Following comments made by Wendy’s CEO on a February 15 earnings call, outlets began reporting that the company would begin testing surge pricing. To those worried that the multibillion dollar burger chain might face criticism, don’t worry; The Washington Post’s Catherine Rampell has Wendy’s back. Rampell saw a helpless multi-billion dollar corporation getting slammed in the court of public opinion and leapt to action, penning a column yesterday that bravely called out the “populist grandstanding” of those worried about Wendy’s pricing experiment. Rampell seems to take Wendy’s PR team’s word as gospel. Why else would she twist definitions beyond recognition, and strive to normalize the practice of dynamic pricing?
Before getting into the specifics of Rampell’s musings, here’s the paragraph from the earnings call transcript that got the whole social media uproar started (emphasis added):
We expect our digital menu boards will drive immediate benefits to order accuracy, improve crew experience and sales growth from upselling and consistent merchandising execution. Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes and suggestive selling. As we continue to show the benefit of this technology in our company-operated restaurants, franchisee interest in digital menu boards should increase further supporting sales and profit growth across the system. We will continue setting the pace in generative AI and now have rolled out Wendy’s fresh AI in several restaurants where we see ongoing improvement in speed and accuracy.
Following reporting of the announcement of testing dynamic pricing, Wendy’s quickly backtracked in a blog, saying that what their CEO meant in those comments was just that they would lower prices in off-peak times. Rampell, though, believes that this was what the company meant all along, as well as that it shouldn’t matter even if the price did fluctuate up and down; corporations can adjust prices all they want and people just have to live with it.
Is it possible that Wendy’s was never going to test charging higher prices at peak times in addition to lower prices at off-peak times? Sure. Does that make sense given the context in the earnings call? Absolutely not. To arrive at Rampell’s conclusion that everything here is normal and good and they were never going to raise prices requires either reading comprehension roughly equal to that of a honeydew, willful ignorance about the situation, or an active desire to distort what’s going on. Rampell is clearly smart, so that leaves the last two.
The way that Rampell talks about progressives in the piece and in this Tweet, also from yesterday, clearly indicates that the whole point is to punch left and take the side of corporations. It’s an effort to chide people for questioning the way things work in the marketplace, not so much a defense of the particular issue at hand. That’s why she calls two sitting United States Senators “progressive pundits” and why “late-stage capitalism,” “greedflation,” and “shrinkflation” are all in quotation marks. So what if Rampell is out of touch with what life is like for most people? Her writings echo the sentiment of her milieu, where the problem isn’t corporate exploits, it’s all those whiny poors who won’t stop complaining.
As I’ve written before, “greedflation” is a pejorative of seller’s inflation that pundits—including Rampell’s husband Chris Conlon– use to avoid engaging with the real argument advanced by economists like Isabella Weber. Complaining about shrinkflation as a new facet of that really shows how out of touch Rampell is; it’s been going on long before the discourse of seller’s inflation got going during the pandemic. It has an established definition and has been the subject of research for at least a decade. Here’s a couple of studies from 2014 and 2016. When I was in high school a decade ago, shrinkflation was already something that people, including me and my peers, had noticed. One time I asked a friend something along the lines of “hey, how’s it going,” to which the response was “it was good, until Lay’s decided to put some chips in the bag of air I got from the vending machine.” That’s how old this news is. Highschoolers were making jokes about it a decade ago.
Honestly, ignorance of the trend is kind of baffling.
That said, this kind of glib “if I don’t know about it, it’s not real” attitude does explain some of Rampell’s credulity towards Wendy’s. It’s pretty clear what the firm’s CEO was alluding to by saying they would test out “dynamic pricing,” and it wasn’t limited to discounts at slower times of the day. For starters, that’s just not how the term dynamic pricing is used. Rampell is technically right when she says happy hours could be a form of dynamic pricing, but it does not fit the imputed meaning. Dynamic pricing is part of a family of similar terms—congestion pricing, peak pricing, surge pricing— that roughly mean prices that fluctuate up and down depending on demand and other conditions. Technically you could cap the price at the base level and have it only ever move down and technically that’s more or less what a happy hour is, but has anyone ever talked about it that way before? If you are portraying a happy hour as “dynamic pricing” to your investors are you doing anything other than beguiling them with the investor buzzword of the week?
“Dynamic pricing” implies charging more than normal in a finite window of greater than normal demand, while discounts like “happy hour” mean charging less than normal in a finite window of lower than normal demand.
Plus, the sentence before mentioning dynamic pricing is talking about upselling, the practice of trying to entice consumers into buying more than they would have. The paragraph is literally about methods of extracting extra money from consumers! Plus, if Wendy’s meant they would be offering discounts to customers, why not just say that? Rampell mentions the PR shellacking that Wendy’s took from other brands pouncing on the discourse and praised it as “clever marketing.” If this was what Wendy’s meant all along, it would have been clever marketing to go ahead and say that they would offer off-peak discounts rather than leave it open to speculation. Maybe their marketing team has the foresight of a cantaloupe. But it seems more likely that they didn’t have a marketing response because it wasn’t the plan.
So when Rampell says that “If you read the Wendy’s statement carefully, it’s not actually a reversal,” what she means is that if you read the statement but ignore the context from the earnings call, the generally accepted definition of “dynamic pricing,” and common sense, you can squint hard and see how this might line up.
But, Catherine Rampell’s spin didn’t end there. She goes on to complain about how it’s so silly and dumb that people are fine with price discrimination via discounts, but get mad when it involves paying premiums:
Cutting prices during slower hours of the day is arithmetically identical to raising prices during busier periods. But for whatever reason, consumers seem more willing to stomach a “discounted” low-demand price rather than a “surged” high-demand price. They also get mad about some consumers being charged more, but they seem fine with price discrimination when framed as some consumers being charged less (senior discounts, student prices, etc.), as long as there’s some predictability to what prices will be for whom and when.
Lower prices in off-peak conditions would lower the average price consumers paid. Higher peak prices raise the average price being paid. Plus, despite what Rampell is implying, there is absolutely no obligation to have discounts and premiums be proportional to each other. In fact it’s unlikely. Peak prices would probably be raised more than off-peak would be lowered, because the ultimate goal is to boost profit and hungry people with limited time for lunch will be more likely to go along with whatever the price is. The premium on the volume of traffic at peak times will just outweigh the possible new traffic they can get on discounts.
A few issues with the math here: One, arithmetically, these operations are not identical, they are the inverse of each other. You could adjust prices by addition or subtraction, which are opposites, or by multiplying by a percentage of the base price, which would still come down to addition or subtraction. It is arithmetically absurd to say that arithmetically 5+2=7 and 5-2=3 are identical, arithmetically. And it is equally arithmetically bizarre to say that multiplying a base price by 0.9 to discount it by 10 percent is identical to multiplying the same price by 1.1 to add a 10 percent premium. This is just ridiculous math. Maybe Rampell meant they were symmetrical, but that has nothing to do with anything.
But even beyond that farcical arithmetical analysis, there’s a reason that price discrimination downwards is less harmful. Many, many people don’t get to choose when they can take a lunch break or when they get off work. Charging those people a higher price for food when they roll up to the drive-thru is sadistic and, yes, very late-stage capitalist. But charging people less when they do have the option can be mutually beneficial; the business moves product it might not otherwise and the customer gets a deal.
Rampell was so eager to stick her tongue out at progressives that she made a comically outrageous argument that relies on corporate forthrightness combined with no critical reading and an insane understanding of basic math to hold any water at all. This is the epitome of corporate apologism. Her argument is also the kind of shoddy work that theories of late-stage capitalism tell us to expect as corporations produce less and less of actual value. Sorry, I meant theories of “late-stage capitalism.”
Image Credit: “The first Wendy’s 7-15-2006 (1)” by Corvair Owner is licensed under CC BY-SA 2.0.