I bought fast food for a group of people last night. The menu pricing was significantly higher than ordering through the app, which also allowed me to attach a digital coupon.
The pricing within the app is what I would expect to pay, or what I believe is “fair” or “reasonable” for chicken nuggets, French fries, and cheeseburgers.
On the other hand, I have cut my fast food consumption by at least half over the last few years because the published menu prices have skyrocketed.
What possible benefit would a fast food restaurant derive from publishing high prices to the casual customer and drastically reducing them within the app?
They have to be realizing a net loss of customers with this model, right?
In: Economics
as well the thing on data allowing them to make it cheap for te repeat customers, why raise prices for the non-app users?
say making a burger costs $9. Would you rather sell 10 burgers at $10 each or 3 burgers at $15?
and a as a bonus since you’re making 1/3 the burgers you probably need fewer employees!
In addition to what others have said, one business strategy that this utilizes is market segmentation. The people who are price conscious are able to get the fairer prices that they desire while enabling Mcdonalds to charge a premium to customers who are more indifferent to pricing. Now Mcdonalds gets to maximize the price and volume that each customer winds up paying
A lot of people have said that it’s about stealing your information, which is actually a secondary benefit.
A big benefit is that you will put the food order into the app before you get to the restaurant. So they saved themselves time and effort because they can insert your order wherever they have room for it and it cuts down on lines at the store.
It’s also a loyalty perk. If you have the app and you have a good experience, you are more likely to eat there again.
Not going to dox myself but I worked on an app for a very very large fast food company and we had little to no info scraping. We didn’t track heat maps, we didn’t aggregate data to sell it, the worst we done was click through rates on notifications and promo ads.
The primary reason for the app was to increase customer loyalty and let the customers know when new products were launched. It also provided a very good platform for syncing available food items in-store, our partners delivery service and other delivery apps like deliveroo and just eat. Before restaurants had to update them all manually.
Any other questions let me know
People who use the app tend to be loyal customers who are more profitable, even at the lower prices.
The app itself is basically free advertising. Instead of having to advertise on a regular channel like Google ads or Instagram or whatever, they just send a push notification to the app for free. Fast food chains spend a ludicrous amount of money on advertising. Spending that money on digital coupons for their app users is much more cost efficient.
Remember that the customers who aren’t using the app are ordering in person in the store. Such a customer is going to weigh the expense of the inflated in-store pricing vs. the inconvenience of leaving the store for the chance at a cheaper meal. Most often that customer stays and pays.
Meanwhile the app user specifically is NOT in the store and has to be enticed with lower prices. That user feels good about getting a deal and goes along with the scheme.
The store owner gets in on the action, too! Suppose that the store inventory and kitchen systems are tied into the app in real time (I assure you, they are). The app drives traffic into the store just in time to sell through expiring inventory. The app drives traffic into the store with “happy hour” deals that even out demand across the day, simplifying the labor schedules. The app replaces at least some expensive TV, radio, and print advertising. Huge wins for the store owner across the board.
Most fast-food places actually prefer app ordering over normal ordering. It makes planning easier as well as fewer incorrect orders from mishearing orders. I would argue that the “true” price is actually the app price, and the in-store price has a hidden surcharge.
In addition, apps often have points, but they can expire. This keeps customers returning back instead of allowing them to pursue other options.
The person reading the prices off of the menu are already in the restaurant. The chance that they are put off by a higher price and eat elsewhere is very slim since they’re already in the building.
The app exists to coerce people deciding where to eat to go to their chain. So they give you lower rates to bring you in the door. The apps really target high-frequency customers. Fast food restaurants make most of their money off of a relatively small percentage of their clients who go there a lot. A customer who goes to McDonals twice a week is exponentially more valuable to the company than an occasional customer. The goal of the app is to target customers with a high propensity to go to the chain of giving them just a little push to increase the frequency of them going. If you get them to go one more time a week because of a “great deal”, it’s well worth giving them discounts on single items.
The fact is, certain fast food items work off huge profit margins regardless of if it’s the discounted app price or not. Remember when McDonalds had their $1 fountain drink promotions for years? Yeah it’s costs them like 3 cents to sell you a fountain drink. $1 was still a massive margin. They’re happy to nearly break-even on a sandwich if that gets you in the door because they know 90% of people will get a combo and the fries and soda are almost pure profit.
Volume from the price sensitive customers
And they get to charge more expensive prices for those walk up ( non app) customers who are obviously not price sensitive
To add to everyone else’s, it’s easier to make people pre load money onto their app. Starbucks has around $1.4 billion in their app that is just sitting there.
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