This article applies to restaurants. A longer article on Pinterest with be posted later on once the changes underway are solidified.
Prices almost as much as quality is what your patrons consider when selecting your establishment(s) to dine in. When raising your prices carefully consider what is currently on the menu. Now would be the time to eliminate items that may not sell well or are not cost effective to produce. Any change to the menu will invite closer scrutiny. Therefore, prices reflect your location, demand and expertise. No one would consider buying a $25 bean burrito if the restaurant is in a dangerous location made by a cook with no credentials. Conversely, if you have an exclusive location with a Michelin star chef creating the dish, then there might be a line down the block.
Keep in mind prices should be balanced between the status of your restaurant at the moment and where you would like it to be in the future.
1. Be Accurate
Patrons understand that food prices fluctuate. However, most are also aware of which restaurants have ridiculous expectations for pricing. This is where you should sit down and consider all areas of food production. Know your costs before setting a price. On average food costs should account for 33% of the menu. Certain items such as entrees will take larger percentages while items such as soups and sauces will take less. Be aware of your percentages when setting new prices. Food cost margins weigh the real cost of the food plus profit. A lobster bisque soup can take $8.00 to make, but can sell for $12 with $4 profit.
After considering your costs and margins, ask what the patrons will be will to spend on each item and then test the new prices on a select group of clients. This can be an exclusive dining experience where members of your email lists might jump at the chance to be asked their opinion. If prices are deemed too high or too low, then make the appropriate changes.
2. Know Your Competition
Every business knows they have competitors. More importantly, patrons know there are dozens of other restaurants like yours. They can quickly compare establishments and decide which one to eat at based on a number of factors. Most will go based on price alone. You may think that researching their online menu will be enough, but it will not be. Go in person and order similar dishes as you offer. Perhaps their giveaways such as unlimited bread or refills are giving them the edge over you. By going in person, you can understand how patrons measure your competing restaurant. If their prices hover around the same price points as you before or after raising the prices, carefully consider if a patron would pay more based on value alone.
3. Avoid whole numbers
There is a science behind pricing. We tend to read numbers from left to right. The first number we see is the most critical. This explains why most prices hover around $9.99 or $19.99, it alerts the mind that this is a good deal. One way to up prices is to round to the nearest whole number and then drop a few cents to make the patron feel as if they are getting a great deal. One caveat, however, do not overuse this tactic. If everything on the menu ends in 99 cents, then the patron will grow uneasy with suspicion. Try this for big-ticket items which you would like to be interpreted as a great deal such as choice cuts of meat or specialty items.
4. Plan the Timing
Wait until you have a customer base. If you ever want to introduce a hen into the coop the best time to do this is when the other birds are sleeping and comfortable. They will wake up with the new member without thinking twice about it. If you introduce the change while the creatures are feeding, fights will ensue. Raise prices too early and customers may feel annoyed because they have not gotten used to anything. People prefer to handle changes without noticing or if it is done in intervals. Use this piece of psychology to your advantage.
5. Increase Value
When raising prices make sure to add increased value to your patrons. Consider adding extras that will be perceived as valuable. Throw in extra sauces or offer a complimentary house salad with bigger ticket items. Another way to add value is to create a new fixed price special . The reason fast food chains offer combinations is that the patron perceives it as cost-effective and, therefore, are willing to purchase more. For more upscale restaurants, consider having a prix fixe menu. This is a combination of multiple course food at a fixed price. This could include soup, salad, entrée and a dessert. If the items are carefully chosen by the chef, then this could be quite successful and exude exclusivity as Europeans are big on this type of dining experience.