Combating Increasing Food Costs: Is Raising Prices the Right Answer?

May 28 2014 – Robert Fiumara

As any restaurant owner knows, as the prices for the goods we rely on to do business increase; we have to negotiate the pricing of the foods and services we provide. It can be a daunting task, as the fear of alienating your patrons is very real. That said, there is some good news on this front.


Considering Raising Prices?


A recent study conducted by Cornell University’s Food and Brand lab indicates that a price hike on your menu might be just the fix you need. They found that on whole, even when the foods consumed were identical, guests were more satisfied with their dining experience when the prices were higher.


The study was conducted in a small all-you-can-eat Italian food buffet restaurant in upstate New York. A group of about 140 customers were allowed to consume any of the food items from the buffet, but were charged either $4 or $8 dollars for the meal. After they were done eating, the customers were then asked to rate both the quality of the meal and their overall dining experience.  They were also asked to rate their first, middle, and last bites of food on a 9 point scale.


Will It Help?


The customers who paid the higher price rated their food a whole 11% tastier than those who paid the lower price.  Likewise, the study found that those who paid the lower price had a diminished dining experience from first bite to last bite over the course of the meal. In other words, the study found that even in the modern dining atmosphere, where customers are constantly bombarded with daily deals, discounts, bargain combos, and dollar menus, the relationship between price and general customer satisfaction is as complex as ever.


This study suggests that increasing your prices may not alienate your customer base, but instead, may actually enhance their dining experience.  That pricing may be the main driver of meal satisfaction, and in turn determine how customers feel about their dining experience.  Granted, this study does not help you determine what the sweet spot for your meal pricing may be, but it does suggest that higher menu prices may not necessarily impact customer perception negatively, which is an instrumental  find for restaurant operators who can no longer absorb the growing costs of the restaurant and food industries. 

Tagged: combating costs, pricing, profit, raising prices, restaurant tips, restauranteurs


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