How do Resturant Owners Design Price Menu and Its Advantages.
If YOUR Company offers any products in "Good-Better-Best" tiers, there is a great opportunity for you to generate significant profit dollars.
The next time you are in a restaurant, take note of the selections and how they are priced in the menu. More importantly, notice how many people order the highest priced item. Savvy restaurant owners know the value of the highest priced item on their menu. They love it, but why? It is surely one of the costliest items for the owner and it is hardly ever ordered by patrons - so why is it so important?
People have a hard time making choices, whether it is in selecting their steak from a restaurant menu or choosing from among several similar products that are used in their manufacturing process.
In the restaurant, people will seldom order the most expensive item on the menu, but they have no issue with ordering the second most expensive. In fact, doing so makes them feel good subconsciously. Taking this a step further, there is usually at least one other choice, the lowest priced. Given three choices, people will usually default to the middle choice - it's human nature. Knowing this, restaurant owners design the most popular item so that it is the most profitable. It makes good business sense.
This takes on the appearance of something that many manufacturers offer to their customers - a "Good-Better-Best" product offering. Three tiers of products that are priced differently. Presumably, the "Good" tier is the lowest priced, and it is marketed to the "economy-minded." The "Best" has the highest price and it usually comes with all of the features that one could want in this type of product. There are certainly customers for each of the these tiers, but the resultant sales from each category is not the biggest benefit to the manufacturer.
The biggest bang from a "Good-Better-Best" scenario comes from the relative positioning of the "Better" to the other two tiers. The "Better" product is somewhere in the middle in most ways (price, performance, and value) but it should stand out from the "Good" and the "Best" when it comes to profitability for YOUR Company.
Human nature tells us that the "Better" appeals to the largest audience. Why? Simply because it is the middle choice. People subconsciously do not like to purchase the lowest priced item - there is some ego invested. They don't like to pay for the highest priced item either. They think they can actually get a better value out of the second tier. It's not that much less than the high end product, after all. Doesn't it make sense for the business owner, then, to enjoy the most profit from this middle tier?
The highest priced menu item helps boost a restaurant owner's revenue, just by merely being on the menu. If you use a "Good-Better-Best" strategy in your product offering, this opportunity exists for you as well. You can learn a lot in a restaurant!
The next time you are in a restaurant, take note of the selections and how they are priced in the menu. More importantly, notice how many people order the highest priced item. Savvy restaurant owners know the value of the highest priced item on their menu. They love it, but why? It is surely one of the costliest items for the owner and it is hardly ever ordered by patrons - so why is it so important?
People have a hard time making choices, whether it is in selecting their steak from a restaurant menu or choosing from among several similar products that are used in their manufacturing process.
In the restaurant, people will seldom order the most expensive item on the menu, but they have no issue with ordering the second most expensive. In fact, doing so makes them feel good subconsciously. Taking this a step further, there is usually at least one other choice, the lowest priced. Given three choices, people will usually default to the middle choice - it's human nature. Knowing this, restaurant owners design the most popular item so that it is the most profitable. It makes good business sense.
This takes on the appearance of something that many manufacturers offer to their customers - a "Good-Better-Best" product offering. Three tiers of products that are priced differently. Presumably, the "Good" tier is the lowest priced, and it is marketed to the "economy-minded." The "Best" has the highest price and it usually comes with all of the features that one could want in this type of product. There are certainly customers for each of the these tiers, but the resultant sales from each category is not the biggest benefit to the manufacturer.
The biggest bang from a "Good-Better-Best" scenario comes from the relative positioning of the "Better" to the other two tiers. The "Better" product is somewhere in the middle in most ways (price, performance, and value) but it should stand out from the "Good" and the "Best" when it comes to profitability for YOUR Company.
Human nature tells us that the "Better" appeals to the largest audience. Why? Simply because it is the middle choice. People subconsciously do not like to purchase the lowest priced item - there is some ego invested. They don't like to pay for the highest priced item either. They think they can actually get a better value out of the second tier. It's not that much less than the high end product, after all. Doesn't it make sense for the business owner, then, to enjoy the most profit from this middle tier?
The highest priced menu item helps boost a restaurant owner's revenue, just by merely being on the menu. If you use a "Good-Better-Best" strategy in your product offering, this opportunity exists for you as well. You can learn a lot in a restaurant!
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