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Viewpoint: Dynamic pricing is the way forward

05 August 2016
Viewpoint: Dynamic pricing is the way forward

It's time that the restaurant sector embraced flexible pricing, says Paul Rawlinson, director of the Baltzersens and Norse restaurants in Harrogate

Dynamic pricing is a fancy term for a very simple idea that is at the foundation of microeconomics: price varies according to demand.

It is a model that transcends borders and is intrinsic to our culture across a spectrum of fields. The hotel industry is routed in altering prices but, beyond the early bird or prix fixe, many restaurants are yet to fully embrace the concept.

One option that we have explored at Norse is dynamic pricing. This is offering dining experiences at different prices based on the day or the time that guests dine.

We expect the effect on guests will be very personal to their situation. If they are flexible it may induce them to change their booking from a more popular day or time to one that is less popular in return for some added value. In return, we have the opportunity to sell another experience at a time when demand is traditionally high. It should be a win-win situation as long as guests still feel that the experience offered at peak times is good value.

A really exciting element of dynamic pricing is the opportunity to widen our pool of prospective customers to include groups that wouldn't have considered us as an option. The benefits of this are clear from a revenue perspective, but on a human level, guests experiencing a style of food or dining for the first time often have the most fun! Many of us are in this industry to delight guests, and it is a pleasure to watch preconceptions change over the course of a couple of hours in a dining room.

We employed Tock, which is a booking system that can be used as part of a dynamic pricing methodology - though it was not designed with that express purpose. In a similar way to guests 'hacking' menus to achieve a desired dish, restaurants like ours are able to use this software to craft a specific offer that appeals to guests.

It was developed by Nick Kokonas, who is also co-owner of the Alinea Group. As he explains: "A crazy idea - selling tickets to a restaurant - has evolved into something more sophisticated and yet more simple at the same time. And the tickets have given way to a series of solutions to help small businesses provide great service to the diners they love."

For restaurateurs and chefs, dynamic pricing requires a fundamental change in our thought process. It demands thought beyond the linear cost of raw materials and labour. It introduces time as a third variable that requires us to think what a plate of food is worth to our guests at any given moment in our working week.

So far for us it has certainly spread the demand and opened up our business to a wider audience. But time will tell whether Tock will really get the business ticking.

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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

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