Blog #3: Pricing Strategies of Restaurants

             Although prices throughout the restaurant industry vary greatly from one place to the next, the basic principles that help set those prices are all, in some way or another, utilized in those different restaurants.  One of the most important parts in designing a successful restaurant is designing the menu, but setting the appropriate price for those items is what will drive success (Gordesky & McCarron 2012).    Before that price is set, however, a restaurant must analyze the surrounding demographics, understand who the target market is, and know what competitors are charging and offering (Gordesky & McCarron 2012).  Making sure that a restaurant is targeting the right market will also ultimately help it better price its goods.  For example, if a community has a higher population of children than adults, a restaurant may want to have a higher price for chicken fingers and French fries rather than fancy salads and wines.  By noting what competitors are selling, a restaurant can better organize their menu/competitively price their products.

            Once all of the background information is taken into account, there are many options for a restaurant to take when pricing the items.  Value pricing allows for the costumer to acquire more bang-for-their-buck because a products benefits increase while the price remains the same (Hammond).  This would certainly draw more customers in.  Another method is penetration pricing, in which the price of a good will be set far lower than normal… usually for a short period of time as seen with the introduction of new products (Hammond).  I feel that this must be timed wisely, and used for only a short period of time so companies do not lose money.  Another major way fast casual and quick service restaurants price their products is by bundle pricing.  This is a marketing tactic in which two or more products are sold together, in which the costumer seems to be saving money (Hammond).  This can also be classified as the “good, better, best” strategy (Von Matterhorn).  Though all of these pricing strategies are different, it is clear that they can be used for a variety of restaurants to help drive revenue upward.

 

Cited Sources:

 

Gorodesky, Ron & McCarron, Ed (2012). Restaurant Marketing: Strategic Positioning of a Restaurant—Pricing. Retrieved from http://www.restaurantreport.com/features/ft_stratpos1.html

 

Hammond, Melanie. The Pricing Strategy for Fast-Food Restaurants. Retrieved from http://smallbusiness.chron.com/pricing-strategy-fastfood-restaurants-23939.html

 

Von Matterhorn, Lorenzo. Restaurant Food Pricing Strategies. Retrieved from http://smallbusiness.chron.com/restaurant-food-pricing-strategies-14229.html