What came first, the chicken or the egg? It’s an annoying and funny question at the same time, which sparks a never-ending controversy.
Yet, what nobody can actually deny is that you can’t have one without the other, right? There’s no chicken without the egg, and vice versa. So where am I heading with this analogy?
Well, similarly, when your clients order food from you, they want to order as much food as possible, yet they’re afraid of the horrid consequences: having to give away a lot of money from their pay check to pay for their meal.
And nobody wants that, for sure. So then the following question arises: how can you get them to order more food from you without thinking about the price? Hmmm… What to do, what to do?
Well, that’s where the power of menu engineering comes into play and saves the day, yet again.
See, marketers didn’t just use secret psychological tricks to persuade more of their clients into buying more food. They’ve also done it to alleviate their clients’ existing pain of paying.
This type of fear can actually be traced back to one of the primary needs of the human being: the fear of loss (an innate, primary need).
The fear of losing their money is what makes them tick and pushes them towards taking some sort of action. However, in 99.9% of the cases, it’s NOT the one that you want them to.
The fear of overpaying can actually make your customers hit the brakes and curb their desire of eating overpriced foods or ordering multiple dishes.
So, this fear of emptying their wallets is quite possibly YOUR clients’ biggest pain point when it comes down to ordering food online or dining out.
Now, what you need to do is actually make them think: “Wallet? What wallet? ”
But how can you do that?
The solution? Counteract their fear of losing money by appealing to their wish of acquiring bargains (the learned or secondary need) … since everyone likes a good deal.
But you’re probably wondering how exactly you can do that. How should you make your restaurant menu prices more appealing to customers?
What is Menu Pricing?
Menu pricing is a calculation that allows you to figure out a final price for each of your dishes, based on what it costs to prepare them, along with other expenses, so that you can make a profit. Other factors you need to take into account when doing menu pricing are food costs, overheads, your target audience, and competition prices in the area.
Here are 6 menu pricing strategies that will help you drive more profit:
Restaurant Menu Pricing Method #1: Highlight the Inherent Price of Your Food
Customers assess the fairness of your food prices all the time. And if they perceive your product as being too expensive (or too low, for that matter), then that will greatly influence the size of their order. And that will impact your sales, right?
Right now, you may be wondering: OK, so, what should I do?
Well, the answer is simple, really. To save your restaurant sales from taking a serious hit, you should tell people why your prices are too low or too expensive.
So, for example if you need to charge more because you’re using organic products, say so.
Customers perceive your more expensive prices to be fair when they know about the cost of materials. This is known as cost-based pricing.
A market study conducted by Xia, Monroe, & Cox (2004) reveals that:
“…consumers have little knowledge of a seller’s actual costs and profit margins…Therefore, sellers’ making the relevant cost and quality information transparent helps.”
So being honest and transparent about your cost of materials helps.
Restaurant Menu Pricing Methods #1:
Highlight the Inherent Price of Your Food
Restaurant Menu Pricing Methods #2: Choose Price Numbers Which Have Fewer Syllables
Coulter, Choi, and Monroe (2012) published a study in the Journal of Consumer Psychology revealing that the auditory version of your price influences price appreciation.
This has to do with a little concept called price magnitude perception, which states that there is a strong link between syllabic length and numerical magnitude.
The more spoken sounds a price number has, the bigger the price perceived by your customers.
Here’s why: the more syllables a number has, the more mental resources we have to allocate to process that number. And so, we falsely attribute it a bigger magnitude.
However, on the other hand, your customers use less mental resources and perceive prices to be smaller when the numbers they see on the menu in front of them have less syllables.
Restaurant Menu Pricing Methods #2:
Choose Price Numbers Which Have Fewer Syllables
Restaurant Menu Pricing Methods #3: Use Expensive Decoy Food at the Top of the Menu
The menu item placement is an important menu engineering tactic designed to make your customers buy more of the cheapest items on your menu. And it matters more than you might give it credit for. The cheeky owners have actually used the restaurant menu psychology to deem a new concept, which most menu engineers informally call “decoy dishes”.
What they do is trick their customers into ordering a whole lot of food, by positioning a more expensive food item at the very top of the menu.
Seeing an expensive dish of sea bass seasoned with different herbs and spices and marinated in a fancy sauce – all for $25 – can have quite a powerful impact on the customer.
He’ll actually be inclined to choose some of your other, cheaper dishes, because he’ll get a better value for his money. Or to put it informally – he’ll feel that he’ll get more bling for less cha-ching.
And who doesn’t like a great deal?
This will also make him feel that he can splurge a little and maybe even drive him to order some dessert, alongside his main course.
Restaurant Menu Pricing Methods #3:
Use Expensive Decoy Food at the Top of the Menu
Menu Pricing Methods #4: Use the Power of Charm Pricing
Using decimals and reducing the left digit of your base number by one (i.e., $20 becomes $19.99) is a common menu pricing psychology tactic that you can also see in supermarkets, listed on almost all pricing labels.
The reason why marketers call this “charm pricing” is because it greatly increases conversion. However, beware: charm pricing is extremely effective when the left digit of your base number changes.
So, for example, a one-cent difference between $1.99 and $1.98 won’t actually be notable to the customer. However, a one-cent drop between $2 and $1.99 actually turns into a pretty significant difference.
So depending on how you choose to use it, you can become penny wise or penny foolish.
The simple explanation behind it? It has to do with price magnitude.
Thomas and Morwitz (2005) explain that:
“…while evaluating “2.99,” the magnitude encoding process starts as soon as our eyes encounter the digit “2.” Consequently, the encoded magnitude of $2.99 gets anchored on the leftmost digit (i.e., $2) and becomes significantly lower than the encoded magnitude of $3.00”.
Restaurant Menu Pricing Methods #4:
Use The Power of Charm Pricing
Menu Pricing Methods #5: DELETE The Currency Sign
Whether it’s eating out or ordering in, the paying bit is the part that makes us suffer the most. So here’s a nugget of wisdom: what you need to do is remove the focus from your menu prices.
Essentially, this will also help take the spotlight away from the total cost of the food that customers order.
Therefore, to make the most use of the restaurant menu psychology, make sure you hide or delete the currency sign that accompanies your pricing number.
Restaurant Menu Pricing Methods #5:
DELETE The Currency Sign
Restaurant Menu Pricing Methods #6: Charge Clients Before Consuming
Charging your customers before actually eating your food is something that benefits both you and your clients. The main reason for this is because they will be happier with what you deliver to them.
When your clients pay in advance, they focus more on what they do get (the benefit of eating good food) than on what they lose (the money in their wallet).
According to Prelec & Lowenstein (1998), getting them to focus on the benefits actually numbs your customers’ fear of losing their money.
So you need to make them to look forward to receiving the food they just ordered and focus on the positive, instead of intensifying the negative aspect of ordering food.
That would be pretty much like twisting the knife. And adding insult to injury is precisely what you’re trying to avoid in the first place.
So that’s why having an online ordering system in place and allowing people to pay online actually takes the heat off from having to pay for their food. Win-win for both you and your customers.
Restaurant Menu Pricing Methods #6:
Charge Clients Before Consuming
Creating a successful menu is easy and this short restaurant pricing guide is quite possibly the best thing since sliced bread.
And best of all? Our online ordering system incorporates them all. We’ve taken care of all that so that you can have one less thing to worry about. Or, as I like to call it “one less thing in the headache department to worry about.”
BONUS TIP: If you want to know how to create a restaurant menu, then give GloriaFood Online Ordering System a try and see how easy it is to set up your own restaurant menu and start receiving free unlimited orders with no strings attached.
That means no contract, no subscription fees, no fee per order. Nothing. Because your happiness is our bliss.
The Gloria Food Team
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P.S. Make sure you don’t miss out the third part of our Menu Engineering Trilogy, which we’ve dedicated to the persuasive power of menu language.