Algorithms are taking over pricing of food home deliveryPosted Apr 20, 2021
Dynamic prices adapt to demand, decrease demand variation and increase restaurant revenue.
The Finnish growth company Priceff, specializing in dynamic pricing, has researched the interaction between price and demand in-home deliveries of restaurant food portions using data from more than a hundred thousand individual orders (so-called “tick data”). The study applies theory and methodology commonly used in research on the financial market. The study is based on data on home deliveries from Kotipizza, the largest pizza chain in the Nordics.
The research shows that the prices of the delivery service adapt to fluctuations in demand. Dynamic prices decrease demand variation, i.e. reduce the difference between peak hours and quiet times. A more even demand improved the availability of the delivery service and increased restaurant revenue.
According to the study, the restaurant food delivery market can be made more effective using dynamic pricing. This in turn is an opportunity to reduce waste.
”Priceff has accumulated a unique database, using which pricing in the real economy can be understood on a whole new level. Effective pricing is a cornerstone of being able to compete in the global economy, as companies have to provide consumers with increasingly good and responsible service”, says Anders Ekholm, Chief Research Officer at Priceff.
“For Kotipizza, dynamic pricing is an important tool as home deliveries of pizza are becoming increasingly important. Using this tool, we can ensure that all of our customers receive a hot pizza at their front door just when they want it”, says Johanna Kuosmanen, Digital and Customer Experience Director at Kotipizza Group.
The study can be downloaded through the Social Science Research Network SSRN: https://ssrn.com/abstract=3809633
Dennis Svartbäck, BSc, Mathematician; [email protected]
Anders Ekholm, PhD, docent, Chief Research Officer; [email protected]
Priceff Ltd. Is a Finnish company set up in 2016, offering a world-leading auto-dynamic pricing solution. With the aid of the service, companies can optimize the price of products or services automatically on the basis of demand. Priceff’s tick database will enable real economy market microstructure analysis. The algorithm behind the solution was patented in the United States in 2017. To learn more, visit https://www.priceff.com/
Kotipizza is the largest pizza chain in the Nordics and one of the most well-known restaurant brands in Finland. Kotipizza chain was founded in 1987. There are approximately 290 Kotipizza restaurants, which are all operated by independent franchisees. Altogether, there are nearly 300 franchisees in the Kotipizza chain. In July 2015 Kotipizza Group was listed in Nasdaq OMX Helsinki becoming the first franchising company in Finland to go public. Kotipizza Group delisted from Nasdaq OMX Helsinki in June 2019. A new chapter began in early 2019 when a Norwegian multibrand company Orkla ASA purchased Kotipizza Group.