Dynamic pricing, which involves adjusting menu prices in real time based on factors such as demand, time of day, and external conditions, is increasingly reshaping the F&B sector across the MENA region. When applied thoughtfully, adaptable pricing can lead to significant revenue boosts. However, if poorly managed, it risks alienating customers, disrupting service, and damaging brand reputation. Alexander Ponomarev, CEO of Syrve MENA, a Dubai-based all-in-one POS and restaurant management solutions provider, shares insights.
“The key to success is consistency and transparency. Slight, predictable price adjustments, like small surcharges during dinner hours or discounts during lunch, help build customer trust. Sudden or inconsistent changes, such as a burger priced at 40 AED on one day suddenly jumping to 55 AED without explanation, tend to create consumer suspicion and may drive consumers to competitors who offer more stable menus, even if their prices are generally higher,” says Alexander.
Data highlights a common challenge: while about 92% of restaurants use dynamic pricing for revenue optimisation, only around one-third of their customers feel the pricing benefits them, with a majority finding it confusing. Without clear communication, dynamic pricing often appears exploitative rather than advantageous.
The forecasting challenge
As per Ponomarev, forecasting demand accurately is crucial. Poor quality historical sales data, unreliable demand indicators, or unforeseen market events can lead to pricing missteps. Overestimating demand results in inflated prices that deter customers, while underestimating demand leaves restaurants unable to capitalise fully during busy periods.
He adds, “Let’s imagine a hypothetical scenario with a cluster of cloud kitchens operating in Riyadh. During a sudden weather change, such as a sandstorm, delivery demand could surge unexpectedly as customers prefer ordering in rather than going out. Without robust forecasting tools that incorporate weather and external data, kitchens might struggle to adjust pricing and manage inventory effectively. This could result in stockouts, delivery delays, and missed revenue opportunities.”
Advanced AI-driven forecasting could address such challenges by integrating historical sales data with real-time external factors, including weather and local events.
Real-world lessons from MENA
The MENA region has seen its share of dynamic pricing controversies: “One Dubai cafe raised prices sharply during Ramadan evenings, sparking social media backlash and forcing a swift return to fixed prices to protect its brand.”
To make dynamic pricing effective in the MENA region, restaurants should adopt several strategies that strike a balance between flexibility and trust, he notes.
Here are some of them:
Fix the prices, use adjustments. Restaurants should maintain stable core menu prices to preserve customer trust, while utilising smaller, time-based surcharges or discounts around those anchors. For example, late-night delivery fees can be raised without changing the main price.
Communicate clearly. Dynamic pricing could be framed as a benefit rather than a penalty. For example: “Enjoy 15% off orders before 7 p.m.” feels like a reward, while unexplained surges feel punitive.
Segment by channel and audience. Restaurants should use data to apply variable pricing where it makes most sense, such as on delivery platforms where users are accustomed to service fees. Prices on in-restaurant menus could be kept to make the experience more predictable.
Protect brand equity. Consider a long-term perspective over short-term profit. Pricing experiments should be incremental, not radical. The goal is to optimise revenue without eroding loyalty.
To use or not to use dynamic pricing?
When done right, dynamic pricing can be a major growth driver. Industry benchmarks show surge pricing during busy periods can lift orders by up to 12%, translating into substantial annual revenue gains for leading chains. Even a 1% price increase, if scaled across high-volume outlets, can lead to double-digit profit growth.
More importantly, dynamic pricing can benefit customers by offering them more opportunities to save. Through clear communication of discounts during off-peak hours or special promotions linked to demand patterns, customers feel rewarded for adjusting their dining habits. When customers understand how and why prices change, they are more likely to see dynamic pricing as a fair system that creates value for both sides.
For MENA’s competitive and digitally savvy markets, success lies in striking a balance between data-driven responsiveness and transparent, customer-friendly pricing communication. Restaurants that master this balance will not only optimise revenue but also build lasting customer trust and loyalty, positioning themselves well to thrive and grow.
