One of the most overlooked details of restaurant management is menu pricing. No matter how great your concept and how excellent your food is, it won’t matter much if your customers don’t think your menu prices are worth paying.
While it’s only natural that you want your prices to be profitable, being too aggressive with your pricing strategy can scare customers away. On the other hand, being too meek can make you lose out on valuable profits.
In other words, your pricing strategy is something that you shouldn’t neglect. Small details can go a long way to encourage your customers to spend more without feeling forced.
In this article, we will discuss restaurant pricing strategies that will boost your sales and keep your customers happy at the same time.
1. Don’t Put Currency Signs
Perhaps the most basic yet impactful restaurant pricing strategy you can try out is not placing a currency sign next to your prices.
A currency sign is a subconscious reminder for customers that they are spending money. In 2009, one study showed that customers actually spend around 8.15% less when they see a currency sign on the menu.
Even if they genuinely want the food, seeing the currency sign makes them subconsciously think about how much they might end up spending on their meal, which makes them more hesitant to spend money. Removing the currency sign will remove this psychological hindrance.
An exception to this restaurant pricing strategy is if your restaurant caters to foreign guests who use other currencies. In these situations, not having a currency sign next to your prices might cause confusion and should be avoided.
2. Write the Description First, Price Last
Written descriptions of your dishes are essential for all choices in your menu.
Descriptions are there to enhance the appeal of your food. By writing about ingredients, cooking methods, and other background information about the dish, the customers will get a vivid idea of how they might experience it themselves.
The description must be the first thing that the customers notice after the name, way before the price. Doing so will build up the customer’s appetite and expectations, which will result in them not minding the price as much when they finally read it after the description, preferably in smaller font size.
3. Increase Value With Charm Pricing
Do you ever wonder why you see uneven prices everywhere, such as $9.99 or $19.99? It’s actually a time-tested pricing strategy called charm pricing, also known as psychological pricing.
Charm pricing utilizes a useful psychological phenomenon common in all humans: automatically deciphering information and attaching meaning even without our conscious thought. This kind of works like a shortcut for the human mind to reduce our mental burden. After all, it would simply be too exhausting to consciously think of everything all the time.
In other words, when people see the first number in a price, their brains automatically attach value to it and assume the value for the rest of the numbers. Brains don’t see $29.99 as $30 minus one cent. Instead, they see it as $20-something.
4. Employ Cost-Plus Pricing
Cost-plus pricing is one of the most common pricing strategies around. This strategy provides a solid guideline for how you price your food items, and it’s very easy to do, too.
All you have to do is to compute all the expenses that go into making a dish and add the desired profit margins.
The list of expenses should include fixed costs, such as rent, utility, and the wages paid to the cooks and other staff, in addition to the prices of the ingredients. Once calculated, simply divide the cost among all of the dishes served in your restaurant. You can then add your preferred markup percentage to this amount to get the final price.
For example, let’s say the cost of a certain dish is $10, and 30% is your preferred markup percentage. 30% of $10 is $3, so the price of your dish should be at least $13.
Cost of dish = $10.00
Markup percentage = 30%
Markup price = $10 x (30/100) = $3
Cost + markup = $10 + $3
Final price = $13
For best results, you can even combine this strategy with other strategies, like charm pricing. The final menu price will be $12.99, which is more attractive to customers than $13.00.
5. Present Your Menu With Relative Pricing
Relative pricing is when you create a distinct contrast between two items to tilt the customer’s perception of a product.
This is best employed by placing expensive food items next to cheaper but more high-profit food items. When customers see the stark price difference between the two, they are more likely to opt for the more affordable items, even if they are actually more high-profit for your restaurant.
6. Increase Sales With Bundle Pricing
You may be familiar with this pricing strategy because marketers and business owners everywhere also use it to price their items.
Bundle pricing is when you combine several products into one prepackaged set. This pricing strategy not only introduces your customers to multiple products at once, but it also increases the sales of related food items.
To make it more attractive, some items may only exist as a unique addition to that particular bundle. You can also offer the bundle at a special discounted rate.
One of the best examples of this can be found in the fast-food industry. Fast food restaurants are notorious for offering all kinds of bundles, such as burger-and-fries combos. Customers might not initially want fries with their burger, but when they’re sold as a set, they’re more likely to consider the deal too good to pass up and end up buying anyway.
7. Increase Accessibility with Portion Pricing
Portion pricing, or pricing by portion, refers to the practice of adding different size options to your menu.
This restaurant pricing strategy makes your menu more accessible to a broader pool of people, including new customers who may be more hesitant to try out your food. It also makes small eaters more likely to order food items that they don’t normally get in fear of not finishing the entire thing.
To maximize its advantages, make sure to charge a higher profit margin for the smaller portion. For instance, you can charge 70% of the full-size price to the half-size version of the same dish.
Full-size (100%) price = $10 (100% of the full-size price)
Half-size (50%) price = $7 (70% of the full-size price)
This is a win-win for your restaurant for three reasons: one, it gives people an option to buy a smaller portion if they wish; two, most people are more likely to purchase the full-size option due to the minimal difference in price; and three, if they do purchase the half-size option, the restaurant actually gains more profit.
8. Generate Interest With Special Pricing
Make dishes seem more special by adding unique ingredients to your recipe and highlighting them in your menu.
For example, you can mix exotic herbs to your house curry or add vegetables to your burgers for a special flair. Don’t forget to mention these in your description to whet your customers’ appetites.
Plus, by adding new ingredients to a dish, you’re essentially creating a unique offering for your restaurant. Now that it’s considered a ‘special’ order, you can charge premium prices or even make it your restaurant’s signature dish.
9. Add More Variety With the Rule of Three Pricing
There’s something about the number 3 that makes it more appealing to the mind. It can be applied in all aspects of life, from statistics to economics.
Unsurprisingly, you can also apply it to restaurant pricing, sometimes referred to as the Good-Better-Best pricing strategy.
When creating your menu, try to come up with three different variations of the same dish. For example, you can make the basic dish as the first choice, add some extras to the second, and add even more extras to the third.
For example, the first choice could be a basic pasta with premade in-house sauce, the second choice could be an upgraded pasta with locally sourced fresh ingredients, while the third choice could have various vegetables and meat options.
You can also use this strategy in combination with the bundle pricing strategy. Serve the basic meal and one drink for the ‘good’ option. Add an appetizer for the ‘better’ choice, and then add a dessert for the ‘best’ one.
One thing to note is that the middle option is typically the best-selling one since most customers consider it the best value for money. So make sure to keep that in mind when creating your dish variations.
10. Create a Perception of Luxury With Premium Pricing
This strategy focuses on creating perceived value by putting a high price tag on items. Due to this, it’s also known as ‘luxury pricing’ or ‘prestige pricing.’
This strategy is often used by well-known brands and is usually employed when a brand has already established itself as a provider of high-quality items and premium services.
With the increased perception of luxury, customers will see your menu as even more exclusive and luxurious. Due to this, they will be more drawn to your restaurant and will want to eat there more in order to be associated with your brand.
However, there are some caveats when it comes to pulling off this strategy. First of all, you have to consider the public perception of your brand. If your restaurant has been around for some time and is already seen by customers as affordable and cost-effective, suddenly marketing your menu as premium might not go well.
That’s why this pricing strategy works best for new or soon-to-open restaurants. Right from the start, you can already market your product in a certain way to create a sense of luxury, such as controlling supply, driving up demand, and attaching your brand to other influences such as popular actors or events.
Second, be careful not to go overboard when pricing for luxury perception. Studies have shown that there are acceptable price ranges for premium pricing in restaurants. Anything beyond that can be seen as excessive and might even turn off your customers.
Implementing the Best Restaurant Pricing Strategies
It goes to say that there are a lot more things that go into pricing than just these tips and tricks.
Remember, crafting your menu prices is not a one-and-done affair but rather an ever-evolving process that takes plenty of real-world factors into account. Before employing restaurant pricing strategies to boost your sales, you need to assess production costs, competitors, and customer demand, just to name a few.
Nonetheless, we guarantee that these best restaurant pricing strategies, when coupled with proper market research, can help you make your menu not just more appealing to customers but more profitable as well.
Trifon Tsvetkov
+1 (786) 292-2373
insights@glimpsecorp.com
