An empty table is lost revenue for a restaurant.  In order to capitalize on hourly changes in demand, many restaurants are now implementing a variable pricing strategy.  The theory behind this is that dinner on a Monday night at 5:00 pm shouldn’t cost the same as dinner at 8:00 pm on Saturday night.  Restaurants are betting that customers used to paying for VIP tickets or extra leg room seats will also be willing to pay more at premium dining times.

Deal sites like Groupon are helping restaurants drive traffic during slower periods.  Mobile apps like Leloca give customers first-come, first-serve deals when reservations come open.  Savored, a foodie website, offers discounted meal services based on reservation times.

Yet, restaurants still struggle with elasticity of demand.  Executives are battling important decisions with implementing variable pricing strategies, like: Does increasing prices on the weekend shift demand to other days? Should we explore more daily deals to boost sales during slower hours? and Can we selectively increase the prices of certain items during certain times?

Discussion Questions:

1. Why are restaurants varying pricing at different times of the day/week?

2. What are the advantages and disadvantages of this strategy from the restaurant’s perspective?

3. Would you take advantage of such a strategy?

 

SOURCE: Casey Corman, Retail Wire, December 28, 2012