25
Jul
09

Pricing in restaurant menus

My manager handed me a paper the other day about the optimal way to design menus. (The paper is here, but you may need a subscription. In fact, you do.)

The study looked at whether people would buy more food if the menu was written in the following format.

1. $20.00

2. 20

3. twenty dollars

The hypothesis was that (3) would induce the most spending because, being composed of words rather than numbers, it obscures the calculative aspect of payment. In other words, numbers remind us more explicitly that we are about to lose that much money. This “pain of payment” can induce us to spend less.

However, it turns out the most spending was done when the menu format was (2). TheĀ  authors’ ending hypothesis was the sensible one that any reference to dollars, either in words or in symbology, brought a “pain of payment” emotion to the front of consciousness.

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1 Response to “Pricing in restaurant menus”


  1. July 26, 2009 at 5:14 pm

    The experiment’s observation is right on. Except I would be interested in seeing the spending pattern change for the customers as they get used to the menu and as they “learn” everytime they pay their tab. It is arguable that the “pain” suffered while paying the tab first time will have an effect when they order next time, but this is only an hypothesis that needs experimentation.
    Prof. Dan Ariely, author of the book Predictably Irrational started a new series in his blog which is a posting of short stories written by his students of the behavioral economics class. The first story he posted is about pricing in Indian restaurant and it has a piece using the “20” vs “$20”. You should check it out.


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