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Pricing Based On Time of Day, Day of Week, Etc.


DaveO
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Well this works well with investment bankers.  I'm not sure how well this would work elsewhere, but its interesting:

"All Restaurants Should Copy The Goldman-Sachs Cafeteria's Genius Pricing Plan" by Neil Irwin on washingtonpost.com

If you think about it, there are minor variations of this all over the place (happy hour, 1000 Open Table points at certain hours, lunch being cheaper than dinner, etc.), but yes, these days are coming.

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I'm doubtful restaurants can ask for more money for peak times versus non peak hours. For example, having a fixed price meal sitting at the chef's table, offers some extra benefit than the regular table experience. If you're paying more money because of time, the restaurant is asking the consumer to pay more for the same product.

Some restaurants may go to reservation only because of popularity but that's a different thing, too.

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In this vein, the Gallery Place location of Chop't gives you an extra topping if you order before noon and California Tortilla gives you free chips and queso if you order before a certain time (I think 11:30). I have several co-workers who take advantage of these offers and it definitely spreads the rush a bit.

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I'm doubtful restaurants can ask for more money for peak times versus non peak hours. For example, having a fixed price meal sitting at the chef's table, offers some extra benefit than the regular table experience. If you're paying more money because of time, the restaurant is asking the consumer to pay more for the same product.

Some restaurants may go to reservation only because of popularity but that's a different thing, too.

It's the same product + convenience.

And convenience has a price tag.

A peak vs. non-peak dining hour pricing model would be an interesting experiment.  Discounts for non-peak dining happen at numerous restaurants I have frequented, and it would be fascinating to see this even more overtly stated and implemented.

(i'd eat it)

(for more or less)

(depending on timing)

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I'm doubtful restaurants can ask for more money for peak times versus non peak hours. For example, having a fixed price meal sitting at the chef's table, offers some extra benefit than the regular table experience. If you're paying more money because of time, the restaurant is asking the consumer to pay more for the same product.

Some restaurants may go to reservation only because of popularity but that's a different thing, too.

It makes more sense if you think of the product as less the food than the entire experience of interaction with the restaurant. Also, if put a $ value on your time.  It drives my economist husband nuts that this model isn't everywhere. Restaurants lose $ they could have earned and those willing to pay for a better experience can't simply buy what they want.

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It's the same product + convenience.

And convenience has a price tag.

A peak vs. non-peak dining hour pricing model would be an interesting experiment.  Discounts for non-peak dining happen at numerous restaurants I have frequented, and it would be fascinating to see this even more overtly stated and implemented.

(i'd eat it)

(for more or less)

(depending on timing)

I think Sundae in the Park touched on the topic of my response briefly, but I'll elaborate a little more.  Your point in regards to convenience is very important. However as a consumer and hopefully, frequent patron of a restaurant, it's my convenience that supersedes the restaurants.  When a consumer makes a reservation, it's an agreement ideally that when the diner arrives, the restaurant will have a space for them at that agreed upon time. 

Having a discount for offsetting the rush of the restaurant is for the financial benefit or convenience of the restaurant. I have nothing against that if a restaurant chooses to enact that, however for me it recommends me of a high school cafeteria scheduling portions of the school body to handle the necessary daily chore. 

Why would a restauranteur want their customers to be looking at each other wondering if the other table gets a 20% discount because they would be there 30 minutes earlier? I think it would cheapen the experience of their product in the long run and turn their restaurant into a car dealership floor vibe with who got the better deal.

However, my thoughts are focused on better quality restaurants versus more cafeteria level of style places as the article states.

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IMHO, the WaPo piece is silly, representing something very old and familiar as something novel.

Restaurants have been doing "early bird" specials since at least the 1970s and likely earlier.  Hotels have always charged more for mid-week than weekends.  It has always been less expensive to plan your Caribbean vacation for July than over the winter holidays. Much more recently, Coke trialed some new vending machines in South America that charged more or less dependent on ambient temperature and weather (so prices would automatically adjust to be higher on hot days).  Airlines, rental car companies and hotels have all been pricing to demand by the minute, second, or transaction.

Why should it be any more right or wrong for different restaurant customers to be paying different amounts than it is for your fellow passenger or guest in the seat or room next to you to be paying something much more or less that you did?  Why is it more expensive to get a car washed in Georgetown that it is in Loudon County?  In industry, such practices are termed "dynamic pricing" and "yield management."  At the end of the day, it's all about the golden rule of pricing:  the supply/demand equilibrium. Heightened demand boosts prices.  Weak demand prompts discounting. Has nothing to do with "better quality" versus "cafeteria style" restaurants imho. And, it's not just about timing.  Many other variables can and do apply like temperature, location, loyalty and volume.

Nothing new here. Just new examples of an age-old and bedrock phenomenon enabled by new technologies and new economic contexts.

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Why should it be any more right or wrong for different restaurant customers to be paying different amounts than it is for your fellow passenger or guest in the seat or room next to you to be paying something much more or less that you did?  Why is it more expensive to get a car washed in Georgetown that it is in Loudon County?  In industry, such practices are termed "dynamic pricing" and "yield management."  At the end of the day, it's all about the golden rule of pricing:  the supply/demand equilibrium. Heightened demand boosts prices.  Weak demand prompts discounting. Has nothing to do with "better quality" versus "cafeteria style" restaurants imho. And, it's not just about timing.  Many other variables can and do apply like temperature, location, loyalty and volume.

More value for the experience can be differentiated and offered at a higher price such as offering a chef's table seating. However, I disagree and argue the same can not be said for time and if it works applies only to the low end of the retail market.

When terms like dynamic pricing and yield management are used as principles for justifications of running a restaurant it probably isn't doing too well in the first place. Fractionalizing your restaurant's floor experience based on time or the other variables listed devalues the overall collective experience.  And, the energy of a room does effect the quality of experience of the individual diners in my opinion.  Next to the taste of the food, most people will remember how did the restaurant make me feel? Already a restaurant acts as a magician to weave an overall experience as diners eat different orders of food and drinks.

In terms of the economic "golden rule", increasing/decreasing pricing because of demand happens.

I think there are intangibles in a successful restaurant that is not a chain restaurant and framing it in an economic analysis only works to explain how to operate the business side. More often than not, trying to apply economic principles to generate the intangibles is where individual restaurants fail.

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More value for the experience can be differentiated and offered at a higher price such as offering a chef's table seating. However, I disagree and argue the same can not be said for time and if it works applies only to the low end of the retail market.

When terms like dynamic pricing and yield management are used as principles for justifications of running a restaurant it probably isn't doing too well in the first place. Fractionalizing your restaurant's floor experience based on time or the other variables listed devalues the overall collective experience.  And, the energy of a room does effect the quality of experience of the individual diners in my opinion.  Next to the taste of the food, most people will remember how did the restaurant make me feel? Already a restaurant acts as a magician to weave an overall experience as diners eat different orders of food and drinks.

In terms of the economic "golden rule", increasing/decreasing pricing because of demand happens.

I think there are intangibles in a successful restaurant that is not a chain restaurant and framing it in an economic analysis only works to explain how to operate the business side. More often than not, trying to apply economic principles to generate the intangibles is where individual restaurants fail.

I guess I'd say it's all of the above.  On one hand, you make a great point about intangibles with which I definitely agree.  A great restaurant does focus on great food and a great experience, whichever end of the market (i.e., high, low, chain).  But their ability to do that to the market's satisfaction (get enough people coming in, paying enough and returning while managing their costs) is obviously the key. Restaurants fail when they're unprofitable and can't meet a payroll.  Same as any business that way.  Reaching and maintaining positive cash flow and profitablity are dependent on many factors, economic and otherwise, very much including pricing and all those critical intangibles of food quality, service and overall experience.  In any small business, the economics of pricing, sales, managing inventory and managing expenses are the most critical things with everything else driving those to successful or unsuccessful outcomes. Can't offer too great an experience relative to costs for example.  This is why we see many restaurants thrive and fail at both the low and high ends.

And, again, time is used as a pricing variable in many other experiential sectors whether hotels, rental cars, sports/movies/entertainment, parking or the local bakery that discounts remaining bread and pastries when late in the day.  Restaurants probably don't often use terms like 'dynamic pricing' or 'yield management.' Those are economic/business terms that can be applied to describe how some (as in the original WaPo piece about Goldman) do price and how more are likely to price in the future.  It's no different from the 'early bird' specials used by restaurants years ago or specially discounted "bar," "happy hour" or promotional "restaurant week" menus widely used today.  Different prices for the same food but at different times.

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I think there are intangibles in a successful restaurant that is not a chain restaurant and framing it in an economic analysis only works to explain how to operate the business side. More often than not, trying to apply economic principles to generate the intangibles is where individual restaurants fail.

Maybe I don't fully understand your premise - but I don't think restaurants apply economic principles to generate intangibles for guests.   Rather, they do so to drive guest behavior.

Simply put, the current lineup of such offers (happy hour, lower priced lunch, early bird specials) is designed to drive the consumer to consider coming to the restaurant at an off-peak time.   The premise is almost always "same great experience at a lower price" or nearly so.

This assumes two things:  1. There's never an "increase" in price, rather there's always a regular price at peak times that is discounted variably.  2. The restaurant is already crowded at the peak times and wants to build on that base.   And they want to do so without compromising the experience at those peak hours (or, they would just pack people in, moving tables closer together or something like that.)

While I can imagine a restaurant messing this up somehow, I'm not sure I see much downside for the diner.  You want to eat at a popular place on a Friday night at 7pm?  That's top dollar.   Are you willing to visit on a Tuesday at 3pm?  They'll have a great deal waiting for you...and if is really, really is a good deal - the place might be just as full as on a Friday night.

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