28 Controlling Costs in Foodservice
Marketing Techniques in Menu Pricing
The prices calculated using the methods discussed in the previous section are rarely
the prices printed on the menu. For instance, it would be unusual to see a menu item
priced at $12.30. Instead, one of several marketing techniques would likely be used to
set the actual price. Marketing techniques focus on the message the price communicates
to the customer, or the psychology of the selling price. The price infl uences the customer’s
perception of a menu item. The goal is to fi nd the price that provides the operator with
the highest profi t, while remaining acceptable to the customer. Common marketing
techniques include
• odd pricing
• even pricing
• promotional pricing
• 2.5-times price spread
• reference pricing
Odd Pricing
Odd pricing is a psychological marketing technique used in many industries,
including the foodservice industry. Odd pricing is thought to create the illusion that
an item costs less than it actually does. Using odd pricing, an operation assigns prices
to its menu items that are just below even-dollar amounts. For example, an item may
be priced at $6.95 instead of $7.00. Since people tend to round numbers down rather
than up, customers would associate $6.95 with $6.00 rather than $7.00. With this in
mind, many operators price menu items with numbers ending in .25, .75, .95, .29, .59,
.79, and .99.
This technique is useful when an operator wants to increase a price. When the price
is raised incrementally—from $8.75 to $8.85, for instance—the change is rarely detected
by the customer. The customer will still view $8.85 as $8.00, just as the customer views
$8.75 as $8.00. The operator gains an additional $0.10 per sale, while the customer views
the price as unchanged.
Even Pricing
An operation using the even-pricing technique assigns prices ending in zero to
menu items—such as $10.00, $9.50, or $22.50. Even pricing is frequently used to price
entrée items. Where odd pricing conveys a bargain, even pricing conveys quality. If
even pricing is used, it is important that the menu item lives up to customer expectations.
Promotional Pricing
An operation using the promotional-pricing technique temporarily offers menu
items at discounted prices. This technique is used to entice customers to either purchase
something new or to visit the operation during a slow day or time. Some restaurants
use coupons or rebates for promotional pricing. Others discount menu items by a
certain dollar amount or percentage, such as “$2.00 off” or “10 percent off.” Another
popular promotional technique is, “Buy one, and get one free.”
Many casual-dining restaurants use a promotional-pricing technique that allows
the customer to select items from three different menu categories for one set price.
For instance, a customer may choose between two appetizers, three entrées, and two
desserts for a total price of $15.99. This is often referred to as bundling.