HungerRush™ Survey Reveals Restaurant Surge Pricing Sours Customer Loyalty and Can Negatively Affect Profits

But this study suggests dynamic and surge pricing models may not be a good idea as a long-term strategy.

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Provider: 
Business Wire, Inc.Business Wire, Inc.
Retrieved on: 
Tuesday, April 9, 2024
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Tags: 
Professional Services, Retail, Restaurant, Bar, Technology, Human Resources, Software, Food, Beverage, Workforce, POS, Blog, Sale, Global Operations
Geotags: 
UNITED STATES, NORTH AMERICA, TEXAS, CALIFORNIA
Organisation: 
HUNGERRUSH
Summary
Key Points: 
  • But this study suggests dynamic and surge pricing models may not be a good idea as a long-term strategy.
  • As seen in recent weeks with national media coverage on the topic, dynamic or surge pricing models don't sit well with customers.
  • According to the survey, 64% of diners said they have a negative reaction to restaurants using surge and dynamic pricing.
  • We've witnessed backlash against surge pricing models in the past, demonstrating the importance of preserving customer experience and loyalty.


HungerRush™, the leading point-of-sale (POS) software platform provider for quick-service and fast-casual restaurants, released surprising results today from a national consumer dining survey on surge and dynamic pricing models for restaurants in the United States.

Restaurant owners face increasing profit margin challenges due to rising food sourcing costs, labor costs, and other economic factors. This month in California, the new $20 minimum wage is now in full effect, making a massive difference in some restaurant owners’ bottom lines. In order to offset these rising operational costs, more restaurants are choosing to raise the cost of menu items depending on the time of day and demand (surge and dynamic pricing).

But this study suggests dynamic and surge pricing models may not be a good idea as a long-term strategy. As seen in recent weeks with national media coverage on the topic, dynamic or surge pricing models don't sit well with customers. According to the survey, 64% of diners said they have a negative reaction to restaurants using surge and dynamic pricing. Additionally, 81% of diners surveyed said they would either stop going to a restaurant altogether or alter their dining hours to avoid prices surging during peak hours.

This signals the need for restaurants to reevaluate pricing increases and instead explore other potential ways of increasing revenue.

Additional highlights of HungerRush’s National Restaurant Price Surging Survey:

  • Are diners more understanding of locally owned restaurants that need to increase their prices?

    48% of diners said they are more understanding of small chains and local restaurants needing to raise prices. This reveals that owners of smaller restaurants have more room than larger chains to experiment with surge and dynamic pricing in order to help offset their high operational costs.
  • How Do Diners Feel About Extra Fees?

    56% of consumers surveyed said they choose/will choose in the future to order from a restaurant with lower fees. 63% of diners are willing to pay a small fee to make up for increased operational costs. However, 21% of diners are only willing to pay a minimal fee of less than 3% of their total visit.

"Coping with the recent $20 minimum wage in California alongside high national inflation poses significant challenges for restaurant owners," said Bill Mitchell, Executive Chairman of HungerRush, and former President of Global Operations of Papa John’s International. "While raising prices may seem like a straightforward solution, it can negatively impact consumer loyalty. We've witnessed backlash against surge pricing models in the past, demonstrating the importance of preserving customer experience and loyalty. Our data highlights the critical role of customer satisfaction in a restaurant's profitability. Instead of solely relying on price hikes, we recommend leveraging technology and optimizing workforce planning to enhance operational efficiency and minimize expenses."

As restaurant operators and owners evaluate if surge and dynamic pricing models are right for them, they need to consider the sticker shock diners will experience. If they go this route, they need to be prepared to make up for the 22% of loyal customers they are driving away altogether.

For more insights from HungerRush, please visit our blog here.

Survey Methodology

The survey was commissioned by HungerRush and conducted by Dynata, the world's largest first-party data company. The survey was conducted in March 2024 of 1,000 U.S. consumers 18 years and older to understand potential dining habits and preferences toward restaurants that use surge or dynamic pricing models.

About HungerRush

HungerRush is a leading provider of integrated restaurant solutions that make it easier to delight guests, drive loyalty, and manage restaurants from anywhere. HungerRush 360, our flagship all-in-one cloud POS system, integrates digital ordering, delivery, customer engagement, restaurant management, and payment processing features with flexible software designed to give operators of all sizes more insight into their customers, more control over their operations, and more power to profitably grow their business. For more information, visit HungerRush.com.

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Copyright Business Wire 2024