#428 – Avoid these Three Common Pricing Mistakes

A tough economy can make us act in risky ways, especially around price and value.

Make sure these two errors don’t undercut the profit strength of your entire menu or beverage list:

#1 Cannibal Pricing: when customers swap from their usual purchase of a $22 Sirloin Steak, to your new ‘bring the crowds back’ special of a ‘Tender Steak for $10’. Or a crazy coupon deal that brings a flood of bargain-hunters.

  • It was meant to open up a whole new market, but how do you stop the regulars trading down for a bargain? The original item gave you a $15 Gross Profit and the special only gives you a $5 GP – bad news!
  • The point of specials and coupon deals is to attract new people who enjoy the offer, realise they’ve found a great place and become a regular. They can also increase purchases by existing customers who will come back more often or buy an extra item. Maybe.
  • The cannibalism happens when you compete with your own hero items or best sellers. Better to introduce a $1 Dessert or Half-price Wine Night, and pile on extra promotion for the existing steak or fish platter.
  • There’s nothing wrong with lower prices (and many menus need a few corrections). But when a discount is made to one or two items without considering the impact on the entire menu, the results can be damaging.

Read the full article at http://www.profitablehospitality.com/