Competition | September 2014 | By Barbara Basbanes Richter

Paying the Price

Lessen consumers’ sticker shock by tweaking the menu and marketing.
Quick service pricing structures soften blow of sticker shock.
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Prices for commodities such as beef, pork, poultry, and coffee are on the rise, and more operators expect to pass the cost to customers, industry reports suggest. And while getting guests to accept a price hike can be challenging, experts say it’s possible with menu and marketing tweaks.

Descriptive advertising can improve consumer perception, making them more likely to pay a premium, says Justin Massa, CEO of Food Genius, which recently published a report on tactics for raising prices.

Massa says language can go a long way, and brands must communicate why a menu item is fresh or premium. “For example, specify that you’ve swapped iceberg lettuce for butterleaf lettuce, or highlight your ingredients’ sources,” he says. “Preparation methods, like ‘hand-smashed burger,’ deserve recognition, too.”

Analyzing pricing by daypart can also help, as the meal occasion plays a key role in how much consumers spend, says Darren Tristano, executive vice president of Technomic Inc. Technomic found breakfasts priced between $4.50 and $4.82 were optimal. Lunch meals sell best at $5.01–$5.82, dinner at $5.99–$6.51.

Evaluating local market conditions and ingredients at competitors also helps operators make informed decisions about points of differentiation, Massa says, and “prices should be sensitive to the market.”

Most importantly, a brand must know where its money comes from, experts say. “Premium positioned brands, like Wendy’s, get more out of margins,” Tristano says. “Operators like McDonald’s focus more on frequency.”