by Freddy J. Nager, Founder & Fusion Director, Atomic Tango LLC
In my ongoing quest to find anything of value on Twitter, I started following Umair Haque (@umairh), a strategy advisor who writes a column for Harvard Business Publishing called “Edge Economy”. Haque recently let loose a blast at someone else’s article:
“i strongly rec everyone read http://bit.ly/GdroN and reflect on why its 1) bad business 2) ethically questionable + 3) lame.”
That micro-rant sounded like something I would write, so I had to check the offending article out…
What sent Haque into a Twitter tizzy (a twizzy?) is an article by Mike Speiser at GigaOm.com, “What We Can Learn About Pricing From Menu Engineers.” The article reported on self-titled “Menu Engineer” Gregg Rapp, who strategically crafts menus for restaurants. Rapp had openly discussed his tactics on the “Today Show,” so this wasn’t some dark surreptitious sorcery at work here. Indeed, his goal is simply to get customers “to look for the more profitable items” on the menu, like crabcakes.
If you object to that, you object to for-profit business in general. My leftist side can certainly understand that. But for all you seasoned capitalists, does Rapp advocate anything here that’s beyond the pale — or even that innovative? Consider that most supermarket floorplans and website layouts are designed to steer customers to spending more money. Just go to the wine section of your favorite store: notice how the cheap wines are on the bottom shelf and the more expensive wines are at eye level? Is that unethically manipulative, or just smart marketing?
To overcome price sensitivity, Rapp’s tactics include removing dollar signs from the menu and not calling attention to the prices. In addition, he recommends writing mouth watering descriptions… Oh noes! What a horrible man! He writes words that make customers want the product?! How dare he?! Lock him up!
The Dastardly Deed Called Reference Pricing
The tactic that excites GigaOm’s Speiser the most is putting an outrageously expensive item on the menu that makes everything else look cheaper. Again, absolutely nothing new here. Car companies for years have put outrageously expensive items in their showrooms that few customers can afford, such as the six-figure Acura NSX in the 90s. The high-end sports car served several purposes: it created a “halo effect’ over the entire Acura brand; if one sold, Acura made a sweet profit; and it provided a steep “reference price” that made the $50,000 sedan appear downright affordable.
Others who practice reference pricing include high-end hotels (with their ultra-luxury suites), wines (with limited edition vintages), sports stadiums (luxury boxes for the mega-rich), computer companies (the 17″ fully loaded MacBook I crave rings up at $4500), and so on. Are they ridiculously expensive? Sure. Is anyone forced to pay those prices? No.
A Case of Anti-Semanticism?
The real problem here is semantics: “menu engineering” is a pretentious term that makes Gregg Rapp’s strategies sound more complicated than they really are, and which enables him to charge higher prices to his restaurant clients.
Hmm, maybe I should change what I do from “brand design” to “brand engineering”…
If Rapp were simply a “menu designer” — and if he didn’t look like John Hodgman’s PC character in the Mac commercials — his story might not have created such a stir. Indeed, he probably wouldn’t have appeared on the “Today Show”; rather, he would have wound up in the back pages of Communication Arts.
Hell, the guy sure knows marketing.
The other problem is the hyperbolic GigaOm article, which contains tabloid-caliber passages like, “Have you ever gone to a restaurant and found some ridiculously priced item on the menu? Of course you didn’t buy it — you’re no sucker. Or are you?” and “He helps restaurants maximize revenue by hacking common flaws in human decision-making.” Gee, I didn’t realize GigaOm was part of the National Enquirer family of publications.
No wonder Umair Haque came out swinging. Haque normally analyzes such topics as the financial markets and political leadership. Anything that smacks of deception raises his ethical hackles, and I respect that.
But in the case of menu engineering, this is much a’twitter about nothing.
Menu engineering is simply smart menu design. Restaurants are for-profit enterprises, and they should think smart and hard about how they present their food in their menus. Are the photos top quality? Is the copy enticing? Will the prices scare customers away from a really good dish?
Menus, after all, are simply catalogs of edible products. Does anyone get on the case of catalog publishers for highlighting expensive products or writing enticing copy? In the online world, does anyone rip into Amazon.com for strategically featuring certain products or having professionally crafted product descriptions?
Think Beyond the Product: Defining “Real Benefits”
Haque tweeted me, “i suggest reading what i’ve written about thin vs thick value and reflect. does menu engineering ever have real benefits?”
You could ask the same question about any and all marketing practices: Are there real consumer benefits to having Michael Jordan endorse your shoes? To having the product come in a shiny package with a cool brand name? Or to having a Super Bowl commercial with a catchy song and a sexy actress?
Haque focuses primarily on product issues: how many direct benefits does the product provide? (“Thick value.”) That’s all fine and good, but it’s also critical to get consumers to try those high-value products you’ve invested all that time and money into developing. Business history is filled with great products that never took off, or that were crushed by inferior products with superior marketing — or simply a lower price. (Think VHS vs Betamax.) You can’t just make a “thick value” product; you have to get people to buy it.
So there is IMMENSE VALUE in getting customers to overcome their price aversion to try those $9.95 crabcakes instead of settling for $3.95 french fries. The customers might love those crabcakes, and be thrilled that they tried them. In the process, the restaurant earns a higher profit, the waiter makes a bigger tip (based on both price and customer satisfaction), and the customers might come back again — and refer their friends. Those are real benefits for all involved.
As long as the price and food are truly as advertised, “menu engineering” is just smart marketing under a scary name. And it works: I’ve engineered some serious hunger just writing this, so I’m off to find some crabcakes, regardless of the price.
Update 12/24/9: Everyone’s doing it, including gourmet Indian restaurants like Tabla in New York. According to the New York Times:
Tabla is just one of the many restaurants around the country that are feverishly revising their menus. Pounded by the recession, they are hoping that some magic combination of prices, adjectives, fonts, type sizes, ink colors and placement on the page can coax diners into spending a little more money.
Somewhere, Umair Haque is having conniptions and trying to coin new phrases to capture his indignation at marketing.