Dynamic pricing is like happy hour, but 'less static': Juicer CEO

Dynamic pricing, which adjusts prices depending on demand, has made its way into Wall Street conversations, specifically in the food sector. Recently, Wendy's (WEN) announced plans to begin testing dynamic pricing as early as 2025, yet the move met consumer backlash.

Juicer Co-Founder and CEO Ashwin Kamlani joins Yahoo Finance to give insight into how his company aims to use dynamic pricing to help restaurants maximize revenue during slower periods of the day.

Kamlani explains what's at the core of the premise of his business: "Really what we are doing here is taking the concept of happy hour, which is intended to help the restaurant during a period which had normally be slow, and making it less static... Now, what could happen in this new world is that your favorite restaurant might have a slow Thursday night between 8:00 and 9:00 when they're normally busy and suddenly they could spin up a last-minute spontaneous happy hour and message all of their customers 'hey, good news, we're kind of slow today, if you come in during the next hour, you can get great prices that we don't normally offer.'"

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance.

This post was written by Nicholas Jacobino

Video Transcript

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JOSH LIPTON: Juicer wants to help restaurants stay competitive with the power of dynamic pricing. Simply put, Juicer helps restaurants to adjust their prices depending on demand, the goal of maximizing revenue and drawing in customers during less busy periods. Juicer just secured more than $5.3 million in funding to accelerate its growth.

And here with more, we're joined by Ashwin Kamlani, Juicer co-founder and CEO. Ashwin, it is good to see you. So when we talk about dynamic pricing, Ashwin, in layman's terms, what we mean is, you know, when I buy a burger, Ashwin, the price of that is going to go up or down depending on when during the day I buy it?

ASHWIN KAMLANI: That's true, although it depends on where you're buying it. So actually, if you think about it, in channels like Uber Eats or DoorDash, this is something that the consumer has been experiencing for many years now. So the consumer already knows that when they open up an app like DoorDash or Uber Eats, that they could order a burger on a Tuesday afternoon. But if they order that same exact burger on a Friday night where it's busy, they may end up paying a lot more. And that's because Uber Eats and DoorDash have flexed up their delivery fees during those times. So the consumer has been conditioned to understand that the same exact meal can change depending on when they order it.

JULIE HYMAN: And I guess I've been conditioned, too, Ashwin, because I experienced that when I'm doing an Amazon delivery, for example, where it says, do you want to get it on this day might cost a little bit less, or we'll give you even a credit or what have you. All of that said, when we recently got the news that Wendy's was going to employ dynamic pricing, there was sort of this firestorm around that. Why do you think that is?

ASHWIN KAMLANI: I actually think that was a huge misunderstanding. I think Kirk Tanner, who was at Pepsi for 32 years and was in the hospitality industry for about one month before he was telling investors why he was spending $20 million on digital menus, I think all he wanted to say was that having a digital menu would give them the flexibility to run more offers throughout the day when things were slower.

Now it was the New York Post that turned that around and said, Wendy's to implement Uber-style surge pricing by 2025, and that's where you saw the blow-up in the public. And I think that's because the public knows that when you get in an Uber and it's busy, sometimes you can pay two or three or even four times what the normal price is, because things are busy. That is not at all what Kirk Tanner or Wendy's wanted to say when they were implying that they would run offers throughout the day.

JOSH LIPTON: It seems, Ashwin, with dynamic pricing is there kind of delicate balance, though, you kind of have to walk here. I mean, consumers are already sensitive, obviously to these elevated inflationary pressures. If you're not careful, you could really alienate them.

ASHWIN KAMLANI: I agree 100%. And so let me make one thing clear, when we do price changes in channels like Uber Eats or DoorDash and we're doing small changes up or down, we're talking about a few cents here or there. So I've seen some people in the media relating this to price gouging. And I would argue that's really not the case.

You know, in an airline you have prices fluctuating, because they have a limited number of seats to sell. And in a hotel, you have a limited number of rooms to sell. Now in a restaurant before COVID, you had a number of seats that you could fill in that dining room. That was your restriction of capacity. But that has changed now because of COVID and so much delivery and what we call in the industry off-premise dining that's occurring. The new measurement of a restriction on a restaurant's capacity is actually their throughput, how much food can they get out of that kitchen in a half hour or one-hour period.

So the objective here is if it's a really busy Friday night, what the restaurant typically would do is just shut off those channels, because they'd rather focus on the people in the restaurant. But if they can make $0.25 or $0.50 more on one particular item because it's a busy Friday night and continue to serve those customers who are willing to pay a premium for that convenience, that's really the thinking here. However, I'll just highlight that the focus of what we do here is offering dynamic discounts and offers, particularly on digital menu boards, kiosks, drive-throughs, even movie theaters, stadiums, and concert venues. And there are a lot of customer benefits from that.

JULIE HYMAN: Well, and this is something that is not entirely new, right? I mean, we've had particularly I can think of the fast food industry offering deals at various times of year seasonally at least. So what's different now about this latest phase? Is it the ability to have that digital menu that you can change quickly? Is it the data at your disposal when you're offering advice on how to do this? How is it sort of moving into the next phase?

ASHWIN KAMLANI: That's a great question. And so we've seen certain forms of dynamic pricing in the restaurant industry for a long time. The consumer already accepts that they might pay a different price for a menu item at lunchtime versus dinner. You have lunch versus dinner menus. You also have happy hours, right?

And you have a situation where I've walked into a restaurant at 7:05, and then found out the happy hour ended at 7:00. But I understand that they're offering those discounted prices during that time because it's a slower period. And most consumers are quite understanding about that concept. Now when I come in at 7:05 and I realize I just missed happy hour, I don't get upset and walk out because now I have to pay more for the same exact food.

And so really, what we're doing here is taking that concept of happy hour, which is intended to help the restaurant during a period that would normally be slow and making it less static. So you might have a favorite restaurant and you know that happy hours every day from 7:00 to 8:00. Now what could happen in this new world is that your favorite restaurant might have a slow Thursday night between 8:00 and 9:00 when they're normally busy. And suddenly, they could spin up a last minute spontaneous Happy Hour and message all of their customers, hey, good news, we're kind of slow today. If you come in during the next hour, you can get great prices that we don't normally offer.

And that's what happened in hotels and travel as well. When e-commerce came to hotels and airlines, that's what allowed the industry to start launching last-minute deals and newsletters where you could find great deals. That was never possible before when prices were printed on a brochure.

JULIE HYMAN: It's really interesting stuff. Ashwin, thank you so much. Really appreciate it.

ASHWIN KAMLANI: Thank you for having me.