Menu Pricing Psychology Flashcards

What is 'charm pricing' in menu design?

Answer: Ending prices in .95 or .99 to make them feel lower than a round number

Charm pricing exploits the left-digit effect — diners perceive $9.99 as significantly less expensive than $10.00 because they process the leftmost digit first.

What menu engineering term describes a menu item that is highly popular but has a low profit margin?

Answer: Plow horse

Plow horses are high-popularity, low-profitability items that drive traffic but contribute little to the restaurant's bottom line.

The 'decoy effect' in menu pricing works by:

Answer: Placing an overpriced item next to the target item to make it appear as a bargain

A decoy item priced significantly higher than the target makes the target seem reasonably priced by comparison, steering diners toward the restaurant's preferred order.

Research from Cornell's Center for Hospitality Research found that removing dollar signs ($) from menu prices:

Answer: Led diners to spend more money

Cornell research showed that diners at tables with numeral-only prices (no $ symbol) spent significantly more than those shown prices with dollar signs, because the symbol triggers a pain-of-paying response.

What is 'menu engineering' as defined by Kasavana and Smith (1982)?

Answer: A method of analyzing menu items by popularity and profitability to optimize placement and design

Kasavana and Smith's menu engineering framework classifies items into Stars, Plow Horses, Puzzles, and Dogs based on their profitability and popularity to guide design and pricing decisions.

Why do upscale restaurants often present prices without cents (e.g., '$32' rather than '$31.99')?

Answer: Round numbers signal confidence and premium positioning, avoiding the 'discount store' feel of .99 pricing

Round prices communicate luxury and self-assurance, whereas .99 endings are associated with discount retail — fine dining avoids charm pricing to maintain a premium image.