What We Can Learn About Pricing From Menu Engineers

Description

What We Can Learn About Pricing From Menu Engineers

By Mike Speiser | Sunday, September 13, 2009 | 12:00 AM PT | 14 comments

Let’s say that you’re an entrepreneur or general manager about to take a new product to market. How do you price it? Traditional economic theory tells us that the market clearing price is the point at which supply and demand meet, and that consumers always know the utility of any given purchase. So surely pricing your product shouldn’t be that hard, right?

Just as most of us must rely on relative pitch to discriminate amongst various tones, so too must the vast majority of consumers rely on relative price cues in order to determine what they’re willing to pay. What this means, according to behavioral economist Dan Ariely , is that the price of everything is “up in the air.” That’s where menu engineering comes in.

Gregg Rapp, Menu Engineer

Have you ever gone to a restaurant and found some ridiculously priced item on the menu? Of course you didn’t buy it — you’re no sucker. Or are you? This Today Show piece on Gregg Rapp may surprise you.

Rapp is a menu engineer. He helps restaurants maximize revenue by hacking common flaws in human decision-making. For example, by simply removing “$” signs from prices, people are less intimidated by them. And he advises against listing items from least to most ...

Original URL

http://gigaom.com/2009/09/13/what-we-can-learn-about-pricing-from-menu-engineers/

http://gigaom.com/2009/09/13/what-we-can-learn-about-pricing-from-menu-engineers/