There was a very interesting article on pricing recently. The article shared some insights from a restaurant menu expert, called a “menu engineer.” There were some very cool techniques that I had never considered, such as
- Always have one ridiculously high-priced item on the menu because it makes everything else look inexpensive in comparison
Okay, I’ve ordered a $12 burger to avoid the $30 Strip Steak
- Remove the “$” before pricing to make it less intimidating
Hmmm, am I less intimidated by this: Prime Rib……$38. Or this: Prime Rib…….38
- Avoid listing items from least to most expensive, because that focuses the consumer on price. Instead, mix up the items, making it hard to find their price—thereby encouraging the customer to emotionally commit to something before finding out what it costs.
Pretty intriguing, wouldn’t you say?
Then the article talked about something called “arbitrary coherence,” which theorizes that pricing is, at least at first, arbitrary; we don’t all have some notion of “absolute price” when it comes to the utility we’ll get from every potential transaction. That’s the arbitrary side of the term. The theory says that once we anchor ourselves to the price of something, our expectations with respect to price going forward is relative to our first impression. That’s the coherence bit.
We believe the arbitrary coherence concept is very applicable to any business. We believe most consumers have no idea what your pricing is. So, if you can set a high first impression you can set their expectations
moving forward. This will allow you to be able to negotiate with the customer even if they already have a preconceived idea of what something should cost.
How many people know what a LOCAL ad in the Super Bowl costs? The answer would surprise you that it is no where near what the national ads cost and can be quite affordable considering how many people you will reach. What is the real difference between a Chevy and a Lexus? Both get you to where you need to be right? However, Lexus has put a lot of time and energy and marketing into what a consumer wants and they have used appropriate branding to be able to charge their price.
Someone will always be the highest, someone will always be the lowest and many will fall in the middle. Set your expectations and sell the sizzle!
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