ICE’s Culinary Management Instructors are seasoned industry professionals who are still active in the industry, working on their own projects while teaching classes at ICE. With such a wide range of experience between them, we decided to ask Julia Heyer and Vin McCann to take a closer look at some of the things we keep hearing so much about. Today, they tackle the concept of demand pricing.
Bloomberg Media’s Dominic Chu (himself no stranger to restaurants) recently featured Grant Achatz’s new place in Chicago, the quarterly changing Next. It looked at the restaurant’s unique pricing model, which differs from the restaurant industry generally in two ways: (1) a guest pre-pays one set price in full, tax, tip and all included, and (2) the cost of the meal differs at different times. This model takes the concept of good old demand pricing (as experienced in the commodities trading by Achatz’s business partner) and applies it to the restaurant biz.
Basing pricing on demand is a working model when you offer something that the consumer wants. It gets even more effective when you, as the seller, can control supply to ensure the consumer’s willingness to pay premium prices remains strong (DeBeers Diamonds, anyone?). And that is something these guys at Next are smartly doing. Yes, I am sure that changing the restaurant and menu every three months also plays to the wishes, playfulness and curiosity of the chef, but really it is the ultimately savvy way of limiting supply of the experience, constantly reinventing the restaurant and re-stoking the demand for it. Each restaurant is only here for three months — come now before it’s gone! And then, when the next iteration comes to market, people want to come back (ergo drive demand) for that new experience (yup, that new supply). Smartly combined! More…