Sunday, July 22, 2007

Price Points:

Pricing on a restaurant menu is always a source if consternation. Customers do not value free stuff very much. Arriving at price points for the menu, that is not questionably low or uncomfortably high, is much more art than science. You should err on the side of higher prices. I have witnessed many restaurateurs agonize over how much to charge, when to raise prices and how much. Will the change drive traffic or punish revenue? Pricing is a function of whether your product and service is a commodity. Your restaurant should never become a commodity because you have no pricing power. Differentiation provides pricing power and that is should be the focus of your efforts and pricing decisions.

The typical way to arrive at menu prices is to survey similar concepts in your area and set your prices. If the quality of your offerings or the atmosphere is differentiated in some fashion you can adjust your price up. If your products are comparable the price should match the prevailing in the area. In misguided efforts to drive traffic some establishments will set there price slightly lower. The most successful price strategy is to charge higher than the average and support it with overarching quality and service, in a design setting that is atheistically pleasing.