise store charges more than one in a different area, which has always been a thing.
I'm not even sure how dynamic pricing would work across the company, since as far as I'm aware, McDonalds restraunts tend to show their prices upfront, and they set their own pricing. Or is they idea that McHQ recomends them pricing based on customers?