restaurant menu pricing

Wish your menu was making you more money? Then it’s time we talk about psychological pricing.

The folks at Entrepreneur define psychological pricing as, “a pricing/marketing strategy based on the theory that certain prices have a bigger psychological impact on consumers than others.” This “psychological impact” can mean big things for your bottom line: better overall sales, higher average check prices, and a lift in customer loyalty.

Before we discuss what psychological pricing looks like in practice, let’s start by addressing (and dispelling) some myths around food pricing in restaurants.

Restaurant Menu Pricing: What Not to Do

First things first: pricing a menu item is neither entirely about you nor entirely about your customer. And it’s not all about your competition, either. While it’s true that imitation is the sincerest form of flattery, your goal is not to flatter your competitors—it’s to design an experience that communicates what makes your restaurant unique in a way that appeals to your ideal customer while turning a profit.

When it comes to pricing your menu items, your job as a restaurateur is to find the sweet spot in your pricing range—that is, the lowest price you’re willing to sell for and the highest price your customer is willing to buy at.

These aren’t your only considerations, though; things like your restaurant food costs, salaries, and ingredient price fluctuations should also be on your radar. Consider, too, what your customers love, hate, or feel is missing with your menu—after all, there’s no use in labouring over how to price an item nobody is buying! Your team is a great asset for this discovery process, given they’re on the floor interacting with your customers day in and day out.

It all sounds like a lot of work, and true as that may be, trust us—the payoff is worth it.

Ready to create a smarter menu? Get started now with our free Restaurant Menu Builder.

3 Psychology-driven Restaurant Menu Pricing Strategies

Now that we’ve talked about what not to do, let’s turn our attention to the reason we’re all here: putting psychology to work to revitalize your menu and boost revenue.

1. Captivate your customers with charm pricing

Don’t be afraid to turn on the charm when it comes to restaurant menu pricing—it turns out that a small change (one penny, to be exact) can have a tremendous influence on customers’ perceptions and purchasing behaviors.

Charm pricing is a numbers game and is most effective when you alter the leftmost digit on a price tag. For example, let’s say you’ve been selling your signature cocktail at $12.00 for years. Your restaurant POS reports suggest sales have been fine, but not great. Applying charm pricing means making a tiny adjustment to the price on your menu from $12.00 to $11.99.

menu pricing strategies

Why does this work?

Because our brains are master encoders, often deciphering information (and subconsciously attaching meaning to it) before we consciously register it. So when someone sees “11” instead of “12,” this is generally interpreted as a better value for money, even though the difference in spend is negligible.

If you want to up the chances of a sale even further, place your charming new prices after a menu item’s label, image, and description (something we’ll talk about next). This allows diners to make a determination of value before seeing what that product costs.

2. Delight diners with delicious descriptions

Consider these two menu item titles: “Bison Burger” and “Juicy BBQ Bison Burger.” Which one sounds more appealing?

When designing or redesigning a menu, an effective sales tactic is to mind your words. Talking about ingredients, where they were sourced from, how they were prepared, and what inspired the dish in the first place are all elements that, together, tell a story. Descriptive menus sell more, too—up to 27% more, according to a study at the University of Illinois.

menu pricing strategies

Why does this work?

Because human beings are biologically predisposed to favor stories. A well-crafted story with sensory-provoking adjectives builds emotional investment, making it easier for customers to justify paying for an item, even if the price is more than they were originally hoping to pay.

3. Treat your target market to the rule of three

As the old saying goes, good things come in threes. With restaurant menu pricing, the same principle applies. Sometimes referred to as Good-Better-Best pricing, the rule of three involves having three variations of a menu item: a “good” version (the most inexpensive option), a “better” version (something mid-range), and a “best” version (with the highest price tag).

Let’s take a standard penne pasta dish, for example. “Good” might include a house-made tomato sauce, “better” ups the ante with a selection of organic roasted veggies, and “best” includes locally-sourced beef, and is baked with cheese.

It’s quite often the case that the mid-priced option sells the most, while the others sell less, in which case, you might want to give special consideration to your gross profit margin on that particular item.

Why does this work?

There are a few reasons: first, customers love choice (but not too much choice). Creating a sense of agency and autonomy—for example, having a say in what toppings are included on the Juicy Bison Burger—can, if executed correctly, lead to increased satisfaction and reduce resistance to shelling out a few extra bucks.

On the other (sneakier) hand, having a “good” option makes the other two look more attractive in comparison, building the case for someone to spend the additional $5 or $10 for what is marketed as a higher quality meal.

P.S. Did you notice all the awesome alliterations in this section? Alliterations are proven to improve information retention. Something to keep in mind when it comes time to name and describe what’s on your menu.

Communicating Restaurant Food Pricing Changes

Once you’ve settled on a strategy (or two, or three…) to try with your restaurant menu, it’s important you communicate your decisions with your team.

Your staff needs to stay apprised of menu changes—ideally, long before they come into effect. Even better is involving them from the beginning across everything from what to put on the menu to how to price it, name it, and talk about it.

If a menu item will be changing in price (for example, a dynamic pricing strategy that sees the cost of iced coffees rise over the summer months, or a charm price change in the other direction), you don’t want to find yourself in a situation where a barista accidentally misadvises a customer about cost.

In-person group huddles are a great place to share the comings and going of your restaurant, but don’t forget about tools like your restaurant scheduling software. 7shifts’ communication tools make it easy to share menu updates and keep a record of what, when, and how.

80% of a restaurant’s food sales come from only 16% of menu items. How do you know which ones? The perfect menu is just a click away with Upserve's Menu Builder.

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Jessica Reimer is the Content Producer for 7shifts, an employee scheduling app designed for restaurant based in beautiful Saskatoon, Saskatchewan. She works with the rest of the 7shifts marketing team to help their customers all over the world save time scheduling, reduce labor costs, and improve communication in their businesses. Jessica has authored feature pieces and blog posts for a number of provincial, national, and international publications and specializes in psychology, community engagement, lifestyle, and business communications.