Optimising Your Restaurant’s Pricing Strategy

Understanding Pricing Strategies in Your Restaurant

The optimal pricing strategy for your restaurant will depend heavily on the context of your brand and products. Here’s a breakdown:

Easier to Gain Volume, Harder to Increase Price

• Rational Purchase Decision: Customers buy based on logic and practicality (e.g., daily meals).
• Newer Category or Brand: Your restaurant is new to the market.
• Innovative Product: You’re offering something unique and novel.
• Smaller Brand: Your brand isn’t widely recognised yet.
• Value Brand: Your focus is on affordability.

In these cases, it’s easier to attract more customers but challenging to increase prices.

Harder to Gain Volume, Easier to Increase Price

• Emotional Purchase Decision: Customers buy based on feelings and experiences (e.g., fine dining).
• More Mature Category or Brand: Your restaurant is well-established.
• Established Product: Your menu items are familiar to customers.
• Bigger Brand: Your brand is well-known and respected.
• Premium Brand: Your focus is on quality and exclusivity.

Here, it’s tougher to attract new customers, but you can justify higher prices due to the perceived value.

Strategies for Reducing Price Sensitivity

To make customers less sensitive to price changes and more accepting of higher prices, consider the following strategies:

1. Continue with Existing Range: Make slight adjustments and improvements to your current menu, potentially increasing prices by about 3%.
2. Launch a New Sub-Brand: Introduce a new line or concept within your restaurant, such as a premium menu or a special dining experience, potentially increasing prices by about 7%.
3. Reposition Your Brand: Shift the overall perception of your restaurant to align more with premium dining experiences, potentially increasing prices by about 10%.

Premiumisation as a Smart Move

For most restaurants, moving towards a more premium offering is beneficial. The more premium your products are perceived, the more thoughtful and considered the purchase decisions will be by your customers, allowing you to command higher prices.

Conclusion:

Adjusting your pricing strategy according to your restaurant’s context can significantly impact your financial success. Implementing premiumisation and strategic brand repositioning can reduce price sensitivity and lead to higher returns, despite the increased advertising costs.