re: McDonald's uses AI to decide how much to charge for Big Mac by location

I worked in Marketing and Research for McDonald’s corporation for 15 years. Left 10 years ago.

Even back then we had something similar. There was a company RMS (Revenue Systems Management I think) that worked on pricing at the store level. The average owner had 6 stores back then and most had the same prices across their organization.

RMS was able to show that was a bad mix. A cheeseburger at one location was worth something else at another location…even if they were across the street from another. A big factor is the pricing inthe whole menu.

They were able to look at a couple of years of price changes at the store level and see how it impacted other items. They would use this to optimize pricing. Meaning going up 10 cents on item X may encourage trade up at that store. Or the opposite. They would propose new pricing that would optimally have no impact on foot traffic but move to more profitable product mixes.

It was entirely optional and it was a hard sell to convince an operator to give up that kind of control. So much about running that business was already dictated by corporate. By law the corporation can’t dictate pricing unless it was an advertised price voted on by the owners. They also hated having different pricing from store to store. RMS did eventually offer pricing by operator instead of location with the caveat it was less effective. It was also very complicated and over most people’s heads

That was 15 years ago. No idea what they’re capable of now (RMS or whoever is doing it), but it’s got be way more advanced and nuanced.