Your customers may think your restaurant is too expensive. Price is not what they are actually complaining about, it’s value. Watch this video as I talk about how price and value affects your customers perception.
To learn more please either watch the video above, read the transcript or listen to the podcast below.
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Today I want to help you increase your restaurant profits using what I call the price value curve. Guests don’t buy products based on price, we think they do but they don’t. They buy based on perceived value.
The Price Value Curve:
I got hired five years ago by a steak restaurant that told me their biggest problem is “People think we’re too expensive”. This restaurant moved to a new location which was big and beautiful, had amazing china and glassware and they said that people are complaining about price. I didn’t think that was the case.
So I compared their prices to their competitors in the area and I found that the restaurant that hired me was a couple percentage points (a dollar or two cheaper) than the others.
So how could people be complaining about price, when their restaurant was cheaper?
They weren’t, they were complaining about value. Value is about expectations, when this steak restaurant redesigned and opened up with new big, beautiful location people’s perceived value went up – they expected more.
So the price value curve basically says that – the higher the price, the lower the perceived value. They’re expecting higher value than they’re actually getting. A lot of restaurants keep their perceived value high by keeping prices low, but some people say “I can’t raise my prices because people won’t come in”. I want to challenge you on that. Instead of lowering your prices to increase value, give people better service, food or a bigger portion.
Find out where your customer is placing value. If you don’t know what your customer is looking for on their value curve, then you can’t know how to price your products.
The only way that we can establish value is to first know your customers expectations and then over deliver on that by even just 1%.
How do we find out what our customers expectations are?
Ask them, survey them, walk up to a table and ask this question: “Did everything exceed your expectations?”. Often times your customers will say they were expecting a bigger portion, a better piece of meat or expecting the French fries to be crispier – that information is gold.
Establish value by finding out what your customers want, it has very little to do with price. Keeping your prices low does not increase a customer’s perception of value, the only way we increase perception of value is to find out their expectations and exceed it, even if just by a little bit.
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