Restaurant Menu Pricing Makes A Difference
How Restaurant Menu Pricing Makes A Difference
HotOperator launched The Land Run restaurant in Enid Oklahoma this past December. And we learned a valuable lesson about how restaurant menu pricing makes a difference in how people understand the prices of the food and how they feel about those prices.
The client wanted to use simple number pricing on their menu. So everything was listed as 10, or 25, etc. No change was listed. The client thought it would help make the restaurant seem a little more upscale, and that the customers would think the food was better because of the prices we were using. So rather than 10.99 for an item, the price was listed simply as 11 and so forth.
HotOperator suggested ending the prices more typically, with 9’s, but the client insisted. When we launched the restaurant in December, our managing partner was on site for the first weekend, and interviewed guests on their experience. About half of the guests would ask where the prices were on the menu. When our managing partner pointed the prices out there was a delayed ‘oh, that’s odd, I would never have guessed that those were prices.’
Over the next several months, things got worse for The Land Run
Guests started to complain that they thought the business was hiding the prices and trying to trick people. Comments started to appear on Facebook, Google Business, Yelp and elsewhere with complaints about the prices being secret, or too high, or that they simply could not find them. They also asked over and over if we were ever going to post a menu on the website showing prices. This became a constant conversation with customers asking to see the prices, followed by our explaining where the prices were, followed by complaints about the prices being too high.
The impact on the business was fewer guests overall. What started as a very solid opening soon became a slow, downward slide. The original performance promised to become a $2.5MM business, but over time, turned out to be a projection lower than $1MM. This is not where we wanted to be, and mostly it’s because local customers had trouble with the single number pricing. They just did not understand the prices, and thought they were too high.
As we updated the menu, our HotOperator recommendation was two fold. First, change the prices to end in 9’s. So as an example, rather than a price being 25, adjust the price to 24.99. Second, lower some of the weight of the steaks an ounce of two so we could lower the prices a little further to increase the consumer value perception at the restaurant. In this way, we were able to get an upswing in our social media comments and make customers feel like they are getting a better price on the products.
All That For A Penny
Most of the prices were adjusted just one penny down. In each case, the comments were immediate and positive. The Land Run customers started to comment on social media and in person that our prices were more reasonable. A single penny drop turned the business around. Seriously, one penny.
In larger markets, I think the single prices would work just fine. In Chicago, Dallas, Minneapolis, etc. there are enough consumers with a higher level of discretionary income to not be as concerned with the cost of a steak. But in a community of less than 50 thousand people, the number of people who think they can afford a premium steak more than once per month are too few. This was a very frustrating, yet valuable lesson in menu pricing.
Mark and Kelly are a design-engineer team and managing partners of HotOperator. They have been working in the restaurant business since 1989. Either can be contacted through the HotOperator website, or by calling 800-316-3198.