Making good money by making customers happy: Six tips to perfect your pricing strategy Thursday 30 July 2020
As a restaurant operator, you understand the importance of smart pricing. Sell your dishes too cheaply or overprice them and you’re bound to sell your restaurant short. A well-thought-out pricing strategy is therefore essential. How that strategy pans out for you will largely depend on your restaurant concept. Whether it’s fast food or high-end dining, every concept comes with its own pricing rules. But which ones should you follow? Where? And why? That’s where this blog post comes in. We’re serving up six pricing tips and tricks for both high-end and fast food restaurants. After all, a penny saved is a penny earned, so get your calculator out and get those digits moving!
TIP 1: You do the maths
High-end or fast food, this monetary rule applies to all: make sure dish prices cover 130% to 135% of the cost of ingredients. Nevertheless, a higher price doesn’t automatically translate into more profit. Purchase and preparation costs are also part of the equation. On top of that, learn the art of efficient portioning to reduce expensive waste. Save ingredients, save costs, save money.
Tip 2: Money mind tricks
Do you know your concept and your targeted customers by heart? This is crucial knowledge if you want to establish a perfect pricing strategy. Your tactic has to fit both concept and customer. Here, the difference between high-end and fast food restaurants is more apparent. And it all starts with an aspect as mundane as the decimals on your menu. Those seemingly insignificant digits after the decimal point play some powerful mind tricks. Rule of thumb: if you manage a fast food restaurant, don’t round your prices! Put a dish on the menu for 4.99 and customers will read it as 4.00, instead of a little under 5.00. Don’t ask me how it works exactly, but this mental maths trick is a smart one to use on your menu.
Do you run a more upscale, higher-priced establishment? Dare to discard the decimals altogether and choose 20 over 19.99. Feeling extra bold? Omit the pound sign as well. Your customers translate this as a statement of great confidence. And rightfully so.
Want your customers to focus on menu rather than price? Forget about a separate price column! Simply place the price at the end of the dish description. A perfect way to make your customers concentrate on your delicious dishes’ fine ingredients instead of on cold price comparisons.
TIP 3: Let me fix that for you!
Does lunchtime always equal crunch time? Is your restaurant packed during holidays such as Christmas and Easter? Or are you the place to be for a romantic Valentine’s Day dinner? Do yourself and your customers a favour and introduce fixed menus for fixed prices. This strategy allows you to:
- Create a transparent, favourable menu for your customers to enjoy.
- Buy yourself some much-appreciated time during busy shifts. Fixed menus allow you to work ahead while you have fewer tasks on your plate.
- Efficiently cater to the needs of your professional lunch crowd. A fast-served fixed dish allows them to enjoy a beneficial lunch before heading back to the office. They’ll be coming back for some more quickies.
TIP 4: To promote or not to promote
Creating an experience and serving high-quality meals are important elements of high-end dining, while value for money is more important to fast food restaurants. Restaurants that welcome more cost-conscious customers can certainly profit from smart promotional activities. Wait on your price-sensitive clientele and serve them special menus or dishes for attractive prices.
But, be aware of the pitfalls! Don’t turn your regular dishes into promotional items by temporarily lowering their prices. Your customers certainly won’t buy at the ‘old’ price anymore. In fact, they’ll deem it a price increase. To avoid this, always promote temporary special items that aren’t part of your day-to-day menu but will make you stand out.
TIP 5: Use some Swedish psychology
Pick up some smart tricks at your local IKEA. And I’m not talking Swedish meatballs! IKEA cleverly caters to a variety of target groups by dividing their products into different price categories: high, medium or low. Most customers are psychologically programmed to pick the safe middle and go for the medium option. Use this knowledge to your advantage:
Create a menu that offers a variety of choices based on low, medium and higher price levels. Anticipate the need to meet in the middle and put an emphasis on your medium menu. Make it a champion dish with all costs and revenues in sync and the potential taste-wise to become a customer favourite. This is your potential money maker! Your goal is to sell the largest amount of this dish at the lowest cost. Turn it into an attractive must-have menu for your cost-conscious clientele and your profit!
TIP 6: Manage your margin makers
Make more out of your menus, create margin makers! Let your guests pick and choose side dishes to go with their main and make some extra money on the side. But keep in mind that you should:
- Either mark-up the main course or the side dishes. Never both! The option you choose depends on your concept.
- Complement reasonably priced, attractive courses with a variety of side dish options. This will both improve the dining experience and enable clever upselling.
- However, don’t burden your customers with an unpleasant surprise at the end of their visit. Extras can add up to a huge bill. Be transparent with pricing to avoid this; otherwise the aftertaste could stop customers from coming back for seconds.
Bonus tip: In for a penny, in for a pound on menu optimisation? Use the menu engineering tool to test your menu, find your key dishes and boost your profit. The best part – it’s absolutely free!
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