You’ve walked into a restaurant and sat at your table. A waiter brings you a menu and you scan through it searching for a dish you like. What do you choose and why did you choose it?
This might sound like a sample exam question, but it’s a question everyone that sits down in a restaurant asks themselves every time they look over the menu. As such, it’s important that any restaurant owner makes the decision as easy as possible.
Through price psychology and effective design, it’s possible to make certain items on your menu look more appealing, expensive items seem less expensive and extra items like drinks and desserts go from optional to essential.
It’s also possible to determine the optimal price for certain items on your menu by understanding the basic price of ingredients and time, the price of restaurants that compete with you and the amount customers are willing to pay.
In this guide, we’ll share three simple but highly effective tips and techniques that you can use to optimize your menu for a higher per-table average spent, increased return customers and a more powerful brand for your restaurant.
Calculate pricing based on your competition
One of the most frequently used restaurant pricing models is referred to as food cost pricing. This method of pricing takes into account the cost of the food (and the labor involved in preparing the food) to work out a reasonable menu price.
For example, a dish that costs $5 to prepare with a desired food cost percentage of 25% should be priced at $20, giving your restaurant a 75% profit margin whenever it’s ordered.
Food cost pricing gives your restaurant a predictable profit margin, but it ignores an important aspect of running a successful restaurant – offering better value, whether in terms of pricing or quality, than competitors.
Instead of simply determining prices using food cost pricing, dine at restaurants that compete with yours to ensure you’re offering the best value – not just in terms of the quantity of food or lowest price, but also the quality – to your customers.
Avoid using currency icons on your menu
Here’s an interesting psychological truth: people are more likely to spend more if the menu they’re ordering from doesn’t include currency symbols – dollars, euros and others, for example – than if it does include these symbols.
This is because people mentally associate currency symbols with cost, making the act of ordering an item from a menu that includes currency symbols a purchase in their mind. When price symbols are removed, this mental effect isn’t as great.
Removing currency symbols from your menu won’t suddenly turn people into big spenders, but it has a subtle but noticeable effect on the willingness of customers to order meals that they would normally perceive as being out of their price range.
If your restaurant sells high-end food that’s priced accordingly, removing currency symbols from your menu could decrease the psychological cost of ordering many of your menu items and encourage customers to spend a higher amount, on average.
Offer a range of items at different prices
The most successful restaurants tend to offer items at a range of different prices to appeal to a wide, diverse audience. For example, a restaurant could offer some of its mains for $50 and a range of cheaper dishes from $25 to $40 each.
Offering a spectrum of different prices gives your customers more a far wider range of items to choose from. It also makes your restaurant seem more affordable due to the selection of inexpensive items, which balance the menu.
The vast majority of people won’t purchase the cheapest items listed on your menu, but simply offering them creates a psychological effect that makes your restaurant’s dishes seem more affordable and competitively priced.
This technique is often used in drinks menus and wine lists, where an inexpensive bottle of wine is used to define the lower end of the menu, increasing the chance of customers ordering mid-priced menu items.