Feb 29, 2024 - Business

Wendy's debacle is a flashback to Coca-Cola's own failed price-raising bid

an illustration of a glowing gold drink can on a hot pink background

Illustration: Tiffany Herring/Axios

Burger chain Wendy's is in damage-control mode following reports that it would be testing surge pricing — a mostly reviled strategy of raising prices during busy times made famous by Uber.

Why it matters: The whole debacle seems very of-the-moment, but actually mirrors another PR crisis from 25 years ago at the Coca-Cola Company.

Zoom in: Back then Coke considered raising vending machine prices when the temperature rose.

  • People thirst for a cold drink on a hot day, "so it is fair that it should be more expensive," the company's then-chairman said.
  • People hated the idea.
  • The word "gouging" came up a lot, wrote the NYT's David Leonhardt more than five years later. Pepsi quickly took the opportunity to say it would never do such a thing — and Coke walked it back.

Between the lines: Coke framed dynamic pricing in a way that was certain to get backlash, says Vicki Morwitz, a professor at Columbia Business School who teaches the episode as a case study.

  • The semantics make a big difference — you don't want to highlight the idea of raising prices. The best practice is to set your highest price as a base price in an algorithm and offer discounts from there.
  • Many private colleges and universities employ this sticker-price strategy, as Ron Lieber details in his book "The Price You Pay for College" — though parents and kids trying to make choices don't love it.

The bottom line: People don't like when prices are high or seem unfair or capricious. Companies should tread carefully.

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