Variable Pricing

What Is Variable Pricing?

Variable Pricing refers to adjusting menu prices depending on external factors such as demand, time of day, special events, seasons, or customer buying behavior. Unlike fixed pricing, which remains constant, variable pricing adapts to market conditions.

This strategy is widely used in industries like airlines and hotels, but is increasingly becoming common in restaurants, especially high-demand cafés, bars, QSRs, and delivery-focused brands.

Why Restaurants Use Variable Pricing

1. To Maximize Revenue During Peak Demand

During rush hours or weekends, demand rises and customers are willing to pay more.
Variable pricing helps restaurants increase margins during:

• Dinner rush

• Holidays

• Festival weekends

• Live sports screenings

This mirrors surge pricing models used by ride-sharing companies.

2. To Boost Sales During Off-Peak Hours

Low footfall periods like:

• Late afternoons

• Weekdays

• Rainy days

can be improved with lower prices or special deals.

This helps:

• Improve occupancy

• Increase table turnover

• Optimize kitchen utilization

3. To Manage Inventory Better

When restaurants have excess stock (e.g., desserts, bakery items), they can lower prices to reduce wastage while still earning revenue.

Types of Variable Pricing Used in Restaurants

1. Time-Based Pricing

Prices vary based on time of day.
Example: Special breakfast rates or late-night surcharges.

2. Demand-Based Pricing

Menu items become more expensive during high demand.
Example: Beer prices increasing during peak sports nights.

3. Seasonal Pricing

Dishes using seasonal ingredients like:

• Mango

• Avocado

• Seafood

may fluctuate based on availability.

4. Dynamic Digital Pricing (Used in Delivery Apps)

Delivery apps sometimes adjust:

• Packaging charges

• Convenience fees

• Surge pricing

Restaurants can adopt similar strategies for online orders.

Challenges of Variable Pricing

• Customers may perceive it as unfair if not communicated clearly

• Requires strong POS data and forecasting

• Needs staff training to avoid inconsistencies

• Must comply with local pricing regulations

How Restaurants Implement Variable Pricing Successfully

1. Use Data for Forecasting

POS insights help identify:

• High-demand hours

• Seasonal trends

• Popular dishes

2. Clear Communication

Restaurants should be transparent using:

• Menu notes

• Table tents

• App notifications

3. Offer Value, Not Just Price Fluctuations

Customers accept changes better when they see added value:

• Bigger portions

• Exclusive menus

• Live events

• Limited-time specials