BUSINESS
LOOK AT THESE PRICES! By Jim Rayner
Last month I wrote about how the way in which prices are presented, and the comparisons they allow us to make, strongly influence buying behaviour. Let’s take that a stage further and look at these extracts from restaurant menus. Which layout works best? Menu 1 Pan roasted Cornish hake ……......…..£22.00 Roasted duck breast ………...………..£23.00 Rib eye steak …………………………..£26.00 Wild mushroom risotto ……......……..£19.00 If, like me, you have a financial background you probably find this layout pleasing. It looks neat, clearly laid out and it’s easy to compare the prices – I can instantly see that the steak is the most expensive and the risotto the cheapest. Graphic designers might feel similarly. Menu 2 Pan roasted Cornish hake, caper mash, braised cherry tomato, leeks & tarragon cream sauce 22 Roasted duck breast, pancetta, charred pak choi, duck fat roast potatoes & plum sauce 23 Dorset rib eye steak, hand cut chips, field mushroom, bubble & squeak 26 Wild mushroom and saffron risotto, parmesan and ripe Somerset pear 19 Now the emphasis is on the dishes themselves with much fuller descriptions and the prices themselves are less prominent without £ signs and without pence. Reading it we start to think about, and start anticipating, each menu item without being distracted by comparing prices. As customers our eyes are drawn to the prices in the first example and we automatically start comparing them. But in the second menu we’re forced to read the much fuller descriptions and our first comparisons will be between the merits of each dish rather than their relative prices. Why does that matter? Well, research shows that when the prices are presented in a vertical column making them easy to instantly compare, customers are much more price sensitive when choosing their dishes. Basically customers tend to choose cheaper dishes if the menu is presented using the menu 1 layout. The influence is subtle but over a whole evening service it is likely to be measurable. Less spending means less profit for the restaurateur. But there’s even more going on here. Research by Yang, Kimes and Sessarego showed that diners in high end restaurants spent less when prices included a currency symbol. And in a separate study, Coulter, Choi and Monroe demonstrated that subconsciously we perceive numbers presented like £1,527.00 to be much bigger than £1527. That may seem strange but it seems to be because we read numbers in our heads, and so the more syllables the bigger the price seems to be.
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So if a restaurant, or any other business, presents their products using the menu 2 layout, does that amount to unfair psychological manipulation? I don’t think so. They are simply making it easier for us to compare the dishes on their merits without immediate distraction from comparing prices. When I go out for a meal I’m looking for an enjoyable experience. Of course price is important (price is always important) but value for money is more important and that starts with choosing a dish I know I’ll enjoy. And of course now you’ve read this piece you will be able to allow for the psychology the next time you eat out! If you really want to enjoy your meal here’s something else you might want to try. The normal pattern in a restaurant is that a member of the serving staff comes to your table and takes the orders from each person in turn. Research conducted by the behavioural economics team at Duke University in the US demonstrated that while the first person to order was usually very satisfied with their choice, the others were often less happy and sometimes regretted their choices. What seems to happen is that without realising it, we frame our choices not just to order something we think we will enjoy but we also want to look good in the eyes of our friends, and anxious to show our individuality, we choose something different. Researchers in Hong Kong observed the opposite phenomenon with diners more likely to follow the lead of the first person to order. Whether we are by nature conformists or rebels, the choices of the first to order seem to affect what everybody else orders. The lesson here is that if you want to increase the chances of everyone in your party ordering dishes they will enjoy, a good plan is for you all the secretly write down your own choices before the waiting staff come to take the order. And of course don’t change your selection as the others reveal their orders. If you own or run a business, whether or not it’s a restaurant, and you’d like to know more about the weird world of price psychology, you can download a free copy of my ebook Profitable Pricing – A Guide for Ambitious Business Owners from my website www.james-rayner.co.uk.
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