Restaurants and dynamic pricing

Most people are quite familiar with the concept of dynamic pricing.  If you’ve ever bought a plane ticket or rented a car you know exactly the meaning of dynamic pricing, more demand, the higher the price, lower demand, a lower price. Sports teams have also embraced dynamic pricing by charging more for ‘premium games’ against top competition and for games played on the most popular days of the week.  Monday would not be one of those days for all but NFL football.  Broadway shows also engage in dynamic pricing for a good reason – they often have the data to help drive their pricing decisions.  

So why in general haven’t restaurants adopted dynamic pricing?  There are a number of possible reasons.  

  • Data is not available to accurately track and predict traffic.  Mom and Pop restaurants in particular.
  • Margins are so small already for most that offering a lower price simply eats up profit .
  • A few restaurants are so busy already there’s no need to consider this type of marketing.
  • The concept of lose money but make it up in volume is tricky at best.

‘Happy Hours’ are a type of dynamic pricing.  The idea of being able to drive business in slower times in the afternoon and late nights has been around for a long time.  My guess is that most restaurants continue to use ‘Happy Hour’ marketing is that they have a feeling that it is working.  But they don’t really know.  

‘Early Bird’ specials (in some places still known as ‘Blue Plate’ specials) are another form of restaurant marketing.  It makes sense in theory.  Restaurants can be successful through an:

  • Increase in customers paying checks.  i.e. fannies in the seats
  • Higher average check per customer
  • Increase in visits per individual customer
  • Increase in higher margin items

Are people really ready for a sandwich to cost less at 3PM than it does at Noon? It may seem obvious but A Forbes Magazine article from earlier this year offered this about dynamic pricing in general not limited to restaurants:

Despite these practices, the use of dynamic pricing appears to be on the decline overall. In RSR’s survey, in 2016, 28% of respondents saw dynamic pricing as an opportunity to drive margin, but in 2017 that number fell to 22%.

What gives? Well, one explanation is that consumers don’t seem to much care for it. We floated a small consumer survey alongside our pricing research, and we found that 71% of U.S. consumers surveyed didn’t like the practice, and another 23% thought it was merely “okay.”

So apparently consumers do not like dynamic pricing or at least are not yet ready for it.  Enter Big Data to the picture and, at the very least, there will be empirical data points to drive decisions.  



Another chart I found from the Forbes article:






Even with that small group’s enthusiasm, a majority of younger millennials still don’t care for the practice – 61% don’t like it, and almost half of those actually hate it. Older generations are even more against the practice, with 80% of Boomers showing no enthusiasm for it.

Given the way millennials tend to view other pricing practices, like an enthusiasm for deals well beyond other generations, it may be that millennials are just confident in their ability to game retailers’ dynamic pricing practices. They tend to be more tech-savvy and more willing to devote time to scouring the internet for the best prices, so they may approach dynamic pricing more informed about whether a price drop is worth acting on or not, and with more of a sense of whether their behavior or the actions of other retailers might trigger a price drop at another retailer as well.

Gaming retail dynamic pricing practices may be ok to millennials but it does seem like an awful lot of work.  

The restaurant industry in the U.S. has been in part responsible for the job recovery as people’s habits have changed and we eat out more than we ever have before.  At the same time it’s never been more challenging to be in the restaurant industry particularly if the restaurant is not part of a larger group that offers economies and efficiencies of scale.  Restaurants will always be looking to reduce costs while maintaining what they consider to be their raison d’etre offering either good food at low prices, luxury/high class dining experience, or a hot scene.  Serve yourself restaurants are also a way to reduce labor costs but still deliver a premium food experience at a lower cost.  

I don’t know that I am ready for true dynamic restaurant pricing but I do expect more restaurants now that they have more data to give it a try.  

An article from Neil Irwin of the NY Times this past Sunday delved into the practices of surge and dynamic pricing.  

What do you think about dynamic pricing for restaurants?

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To protest is something to champion

Boomers got to where they are today in their own unique way. From reciting the Pledge of Allegiance each morning in school, to singing My country Tis of Thee also in school, to watching Superman reruns starring George Reeves where the Man of Steel fought for ‘Truth, Justice, and the American Way’, we all had reason to believe that the U.S. and the Allies having recently won (from the perspective of the mid 1960’s) WWII, was inexorably on the side doing the right thing. Yet fear of the Red Menace was alive and well in the 1960’s and 1970’s and as any Boomer can tell you, doing drills where you had to get underneath your desk in the classroom, and signs for Fallout Shelters were unnerving to say the least.

The Korean War ended in 1953. I was a kid in the 1960’s and the TV show M*A*S*H* (an outgrowth of the protests and dissension of the 1960’s) in the 1970’s did not paint a pretty picture. The show was about doctors in a mobile hospital (that never moved) during the Korean War. But I am betting that many people like me were not sure if the U.S. won or lost. Bill Murray’s character in the 1980 movie Stripes has a line where he notes that the U.S. was 10-1-1 in wars. This was five years after the end of the Vietnam War and while I had little trouble figuring out which was the tie and which was the loss, it still was a pretty impressive record. Our parents came from the ‘Greatest generation’ and I guess the perception was that the U.S. was ‘undefeated’. Talk about a high perch to maintain!

The protests of the 1960’s are often thought of as the dawning of an awareness that not everything the U.S. did was right or ‘worked out’. Then, like today, protests were seen by many as being disrespectful to those that serve in our country’s military.   It was as if questioning policy, motives or actions of the government of a free country should never occur. Of course nobody actually feels it should never occur since that’s un-American. But the misguided notion that protesting by kneeling or sitting during the playing of our national anthem disrespects our servicemen and servicewomen is creating unneeded strife in the United States. Social media has not helped here since before social media you’d never read something publicly from a ‘friend’ that would cause you to form a different and negative opinion of that person. Civility would hold when meeting in person and even if there was a difference of opinion that was not tantamount to ending the relationship or friendship. Sadly that appears not to be the case today. Social media is clearly a megaphone for people to have their voices be heard.

I want to live in a country where it’s not only acceptable, but there’s encouragement for people to have their voices heard whether I agree with those voices or not. In the Vietnam War there were ‘conscientious objectors’ – like Muhammad Ali. Many of them paid a dear price for refusing to serve being arrested and jailed. Others moved out of the country. But there were also many who despite maybe having deep reservations about America’s involvement in Southeast Asia, served their country anyway. I did receive a draft number in the late 1970’s but by that time the U.S. had exited Vietnam and it never went beyond receiving the number. I thought at the time and still do that had I been drafted I would have served my country even if I disagreed with the reasons for our being there. I am watching Ken Burns’ Vietnam on PBS and it brings back so many memories about the way I felt at the time.

People that serve AND who put their lives on the line every day be it military service, law enforcement or other services that are in place to protect the public, are to be admired and appreciated – particularly by civilians. Among the many things these brave people are protecting are the rights of all Americans to be heard in whatever form of legal expression is in place. That’s something to fight for and something that I personally champion and will continue to champion.

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How Pro Sports teams act like startups

I’ve written that even start-up companies need to have a revenue generation model.  The idea that ‘If you build it, they will come” is rarely successful outside of Facebook and LinkedIn.  Startups need to show how their future success prospects warrant investor confidence.  Operating profits are uncommon with startups since most of the time building the platform and audience devour what little profit is generated (and most often there are losses not profits).

Entrepreneurs can create enterprises that have operating profits.  This I know from experience as a company I started in 2000,, has managed to show a profit every year (well ALMOST every year), but the overall audience and sales are relatively modest.  It’s not an easy business to scale since the price point is low and the cost to attract attention in our category (personalized fake magazine covers) is very high.

A couple of weeks ago it was reported that the NBA’s Houston Rockets were sold for $2.2 Billion.  And as the NY Times reported “…the man who will be getting the big check is Leslie Alexander, who bought the team in 1993 for $85 million.”  24 years and an increase in value of $2.115 billion is staggering.  It’s a 2500% increase in value in case you are scoring at home.

Now we all know the Houston Rockets even in 1993 were not a startup.  In fact the team started in 1967 – as the San Diego Rockets – as a member of the old American Basketball Association.  They moved to Houston in 1971.  Over their history the Rockets have had bad, mediocre, good and two championship seasons. (Much to the chagrin of this New York Knick fan).  They’ve also had seasons where the team made an operating profit, came close to breaking even, and others where there was an operating loss.

Most recently Forbes reported  the Rockets, like many NBA teams are operating at a profit.  The huge NBA TV and marketing contracts have made this easier – as long as the team performs well on the hardwood. Even if NBA teams don’t perform well, their brand and reach afford them the ability to build their franchise value even when their on the court performance stinks.  As an example, consider my beloved Knicks who are valued at $3.3 billion – the most valuable NBA franchise.

Do ever-increasing valuations like the Rockets impact the way NBA (and other major sports) run their teams?  Think about it in this context.  If your company has a losing year but knows in the long run the valuation of the enterprise is increasing, that knowledge creates resistance to hitting the panic button in and after any particular season.  It’s sufficient to offer that most business owners do not have that luxury.

Clearly the long-term business prospects of professional sports franchises have increased for many years.  However the more recent stratospheric valuations far outpace those of the 1990’s and before.  Prior to this century, owners of NBA franchises were not playing with the safety net that has been created by worldwide distribution of their product.

Startups and pro sports teams are similar in the lack of a need for a year-to-year operating profit (think Twitter).  There are currently 30 NBA teams.  There are thousands and thousands of startup companies.  Investors are willing to take chances betting on the next Facebook.   When it comes to your company – you are the primary investor and have to evaluate the chances you are willing to take.

Startups are also dissimilar. For the few companies that have the audacity and ability to create a workable, and scalable growth model by spending money to add users to an already valued platform – good for them.  For the rest of us, building a company that creates an ongoing operating profit AND growth, is the only smart choice.




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Marketing and Podcasts

Had the iPod not been developed what would we call recorded audio programs today?

I went to Wikipedia: Podcasting, first known as “audioblogging”, has its roots dating back to the 1980s. With the advent of broadband internet and portable digital audio playback devices such as the iPod, podcasting began to catch hold in late 2004.

Today there are more than 115,000 English-language podcasts available on the internet, and dozens of websites available for distribution at little or no cost to the producer or listener. I am not a regular listener when it comes to Podcasts. Partly due to an unfair bias I have about not wanting to give Apple credit for being the foundation of the term Podcast. Given the impressive statistics with regard to podcast listeners I am out of step with the way people behave. Those stats are eye opening.

An article last week on the Podcast upfronts (yes this was for real) ‘Podcasting will pull in $220 million in revenues this year, up 85 percent from the year before. That stat,courtesy of PriceWaterhouse Coopers, was read by Randall Rothenberg, president and CEO for the Interactive Advertising Bureau (IAB), this morning at the start of the IAB’s third annual Podcast Upfront.

Westwood One presented fresh research showing 5 percent of U.S. adults are heavy podcast listeners, 15 percent have listened in the last week, and 24 percent listened in the last month. Those heavy listeners tend to be young, male, and have an above-average income. They’re also heavy viewers of streaming platforms like Netflix, Amazon, and Hulu.

Podcasts fall into the category of content marketing. One of the things that makes them cool is the ability to track engagement in terms of downloads. The statistics are interesting. A recent Edison Research 2017 study of podcasts revealed that 50% of podcast listeners (estimated to be 42 million) listened to 3 or more HOURS of podcasts per week. Concerned that it’s only young people with time to spare? 33% of listeners are 35-54 and 44% are 18-34. 16% are 55 plus – which surprised me more than anything else. 77% download and then listen to the podcast immediately. Almost 2/3 of podcast listeners (64%) listen to 3 or more podcasts per week. This makes me wonder where and when they are listening and the data shows 51% ‘mostly’ listen at home.

Another really important statistic is that listeners hang around – 86% listen to all or most of the podcast. This is the reason that sponsorships of podcasts continue to gain traction. Below is the summary from Edison. Podcasting continues to rise, with Monthly listeners growing from 21% to 24% year over year.

♣ The audience for podcasts continues to be predominately 18- 54, and leans slightly male.

♣ The Podcast listener remains an affluent, educated consumer— and one that is becoming increasingly more likely to gravitate to ad-free or ad-light subscription experiences.

*The Podcast Consumer – Summary The Infinite Dial © 2017 Edison Research and Triton Digital THE INFINITE DIAL 2017 Survey Methodology.

♣ Clicking on a podcast to listen to it immediately (either streamed or via progressive download) is the dominant paradigm for listening, though 27% do subscribe to podcasts.

♣ Subscribers tend to have been podcast consumers for longer than non-subscribers, consume more podcasts, and are more likely to use their smartphone as their primary podcast player. . The Podcast Consumer – Summary The Infinite Dial © 2017 Edison Research and Triton Digital THE INFINITE DIAL 2017 Survey Methodology

♣ While Home continues to be the most often named location for podcast listening, the vehicle is a strong second.

♣ Most podcast consumers listen to most of the podcast episodes they download, and the vast majority listen to at least most of each episode. Podcasts are the number one audio source by time of consumption among podcast listeners.

♣ On the smartphone, podcasting’s Share of Ear® is tied with AM/FM content, and leads AM/FM among 13-34 year olds.

In sponsoring thoughtful and/or thought provoking content, the benefit include helping build overall brand value given the growth of podcasts, growing the commitment by the audience, and finding ways to leverage the ability to measure engagement. While it remains dependent on the product, podcasts should be considered to be a part of a smart marketing channel mix.

I’ve not always felt that way but the stats are too compelling to ignore.

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If you want to work with or for a company try asking them

Throughout my professional career much of my most important work has been done in winning engagements with clients. Yep, I am and always will be a sales guy. Did a chill just go up your spine? “Being in sales is icky.” Are you nodding yet? But most people know that in many ways we are all salesmen. I wrote about that in 2010 and feel no differently today.

It’s one thing to go for the sale (or the new job for that matter), and quite another to precisely target the kind of company that interests you enough to work for or with. I mean, when looking for a job or new development opportunities, most of the time beggars can’t be choosers right? I’ve been in that position and it’s difficult and not enjoyable in any way.

So how can you break that cycle? You know, the cycle, the one in which you stay at a job long enough to detest working at your current company, and are bored and aggravated with your co-workers. Or the one in which you are overly dependent on your best client and are so busy doing the work there’s not enough time to find that next great client. You’re nodding now right?

We all are aware that people can easily become mired in their own routines, making change more difficult than it should or can be. Yet it’s incredibly satisfying to take that first step. The first day you start looking for a different job, or a new company to pursue doing business with, is a great one. The reason is because you are actually DOING something about your current situation. While there’s no guarantee of a successful outcome you are certainly a lot closer to changing the status quo than if you just wait until tomorrow, next week or next month. Not to mention next year.

Why am I making a big deal about what seems so obvious? Mostly because I’ve personally been able to find great companies to work with, those with missions I believe in, and people I like to interact with on a regular basis. And here’s the really odd thing, my success rate in targeting a new prospect is EXTREMELY low. Far less than 5% of the companies that I seek out for a possible business relationship become our clients. Most often my entreaty is totally ignored. (That has never bothered me). Other times I might get a reply of no thanks. But I keep on looking for new and interesting opportunities and because I am doing it out of self-interest I remain engaged in the process and not deterred by my overall low rate of success.

And you know what? Sometimes I AM successful in connecting with, talking to and winning a new engagement with a cool new client. My goal in those cases is to work with that client for a long time or at least as long as our collective missions are aligned.

I don’t mean to sugarcoat this idea of seeking out working with companies that have missions that truly interest and inspire you. For many of us there will be plenty of instances where we take what we can get and while not happy about it, make the best of it.

What I am suggesting is for you to consider the kinds of work you’d like to do and the kinds of places you can do that work and then find multiple ways to contact those companies. Give it your best shot. And then try others. Your being in control of the process is a very empowering way to live.

At least that’s the way I see it.

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Stopping my mental pricing bias

Many years ago (ok it was 1983), before he was a big-time star, I saw Jerry Seinfeld do a stand-up routine in Boston. He did a bit that went something like “I can’t compete with my father’s stories about the old days.” His dad would say “When I was your age a car cost a quarter and house cost a dollar” You win dad. It was clear that his dad had an internal pricing bias. I recognize this because I even see it in myself.

I’ve written about XM radio and how I felt the $15/month price was unreasonable and I avoided doing it for a few years. But I finally relented and admit that I like having it even though I am not in my car to get the benefit as much as some other people. It’s really a good service on long trips and I enjoy having the option. $15/month turned out to not be too expensive after all once I readjusted my own value proposition. Your results of course may be different.

On the other hand, from the moment Spotify came around I jumped aboard. The $10/month individual fee for unlimited choice without ads was a slam-dunk value proposition. Don’t tell the folks at Spotify but I’d be willing to pay more. Because I have in mind that back in the 80’s and 90’s I was buying lots of CDs (which I NEVER listen to anymore), and was easily spending more than $200 per year buying music.

I went through a period where I did not buy any music but listened to what I had purchased already. Unless you’ve been around nearly as long as have I you may not understand. Even now I am spending less yearly than I did all those years ago on a dollar for dollar basis. Spending $200/year on music in 1987 was not a big deal. And in today’s dollars $200 in 1987 would be $436.98.  It’s pretty clear to me that Spotify could raise prices a bit and afford to pay the artists more.

I have other pricing biases like hotel rooms. Having been around for a while I remember when $100 for a hotel room was a small fortune. Despite knowing that ‘things’ get more expensive over time it’s not easy to throw off the bias I have when I see a simple hotel room with no frills costs $200 or more depending on what city and time of year you are traveling. The $99 hotel room (which was quite adequate) in 1987 would be more than $200 today. In that context it doesn’t seem so outrageous.

Then there are airline tickets. Somewhat anomalous to the general upward trend since prices for airlines seats actually have declined in real dollars since 1987. And in 1987 there were still people smoking on planes, they served a lousy (but ‘free’) meal and the seats were uncomfortable. The Atlantic Monthly had an article about that in 2013. Yet people still feel that airline prices are too high. That’s a kind of reverse pricing bias.

How about renting an apartment in New York City? Back in the early 1980’s I rented a 2-bedroom apartment on Manhattan’s east side (it was a 5 floor walkup) for about $500/month. In 2017 dollars it would be about $1,100. And if you think you can rent a 2-bedroom apartment no matter how small for $1,100 you probably believe in the tooth fairy. Paying 40% of your salary to live in NYC is not at all unusual. My half share was probably closer to 25% of my salary back in the 80’s. (Clearly I was underpaid).

We Americans pay less for food today on an adjusted for inflation basis than we did 30 years ago. Yet we spend more to eat out than we did. I guess that leaves more time to ‘consume’ media and content. Americans also like to complain about the cost of gasoline and transportation (my monthly commute to NYC costs more than $350 and does not include subway fare in the city). This translates to $160 in 1987 which fairly closely matches what actually happened.

As it relates to marketing, pricing biases make marketing goods and services all the more challenging. Marketers put a great deal of effort gaining understanding how consumers (i.e. PEOPLE) are actually behaving at the same time trying to keep their own and our own biases out of the picture. is a good idea but probably not sustainable if people actually don’t have the will and time to spend 30-45 minutes cooking. Throwing the unused food out drives people crazy. $10 for a home cooked meal seems like it might be ok until you realize that you have to do the cooking and take out is no more expensive and SO much easier! The price bias there is cooking healthy at home maybe should not be as or more expensive than take-out.

Those marketers that ignore the existence of pricing biases do so at their own risk. Not to mention their client’s risk.

Do you have any good examples of pricing bias?

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When it comes to clients who should deliver the bad news?

When you’re involved in a service business it’s no secret that not everything goes right all the time. Making the client aware of the bad news is probably one of the least pleasant things we professionals experience. But in that client relationship who should be the one to deliver that not good or ‘bad’ news? For me it was always the owner of the relationship. In most cases it’s the business development specialist or (old school) salesperson that had brought in the business in the first place.

I’ve been fortunate to have some terrific project managers on my team over the years and I always appreciated their efforts in being on the front line of the client relationships that I had initiated. I always wanted them to be the ones delivering the good news – we were ahead of schedule on something, had better results than we had forecast and other day to day account activity.

Upon occasion things did not go well, I always was willing to be the one to deliver that bad news in as timely a manner as possible. I note willing since sometimes the project manager would take that on directly with the knowledge that I was behind them to lend support. I believe that was appreciated all around and we had clients almost always more than happy to work with any member of our team.

In times of crisis the worst thing that can be done is to hide and not communicate. Clients don’t like bad news any more than anyone else. But what I’ve found they dislike even more is lack of communication.   In the absence of communication people always make up their own narrative as to what they think is going on and it’s usually not favorably inclined toward the agency.

Working with Google, Facebook and Amazon for example does not offer many direct lines to communicate with a person within those organizations. This is done intentionally in this self-service world of customer service. Certainly if a company spends enough money on any of those platforms, a real-live person will get involved. However there can be other situations in which the platform’s policy is invoked and the client’s participation in the platform is suspended ‘temporarily’. This is the kind of thing that makes a client apoplectic – and that’s not without good reason.

Even if the problem is not of the agency’s doing, helping the client resolve and deal with the issue is paramount and communicating what is being done and when becomes the critical thing. If you’re on the front line be sure to have the relationship owner standing right with you – and hopefully they’re smart enough to be taking bullets for the team.

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