The Psychology of Pricing
Chances are when you scan the menu at your local neighborhood restaurant and select an item, you do so with the belief that you arrived at your decision independently. You probably listened to your stomach to see what sounded tasty and then listened to your wallet and checked to see where the best value for your money lay. However, what you may not realize is that many of your decisions were made for you before you even stepped in the restaurant.
Greg Rapp is a menu engineer and in this Today Show piece he explains how restaurants design their menus in such a way to encourage specific decisions on the parts of their customers. For example, at a smart restaurant you will never see “$” sign anywhere on the menu. By pricing the fresh fish as 26 rather than $26, the price is softened in such a way that causes patrons to disassociate the number they are viewing with the actual dollars in their wallet. A number without a “$” is much less intimidating.
Next, rather than listing the prices in an organized fashion such as cheapest to most expensive or in a single column, Rapp designs menus with prices hidden in the text describing the food. In designing the menu this way the customer is less focused on how much the item costs and is more likely to spend money based on the food itself.
Finally, have you ever wondered who pays for those absurdly high-priced items on the menu? No one. They are just there to make you feel better about paying for something a little bit cheaper. Most people would never pay $20 for a hamburger, but if it’s sitting just below a $120 seafood plate it sounds like a much more sensible decision.
This psychology of pricing doesn’t just apply to restaurants. Supermarkets are masters of manipulating your decision-making process. Check out this 2-min video.
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3 comments
The world starts looking very different once you see the psycho-social priming going on around you. Whether restaurants, supermarkets, media or business in general, the supply/demand dynamic exists everywhere.
What I always find interesting is consumers don’t necessarily view themselves as being in a constant business transaction whereas that’s all businesses think about. I’m not talking morality or ethics here, it’s all fair.
We should simply be more attentive as consumers and employees that what we choose to spend our time and effort on is as much a trade in currency as with money itself.
@Akshay,
spoken like a true disciple of Seneca – if only we valued our time like we value our money
Yeah. . .I get a little depressed every time I am reminded that people are so bad at decision making that something as simple as the presence or absence of a “$” is statistically significant.
The last example I heard for the phenomenon described used a funeral home. They would put a cardboard (seriously) coffin at one end of the room, and a blinged-out gold coffin at the other end, and the one they actually wanted you to buy in the middle. No one ever bought either of the two extremes (ever), but their mere presence greatly increased sales of the regular coffin over presenting the regular coffin on its own.
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