Getting your menu pricing right is one of the most important aspects of running a successful food service business. With tight and ever fluctuating margins it’s crucial to keep on top of food and staffing costs, but also to understand how to extract the maximum value from your customers.

Menu pricing is often decided from a cost of goods point of view, deriving the price by adding a profit markup to the cost of a products’ individual ingredients. A valid strategy, but one that leaves significant potential profit on the table.

To maximise profits you should aim to understand the value your customers gain from your service, the psychology behind purchasing decisions and how presentation and formatting can determine what customers buy. This can all be achieved without even raising your prices.

Currency Symbols

If your current menu lists prices with an associated currency symbol; £s, $s, €s or otherwise, you should strongly consider removing them. Often suggested by restaurant consultants and menu engineers, the effects of removing currency symbols have been well researched. A 2009 study by Cornell University found that diners at St. Andrew’s in New York spent considerably more when prices were presented in numerical form without a $ symbol. So displaying a price of 29 for a steak would outsell the same steak listed at $29. The theory behind this is that when people see currency symbols they are made more conscious of the money they are about to spend and will subsequently be more likely to choose items based on price rather than desire.

But would 29.00 have the same effect as 29? Perhaps not, a study by the Journal of Consumer Psychology found that increasing the number of syllables in a displayed price also increased the customer’s perception of the price. Even when not spoken, prices written with commas, points and pennies will be associated with higher prices and so should be avoided when possible on menus.

To Round or not?

Whilst the origin of psychological pricing (pricing items at .99 & .97 points) is disputed, various theories have been suggested; including loss prevention required by the introduction of the cash register, accommodation by shopkeepers for newspapers priced at 1 cent and competitor price battles on commodity goods. The benefits are well documented though, customers will perceive the same product priced at £4.99 as better value than when priced at £5. Again, the reasons behind this behaviour are disputed – one theory, named the left-digit anchoring effect, suggests we place emphasis on the first digits of a number.

Whether it makes sense for you to implement psychological pricing will depend on your branding goals and customer profile; it may make sense for quick service restaurants and cafes (where customers tend to act more price sensitively), but the cheap/bargain/value nature of the pricing strategy may not fit in with higher end restaurants aiming to impress.

Presentation

Presentation can play a big role in how customers read and analyse your menu. Right-aligning your prices into a easy to read column? Customers will be tempted to compare and choose items by price, keeping your prices on the same line after the title of the item will reduce the pain of paying problem.

Emphasise your most profitable items (or “stars“) by increasing visual hierarchy with highlighted text, borders and other design patterns – see how pizza express highlights their star items in this menu.

Spend time on the copy for star items, write more and more descriptively to entice customers into choosing your most profitable items.

Taking a look at a menu in use at the excellent London restaurant, Barrafina, we can see these tactics employed perfectly. Prices, although arranged in a column, are devoid of £ symbols, written in their simplest possible form ( 3.1 rather than £3.10) and their star product, the “hand selected” Manzanilla is adorned by descriptive copy and clear visual hierarchy.

Read our post on menu design for a look at menus in a non-commercial way.