As anyone in the restaurant space knows, each day is a mixture of busy periods and slow periods. Most businesses do their best to roll with these punches in order to stay afloat. At times, demand can become so intense that some operators turn off some of their distribution channels rather than run the risk of having dissatisfied customers. But did you know there’s a way to make the most of those inevitable ebbs and flows in demand? It’s called smart pricing. It’s a powerful way restaurants can maximize their revenue and profits with a “right price at the right time” model. Smart pricing encourages optimal capacity without sacrificing customers eager to patronize your business — here’s why.
Smart pricing involves changing menu prices based on demand. Fluctuations in market demand are all considered to determine how (and when) to price menu items strategically to increase revenue and retain customers. Other factors such as historical sales, orders, customer retention, and click-through rate are also considered when creating unique pricing strategies depending on restaurant goals.
How does this relate to ensuring every potential customer gets fed (and no revenue gets lost)? Smart pricing allows operators to create perks and programs around certain menu items, incentivizing diners to dine during off-peak times. This helps distribute the waves of customer demand and makes them more manageable for operators.
There are many benefits to smart pricing, including:
Many smart pricing platforms also allow operators to develop pricing strategies. For example, if a restaurant wants to experiment with increasing prices on certain menu items after 10 PM, the operator can set an automated schedule. Smart Pricing can also be applied only to third parties so that loyal customers’ direct ordering always gets the best prices.
Maximizes revenue and profits:
By identifying busier periods and increasing profit margins during those windows, restaurants can cash in on higher-demand phases throughout the day. Smart pricing also helps restaurants attract more customers during slower periods, giving them a leg-up when responding to competitive changes in the market — for example, a new restaurant opening nearby.
Widens customer pool:
Having the ability to shift menu prices depending on the customer audience — people who order during the week vs. the weekend, people who order after 8 PM vs those who order earlier in the day, etc – can further drive demand
Smart pricing is still a relatively new development within the restaurant industry. It significantly impacts restaurants that have successfully implemented it, with some increasing their margin for dinner items by 15% without reducing volume (or affecting guest experience). Chowly’s smart pricing solution has restaurant brands seeing a daily increase of 9.4 percent in sales and an increased basket size of $1.11, representing a 38 percent increase in profit for each order! One of the restaurant brands is on track to generate an increased annual profit of almost $10K for each store.
The key to the successful implementation of smart pricing is integration with point-of-sale technology and always keeping the customer experience in mind. Maintaining a collaborative, win-win mindset will preserve customer loyalty while creating more profit. This is just the beginning of an exciting new age in restaurant technology, and we’re here to help you make the most of it.