How a burger joint got me to pay more than ten bucks

Guest post by Jon Manning, Pricing Prophets

Oscar Wilde once famously said “a cynic is a person who knows the price of everything and the value of nothing”. I wouldn’t classify myself as a cynic, but being a pricing consultant, I probably notice prices a bit more than your average Tom, Dick or Oscar.

Like everyone, every now and then, good, healthy eating goes out the window, and I grab some fast food. At one particular burger joint, I know the price of my preferred meal deal of a chicken burger, chips and a can of Diet Coke. It’s $10.

 pricing tips

It’s been $10 for a couple of years now. Before that, when this particular burger joint started out, it was $9.95. When they put the price up five cents to $10, I noticed, but I doubt many other people either noticed or cared.

The next move was going to be critical however. How do you raise prices over a psychological price point like $10? Unlike the increase from $9.95 to $10.00, breaching a psychological price point is where you often see a change in demand (i.e., people say “ouch!”).

This week, I found out. The burger joint increased the price of my meal deal by $0.50 to $10.50, but when asked what drink I wanted, I received a 450ml bottle of Diet Coke, rather than a 375ml can.

“OK”, I thought to myself, as I searched my pockets for a fifty-cent piece. “They want me to pay a little bit more, but I’m also getting a little bit more” (not that I was 75ml thirstier).

I’ve been trying to do the sums on this price change, but have struggled to find the retail price of a 450ml bottle of Diet Coke. Seems it might be a “trade only” product. But what I assume the burger joint has done is added 75mls of value to the meal deal, the cost of which to them is less than the additional fifty cents they’re asking customers to pay.

Increasing price and increasing value is a great way to increase prices. It also worked for Apple when the first iPod with photo functionality came out (they increased prices by $100, but the functionality only cost Apple $20 to put into theirpricing tips devices.

It can work for you too.

Jon Manning is Principal Consultant at Sans Prix Pty Ltd, and the Founder and Managing Director of the worlds first and only online pricing advisory service PricingProphets.com, where companies can ask a panel of global pricing experts and thought-leaders what price they should charge for a product or service and why. Follow on Twitter and YouTube.

 

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