Pricing Lessons from Restaurants

My last Neuromarketing post, Neuro-Menus and Restaurant Psychology, talked about various things restaurant menu engineers do to maximize sales and profits. I think it’s worth calling special attention to one aspect touched on in that post: how price presentation affects sales. Not, the price itself, which of course is very important, but the way the price is displayed to the diner.

A study by Sybil S. Yang, Sheryl E. Kimes Ph.D., and Mauro M. Sessarego of Cornell University, $ or Dollars: Effects of Menu-price Formats on Restaurant Checks, looked at several common restaurant price display techniques:

  • Numerical with Dollar Sign: $12.00
  • Numerical without Dollar Sign or Decimals: 12.
  • Written: twelve dollars

The researchers expected that the written/scripted prices would perform best, but they found that the guests with the simple numeral prices spent significantly more than the other two groups.

To me, this seems to be consistent with research that shows the subliminal effect of currency symbols. Subjects exposed to subtle currency symbols (e.g., a poster or a screensaver while “waiting” for the experiment to begin) showed less willingness to help others and actually positioned their chairs farther apart from other subjects than those who saw neutral symbols like fish. (See Thinking About Money.)

For those in the restaurant business, the implication is obvious: get rid of the dollar signs. But other businesses might boost their sales by the same techique – simple prices, no currency symbols, and as little as possible to trigger the “money effect” in people’s brains.

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Roger Dooley writes and speaks about marketing, and in particular the use of neuroscience and behavioral research to make advertising, marketing, and products better. He is the primary author at Neuromarketing, and founder of Dooley Direct LLC, a marketing consultancy. Follow him on Twitter.

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10 responses to "Pricing Lessons from Restaurants" — Your Turn

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Verilliance
Twitter: verilliance
7. January 2010 at 11:48 am

Hm, I’m curious how this would translate to websites. It seems websites are more constrained by usability standards because online consumers can navigate away so quickly. I imagine that users look for dollar signs to help them quickly determine how much a product is online so they can compare and make decisions quickly. I bet removing dollar signs online would backfire.

As for restaurants, I’ve been to restaurants that didn’t use dollar signs on the menu, and I liked it, though had no particular conscious thought as to why. This offers a clue or two.

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Roger Dooley
Twitter: rogerdooley
7. January 2010 at 3:17 pm

Interesting question, Verilliance. I think the “no currency symbol” approach may work in some cases, but not in others. For example, if you are offering an excellent price on a product, highlighting the price in bold colors and with a dollar sign might work.

For websites, at least, one can test. I’d suggest an A/B test on a popular ordering page and see what happens. (If the site is dynamic and you can readily control how prices are displayed for all items, running the A/B test sitewide would be best.) As even the Cornell researchers found, what you expect going into a test isn’t always what turns out in the results.

If you try it, be sure to post here with the results!

Roger

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Brendan 10. January 2010 at 8:13 am

On a web site it could be tricky to leave out the symbol as people need to know what currency in which they will be spending their money.

One interesting thing try could be changing the actual symbol ($ or £ or ¥ etc) with the text representing the currency, eg USD, AUD, GBP, JPY.

As “USD” seems more abstract than “$”, it might have the same effect as leaving out the symbol altogether..?

When I have a site that has progressed to the stage where I can do A/B testing, I’ll try it out!

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Roger Dooley
Twitter: rogerdooley
10. January 2010 at 12:59 pm

Good point about the international nature of many websites, Brendan. While a restaurant can be expected to price in the local currency, no such expectation exists for websites. I agree that perhaps the text representation of the currency might be less of a trigger, though I suspect we are talking about some rather small effects overall here.

Roger

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Paul Johhnson 12. January 2010 at 11:57 am

I’ve decided (years ago) to avoid rubbing currency signs in people’s faces. If you have a column of prices, only the figure at the top needs a currency sign. If you are quoting in paragraph form, mention the currency with just the first figure on the page, like this:
****************************************
MySoftware is only USD $6 per seat license, plus annual maintenance (which is 15% of the seat license).

While the standard license for 1,000 seats is only 6,000, your educational discount will save you $2,000 (33%) for a net of just 4,000. Maintenance is just 900.

Maintenance is required in the first year and is optional in subsequent years.

Your total, including 1st year maintenance, is only 4,900 (4000 for licenses, plus 900 for maintenance).
****************************************

No one has ever gotten confused.

Note that I showed the discount amount with the currency sign, so they could “feel” how much they’re saving.

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Claire Boyles 14. January 2010 at 11:56 pm

This is fascinating, I don’t have any great insights but I am amazed to see the effect that currency symbols have on people’s behaviours.

It’s fascinating that the participants moved their chairs further away & were less willing to help others. Seeing currency symbols seems to trigger a response that is competitive & is based on lack, & fear of scarcity= as in money is scarce so I must fend for myself kind of attitude, must keep as much as possible & not share!

Fascinating. Still thinking about how I can use this information when selling in my own business. I never thought that a currency symbol might be off putting before. I’ll certainly test out different options, probably going with euro or GBP or USD

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Hannah Hamilton@suit garment bag 11. November 2010 at 5:12 am

I love your post.The price techniques you have displayed are very interesting.It is a good idea for the restaurant owners who want to change the price tags and want to look it effectively.
I think this no currency symbol is not applicable in all the cases.
You try to work hard for it in order make this issue success.

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denia rentals
Twitter: Rentin-Denia
16. November 2010 at 6:08 am

This blog is so amazing. The price displays are of great interest to me as i own a restaurant. I don’t have any great insights but I am amazed to see the effect that currency symbols have on people’s behaviours.

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TattsLotto 26. June 2011 at 9:33 am

At first sight this pricing lesson is interesting. However, since this research has been conducted in one restaurant only the empirical significance of the results have to be taken with a grain of salt.

Reply

Roger Dooley
Twitter: rogerdooley
26. June 2011 at 9:49 am

And a dash of pepper, too!

Roger

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