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Surge pricing is the next wave of digital ordering

Originally published in SmartBlogs

By Noah Glass, Founder & CEO

If you followed this summer’s public debate surrounding ride sharing, specifically the car service Uber, you might have heard the term “surge pricing.” The term incensed high-ranking government officials, but surge pricing illustrates the most basic of economic concepts: When demand is high, charge more.

Airlines and hotels have been surge pricing for years. But other than a “market price” for fresh fish or other rare commodities, the restaurant industry has largely stayed away. All this could soon change as mobile ordering gains momentum. Uber raises pricing on the fly based on real-time data gathered via mobile devices, the primary source for ride requests. Digital ordering for restaurants allows a similar opportunity by enabling fluid pricing. If, for example, a concert lets out at Madison Square Garden, Uber might charge higher rates to encourage drivers to come to the area. The local burger shop might also experience a flood of mobile orders. Algorithms via mobile device data could calculate that demand and create real-time price increases for the restaurant, while direct connections to POS systems allow changes in price to be displayed across the digital ordering interface — website, mobile app or in-store kiosk. Moreover, all this can be accomplished without human intervention and in real time.

Varying price to drive demand is nothing new to restaurants — just look at the wave of deep discounting in recent years. Similarly, daily-deals services like Groupon offer discounts to drive traffic. Even daypart-based pricing, charging a lower price for a cheeseburger at lunch, for example, is a way operators change pricing to drive demand. So what’s new about surge pricing? In surge pricing, the arrow of causality reverses direction. Demand drives price, rather than price driving demand, a reversal that could reap rewards for the industry.

Managing supply and demand based on real-time data isn’t just a moneymaking tactic (as Uber is quick to point out). Uber manages its finite number of cars by incentivizing its drivers during peak times — an incentive made possible by dynamic pricing.

These days, the restaurant industry is smack in the middle of the minimum wage debate. What if fast casual workers could earn extra pay? Surge pricing could create a scenario in which operators subcontract trained workers who earn a fixed percentage of sales, just like Uber. Using mobile ordering, an operator could see a traffic spike and blast out a message to his workforce offering greater pay if workers pitch in during a real-time surge in demand. The combination of digital ordering and surge pricing could make that a reality. Surge wages could also help ensure consistency in an operator’s profit margin, while maximizing employee wages and throughput capacity.

Demand-driven pricing also can support marketing programs that smooth out the demand curve. Imagine pushing promotional offers to loyal customers during certain off-peak times of day. I’m not talking about a premeditated Early Bird Special or Happy Hour. I’m talking about a real-time knowledge of surge demand and forecasting excess capacity. Operators with multiple units could level off demand throughout a city, showing a range of prices at locations across a metro area at different times of day (think about flying out of a metropolis like New York City and choosing flights from JFK, LaGuardia or Newark). That may seem silly for an individual order, but it could be meaningful to the operator and the customer in the case of a catering order in which the customer is less sensitive to which franchise prepares the order for pickup or delivery.

The bottom line is this: The combination of surge and off-surge pricing could positively affect the bottom line, allowing restaurants to push as much demand through their four walls as possible, every day, while managing labor costs and employee satisfaction. It’s hard to believe, but all this operational magic is in your pocket — and the pocket of your customer. It’s as simple as mobile ordering.

5 insights from mobile restaurant customers: the new shopper mindset

Originally published in QSRweb

By Jackie Berg

Every day, more people are relying on only mobile devices to make purchase decisions – even when a PC is nearby. xAd, Telmetrics, and Nielsen recently tapped insights from over 8,000 Smartphone and Tablet users in the 2014 “Mobile Path to Purchase” study, which is a fascinating read. The study analyzes mobile purchase funnels and behavior across four key industries: telecom, restaurant, auto, and entertainment. Here are five key research insights foodservice operators will want to take note of:

1. The majority of your mobile customers are choosing where to eat without the help of a desktop.
60% of restaurant consumers in the study used only their mobile devices in making a purchase decision. Mobile-only usage for restaurants trumped all other categories in the study – the next closest being entertainment, where 40% reported using only mobile.

2. Most mobile users only have a general idea of what they’re looking for at the start of their search. Surprisingly, restaurant mobile users know exactly what they’re looking for just 25% of the time. Most claim to have just a general idea, leaving an open window for limited-time offers to push their cravings in a specific direction.

3. Device usage climbs steadily during the day and peaks during dinnertime. The dinner segment is an opportunity to explore options outside of a normal routine. Tablet usage has the steepest dinnertime climb, presumably after people return back home.

4. Dining decisions happen quickly on mobile. 64% of mobile users in the restaurant category (the highest studied category in terms of immediacy) are looking to complete their purchase and be on with their day within the hour. QSR and fast casual brands offering added conveniences of credit cards and favorite orders will have a better shot at staying top of mind with customers looking for a self-service experience.

5. A big segment of your customers are now spending more time on mobile than desktop. We’ve recently learned about how Smartphone sessions have eclipsed desktop sessions – the same is true, as it turns out, for the restaurant segment specifically. The restaurant segment also had the highest mobile conversion rate in the study, with 80% of restaurant users reporting a transaction.

These findings are a wake up call to brands investing millions in their web presence and still designing their mobile experience as a secondary, afterthought initiative. Read the full study at mobilepathtopurchase.com.

Teaching in-store and digital ordering to play nice →

The majority of customers are ready for mobile ordering. Is your restaurant ready to serve them?

Restaurant operators: ever worried about keeping order flow in balance? Olo founder & CEO Noah Glass gives his advice in FastCasual.

Olo’s Greg Shackles to speak at Xamarin Evolve 2014

Today Xamarin announced their lineup of expert-led training sessions for this year’s mobile development event, which will be held in Atlanta on October 6-10th.

Register to hear Olo’s own Greg Shackles present on testing and continuous integration!

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Cousins Subs Enhances Online Ordering Website and Mobile Apps With Olo →

Cousins saw their average check increase by 33% during the test period. Check out the web, iOS, and Android apps today!

Brunch with Olo this weekend

Meet the Olo team at Amusemi’s food tech startup brunch on Sunday, June 22! We will be joining Plated for a morning of conversation with fellow NYC designers, entrepreneurs, and food-techies.

Olo is 9: Mobile Ordering Since June 1, 2005

By Noah Glass
Founder & CEO, Olo

Olo
 celebrated its ninth birthday on Sunday, marking another amazing year. 
 
When I founded Olo on June 1, 2005, fewer than 5 percent of mobile phone users had smartphones. Many people thought we were crazy when we suggested that smartphones would be the key to bringing the “faster, more accurate, more personal” advantages of online ordering to all restaurants: even coffee shops. No one thinks we’re crazy now.
 
With over 70 percent of mobile phone users now using smartphones and rampant usage of apps like Uber that have fundamentally transformed our interactions with the offline world, leading restaurant brands have come to view mobile ordering as the perfect platform for customer engagement. Even coffee and fast food brands see that mobile ordering can help them deliver a faster, more accurate, more personal customer experience by letting customers “Skip the Line®.”
 
Watch my keynote from the 2014 Restaurant Leadership Conference here:

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Mobile is Eating Your Restaurant

Over this past year, Olo:

Olo’s enterprise-grade digital ordering engine is making it easy for the fastest-growing restaurant brands to better serve loyal customers by letting them order and pay from everywhere and Skip the Line®. Faster, more accurate, more personal. That’s Olo.

3 reasons why the Starbucks app would fail at your restaurant →

The Starbucks mobile concept is widely-idolized, but would it work for most retailers? Olo Founder & CEO Noah Glass tackles this issue in QSRweb.

Why Did Panera Just Spend $42 Million on Mobile Ordering? →