Episode Transcript
[00:00:01] Psychology is a big factor in any sort of selling, and that's what we are in the business of doing. Selling. We sell things, products, experiences to other human beings. And so if psychology factors in as prominently as it does, then we might as well talk about it. On today's episode, I want to talk about transactions. I want to help you better understand pricing. And through that conversation we're going to talk about worth, value and abundance. Bunch of other things that are going to help you better understand. Really. My hope is to help shift your mindset in this area so that you understand some really key things about what we do. Things that you might not have realized before. Don't go anywhere. All of that More on today's episode of Restaurant Strategy.
[00:00:41] There's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking.
[00:01:12] Hey everyone, thanks for tuning in. My name is Chip Close and this is Restaurant Strategy, a podcast dedicated solely to helping you build a more profitable business. Each week I leverage the 20 plus years that I have in this industry to help you build that more profitable and more sustainable business. I also work directly with owners and operators all over the world through my P3 mastermind program. What are the three P's they stand for? Profit, Process and Progress. If you struggle to generate consistent, predictable 20% profit month after month, then I'm here to tell you there is a better way. The impact we're making in the program is real. So if you want to learn more, please set up a free call with someone from my team. We'll learn more about you and your restaurant. You'll learn more about our program and ask all the questions you have about our program. We can see if it's a good fit. If it is, we'll talk about next steps and if not, you'll leave that call with some actionable insights. I promise everyone who leaves those calls learns more about themselves and their businesses, even if you don't decide to move forward. The best way to schedule that calls visit restaurantstrategypodcast.com schedule as always, that link is in the show notes now. Have you read the 2023 State of the Restaurant Industry Report from the National Restaurant Association? There's a lot to digest in that 41 page paper, but that's where you can lean on Spot on the presenting sponsor of the report as a top rated restaurant technology company, Spoton Leads from the Front not only are they helping restaurant operators make sense of our changing landscape, they're also working directly with restaurants to overcome challenges with innovative solutions. Their handhelds and QR ordering can help you turn more tables while yes, creating a better guest experience on the back end. Their labor management tools can save up to 20 hours per week on tasks like scheduling, payroll and tip distribution. And when it comes to rising costs, Spoton's reporting gives you the real time data you need to make informed decisions about your menu, employees and operations. Best of all, Spoton's direct online ordering puts you in control of your takeout and delivery operation without the third party commissions. They got all these tools in one integrated system backed by a customer support team that actually answers the phone. Learn more by visiting spoton.com chip again spoton.com chip and yeah, you better believe it. That link is in the Show Notes.
[00:03:34] Now when it comes to selling, it's important to note we are all salespeople, right? If you sell things to other human beings, you are in sales, you are in marketing. We have to think then about the sales process. We have to think more deeply about the way we market, the way we target people who might want to buy the things that we have. I love to read. I read a ton of books specifically on this subject. A couple of things that I'd love to recommend. I'm going to put these links in the Show Notes to Sell as Human by a guy named Daniel Pink, Thinking Fast and Slow by Daniel Kahneman. You wouldn't think it has anything to do with this, but has everything to do with it. Blink, that's another great book by Malcolm Gladwell. And then there's a new book called Priceless that it's not new. It's been around for about 12 or 13 years. I'm just reading it now. I'm about 3/4 the way through it. And that has made a really big impact. Some of those insights from that book I'm going to share here on this episode. In fact, most of what I'm going to talk about are insights that have I've pulled from other places. And what happens is that I get, I read really smart writers and they're able to articulate what I know I'm already observing in the market, what I'm observing in the restaurants. And with the restaurants that I work with, they just seem to articulate it more clearly, more succinctly than I was able to do that. And then of course, I've put together my own thoughts on the on the matter, all of that is sort of swirled in. I lead with my inspiration. So, you know, these are not original ideas, and I'm not claiming them to be. Many of these have come by from very smart people, and I hope that this inspires you to go read some of these books by very, very, very smart people. The idea of pricing, this idea of transactions and how it relates to our industry and, and, and the psychology behind those, those things I think is a really fascinating thing to understand and I think absolutely crucial if we want to have a thriving business.
[00:05:32] So let's start off here. There are a whole bunch of points that I want to make over the course of this episode. We're going to split into two chunks. We're going to hear from a little word from our sponsor in the middle. But there's tons of great stuff that I hope you take away from this episode. First and foremost, the biggest point I want you to make right off the start is that a meal, right? A meal at any of our restaurants is just a series of transactions. More than that, the diner comes to expect those transactions. So think about it this way. A diner sits down in your restaurant and you offer them water. You offer them a cocktail, glass of wine. Maybe a bottle of wine.
[00:06:09] Do you want an appetizer? What would you like for your main course? Would you like a side dish with that? Do you want another glass of wine to go with your entree?
[00:06:16] Is anyone up for dessert? Can I offer you an after dinner drink, coffee to go with dessert?
[00:06:22] We are. See, it's a series of sales. It's a series of mini transactions. And the interesting thing, like I said, is the customer, our guest, our diner, comes to expect those. In fact, if the transactions don't happen, they get flustered and upset. They write bad Yelp reviews, meaning, right?
[00:06:41] Their steak gets delivered and they're looking all over, they're going, oh, where's, where's my server? I just, I just want her to sell me a glass of red wine.
[00:06:49] Really, what they're meaning to say is, I'd love a glass of red wine because it'll pair beautifully with this steak. That's what I'm in the mood for. And I can't find my server. Why won't they transact with me?
[00:07:00] We see it as good service, but really it's a transaction. Our customers are want to purchase from us. They didn't show up to be convinced to buy stuff. You've already convinced them to buy stuff. So you've made the first sale. The first sale was Getting them to book the reservation was getting them to open the door and ask if you had a table for two.
[00:07:20] That hard part is done when they sit down. Then we have to understand the psychology of transactions. And through that we're going to talk about worth, value, price.
[00:07:32] All of that becomes an important conversation. But understand this is an important thing to get your managers to understand and your servers and bartenders to understand.
[00:07:41] They don't have to feel bad about selling. They've already made the commitment. When, when a diner sits down, when one of our guests sits down at the dining room, they're expecting to be sold to, to be sold bottled water and a cocktail and wine and an appetizer, an entree and a side dish and another glass of wine and a dessert and an after dinner drink and a cup of coffee over the course of an hour or two. In our restaurant, they expect all of those pitches. It's a series of transactions. And often, here's the interesting thing, often, like I said, just pointed out in my, my exaggerated example, if they're not sold to, they get angry.
[00:08:16] That's the interesting thing, right? We always get the same, the same complaints in our industry. Right? Couldn't find my server and it took too long.
[00:08:23] They are looking to transact. So let's not pretend like they're not there to spend money. The decision they made before they even walked through the door, do I have the money to dine out or do I not have the money to dine out? Do I want to spend my money to dine out or do I not want to spend my money to dine out? That becomes a really important thing. If they're sitting in the dining room, they've already committed themselves. They know about how much a meal at your restaurant costs. The, the question is not, well, do I want to spend a hundred dollars tonight or $115 tonight? They've already made the decision to spend about a hundred, one hundred and fifty dollars, something like that. They have the budget for that.
[00:09:01] So maybe really they only have $100 budgeted.
[00:09:04] They're adults. They can say no. It's your job to continue offering things. And that's the interesting part, is there really is complete alignment here in great service and great selling. We want to provide great service so our people feel like they're taken care of.
[00:09:19] And also the more, the more we provide them with that service, the more we offer them constantly offering better ways to experience our restaurant or a way to experience, experience our restaurant in the best possible way.
[00:09:34] That includes selling very often the best way to enjoy this steak, I think, is with a glass of this cabernet. The best way to enjoy this dessert is actually to have a glass of this bourbon. It's a perfect pair.
[00:09:47] It's our job as merchants on the business side to tell them over and over the best way to experience this. Now, I'm not talking about gouging, not talking about having them spend money that they. That they don't want to spend. They can say no, but it's our job to show them the best way to experience it. And I believe that's what they want as well. And this is what I mean. There's complete alignment in having great service and being sold to. So when we talk about this subject, we have to begin by understanding the nature of transactions, that a meal in our restaurant is just a series of transactions, transactions that the guest expects, and if they don't get them, they actually view that as substandard service.
[00:10:29] So let's get in the right frame of mind, and more importantly, let's get your team in the right frame of mind. And the other important thing that I want to point out about transactions is that more is traded than just food for money, right? So what is a transaction? A transaction is an exchange between two parties, right? It's a trade. I give you this, if you'll give me that.
[00:10:52] So that's this beautifully. This well cooked piece of halibut. I will give you this well cooked piece of halibut if you give me $38. Great. It's a trade.
[00:11:01] Now here's the other important thing, though, is that there's more that's being traded than just fish for money. Because on the merchant side, we prep the food, we then cook the food, serve the food, cleared it away and cleaned up afterwards.
[00:11:15] We gave them a beautiful dining room to enjoy this beautiful dish. And also we're trading away our experience, our expertise, the years that it's taken us, the years that we've built up, right? And the knowledge, the know how to create a recipe that will land, that will impress the diner.
[00:11:34] All of that is being traded.
[00:11:37] It's difficult to quantify that, right? We can't, can't charge extra necessarily.
[00:11:42] Or can we?
[00:11:43] So when we talk about a transaction, more is being traded than fish for money. On the merchant side, there's all that stuff. Experience, expertise, skills. The prep, right? The shopping. You went shopping for the food. You prep the food, you cook the food, you serve the food. You cleared up, you cleared it and cleaned up afterwards.
[00:12:01] They couldn't do all that at home. And actually, in fact, the diner has chosen. I don't want to go shopping, I don't want to prep, I don't want to cook, I don't want to bring it to the table, and I certainly don't want to clean up afterwards.
[00:12:11] Not tonight on my anniversary, not on this Friday at the end of a long week. I just want to be taken care of. It's really important to understand. Now, on the other side, on the consumer side, here's a really important point. They are also trading more than money for this halibut. Right. Because a dinner at your restaurant takes time. So they're trading their time, which is one of the most precious resources they have. In fact, they trade, in addition to the money, the three most precious resources they have, which is time, attention, and trust.
[00:12:41] It takes time because this food does not come right out of the microwave.
[00:12:47] It's got to be cooked, it's got to be played, it's got to be served.
[00:12:51] A meal in a restaurant requires time. So if you're in a rush, that's not a cost you're willing to pay. You don't have the luxury of paying for that. So in addition to money, we're also paying with time, we're also paying with attention. Can't be somewhere else if you're here.
[00:13:07] Yeah. You can be on your phone. Yeah. You're having conversations. So your attention is split for the most part. Your attention is on the room, the server, the table, the meal that's put in front of you.
[00:13:18] That's a big deal. Again, we only have so much time on this planet. Someone's choosing to spend one of their nights here with you. That's a big deal. And they're giving you the attention you're asking for.
[00:13:28] And then finally trust. I think it's amazing that people put things that we serve them into their bodies, that they sit down, they order something, and somewhere around the corner, but behind a wall, someone they've never met, who they've never checked their qualifications, that person is preparing food supposedly the way that they ordered it. Right. This goes beyond cooking a medium rare steak.
[00:13:55] This also goes to the point of like not putting broken glass in the. In the burger, in the ground beef, not putting poison under the cheese on the burger.
[00:14:04] That we trust that somebody we've never met, that we can't see is doing exactly what they tell us they're going to do. I'm profoundly moved by that, and I hope you are too. Our diners show up and they give us their Hard earned money. And they also pay us with their time, their attention, and their trust.
[00:14:22] I think that is really special. I have said this before. People couldn't do what we do. What we do is amazing, and I hope our diners appreciate all that you do for them. So we're talking about a transaction lasts a long time. It's expected.
[00:14:39] The series of transactions over the course of a meal.
[00:14:42] More is being traded than just fish for money.
[00:14:47] It's not just food for money.
[00:14:49] There's expertise, there's service, there's decor, there's ambiance, and there's time, attention, and trust. All of those things are being traded.
[00:15:00] There's the other important thing we have to talk about when we talk about transactions. Transactions work when it's a win win. On the merchant side, we charge more for a dish than it cost us to make. We're willing to make the trade because we make out on the deal, right? Cost us $7 to to make this dish, and we're willing to sell it for 25.
[00:15:21] That's literally a win on our side.
[00:15:24] We're charging more. Someone's gonna pay us more than it costs us to make. That's the definition of profit. But on the other side, on the consumer side, they're willing to pay for it because it's a win for them as well, because everything they get is worth more than the $25 that you're asking for that dish.
[00:15:42] Because again, it's also the time and the skills to go shop and prep and cook a dish that many of our diners couldn't do. They couldn't cook a dish, they couldn't put together a recipe as good as what you're doing.
[00:15:57] They couldn't create an experience as good as the experience that you're creating in your restaurant.
[00:16:06] It is literally a win win.
[00:16:08] We sell the dish for more than it costs us to make. We make a profit. It's a win on our side. And on the diner side, they say, man, this is. This is worth more to me than the $25 you're charging. I'm willing to pay it because I don't want to go shopping, I don't want to prep, I don't want to cook it. I don't want to clean up later on my anniversary. Let's say again, on a busy, on a Friday, at the end of a busy week, I'm willing to pay extra.
[00:16:33] I'm willing to pay that extra to have all that stuff done for me. For the consumer, the consumer says it's worth it to me. And in fact, that happens with every transaction in our lives. We look at the price and we say, is it worth it?
[00:16:47] And the consumer says, it's worth more to me. Right. When I go buy a shirt at the store, when I go buy a suit jacket, it's worth paying that money because I don't know how to make a suit on my own.
[00:16:57] Yep, I could go find fabric, I could find a, you know, I could find a pattern, I could cut and stitch and all that. I would never have the skills to put together a suit as beautiful as I can just walk into a store and buy one.
[00:17:11] Same thing with a car. I buy a car because I can't make a car.
[00:17:15] And I choose as a consumer to pay for a nice meal or to pay for a bagel sandwich and a coffee because I'm running late and I don't have time to do it at home. So I'm willing, I'm buying time.
[00:17:27] Somebody's gonna make the food for me, give me a cup of coffee really quick. I don't have time to make coffee and I don't have time to make myself sandwich, make myself breakfast because I'm running late.
[00:17:36] Consumers all the time are paying for things that they can't do themselves either because they ran out of time. They just don't have the skill set or they don't have the interest.
[00:17:45] All of that gets to the psychology of what we do, the psychology of selling and pricing.
[00:17:52] So understand now what we're talking about is value, right? Because I'm talking about price, what you're charging for a dish, $25. And then we also have to talk about worth. What's it worth to the consumer, to anybody who transacts? It's a win win for them because it's worth more than you're charging. They would probably pay more because they're stuck, because they need a reservation for their anniversary, because they need a quick bagel sandwich before they catch the train. Otherwise they're not going to eat this morning.
[00:18:25] It's worth more to them, so they're willing to transact. And that's a really powerful thing to understand. This gets to the heart of the word value.
[00:18:36] Value is why a consumer buys things.
[00:18:40] Here's the equation for value.
[00:18:42] Worth minus price equals value. So we talk a lot about value and I think it loses all meaning.
[00:18:49] Price is what we charge for it. Worth is what it's actually worth to the consumer. And the space between is value. So we talk about, we have to provide value to the diner. We have to understand what it is they need help with, what problem that they need to solve.
[00:19:10] That becomes a really, really important conversation to have.
[00:19:16] So here we are talking about transactions and the psychology of transactions. And now we've talked about worth, price and value, right?
[00:19:24] All of that is sort of a foundation for us to have this deeper conversation.
[00:19:29] Here's the important thing then, about price.
[00:19:32] Price cues the diner. This was talked about in this book that I'm in the process of reading right now. Priceless. It said, price tells the diner what to focus on. So if we price a product higher, the consumer tends to focus on the things that explain why it might be more expensive. Likewise, if a product is priced lower, the consumer tends to focus on the things that might explain why it's cheaper.
[00:19:59] Cheaper than other options out there.
[00:20:03] Think about wine list. This is a great option, right? So you look at a wine list, a whole page of California cabs. Some of them are priced at 65, $75. Others are priced at 300, 400, 500 and beyond.
[00:20:16] Why is something priced $500?
[00:20:19] Oh, it's famous. It's scarce. It's tightly allocated. It is a famous wine producer, It's a famous vineyard, it's award winning, it's well reviewed.
[00:20:31] Some pop star was pictured drinking it. Somebody talked about it in a song. Many reasons why it might be priced higher, why it might command that price. But consumers all the time are looking at those and making snap judgments.
[00:20:46] Likewise, when you see a cheap thing, well, why is that cheaper? Oh, the grapes probably aren't as good. Oh, the grapes are sourced from a series of vineyards, maybe all over California, not just in a single Appalachian, not just from a single vineyard.
[00:21:00] This label is not famous. The winery is not famous. It's the second label of a larger winery. It's the winemaker has no notoriety. We start doing things like that, whether we realize it or not, try to say, hey, why Is this only $75 and this is $575?
[00:21:16] We make snap judgments.
[00:21:19] So this gets to the heart of what, what we should be talking about also, which is anchor pricing, which we'll talk about in just a minute after word from another one of our sponsors.
[00:21:29] Now, today's episode of Restaurant Strategy is also brought to you by Seven Shifts. Seven Shifts is a team management platform built specifically for restaurants. Great restaurants are built by great teams. And seven shifts is your secret weapon to better understand your restaurant, to hit labor targets and to keep your entire team connected with drag and drop scheduling in app communication, task management, tip management and More it makes restaurant work a lot easier from back a house to front of house managers, franchise owners and larger corporate teams. Seven shifts has benefits at every single level.
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[00:22:25] Yes, you will find that link in the show Notes.
[00:22:29] So now we spent a lot of time talking about transactions, understanding worth, price and value.
[00:22:35] We've shifted your mindset hopefully about this area. We're talking about the psychology of a transaction. The psychology. Now I want to talk about the psychology of pricing.
[00:22:46] So when we price an item, higher prices say one thing to a consumer, lower prices say another thing. Whether they'll ever, you know, say it out loud.
[00:22:55] Internally, they're coming up with reasons. They're trying to explain away the price differential.
[00:23:02] Again, a perfect example of this is a wine list. But if you look outside of our industry, perfect example is to look at luxury cars, right? Any sort of luxury handbag or shoes. This happens all the time.
[00:23:16] All the time. Now, the reasons you might that a diner or consumer might supply for why it's expensive.
[00:23:23] Oh, it's just all the marketing. That's why it's so expensive. Maybe, maybe. But the diner is still playing that game, the game that you want them to play. They're trying to find reasons that explain why it's more expensive. Here's the important part about it.
[00:23:38] As a merchant, we can help supply answers that explain why something is more expensive, why something is worth spending a little bit more, or just like your restaurant, why it's worth going out of the way for.
[00:23:54] This gets into this idea and I just, and I talk about this quite a bit. This idea of the luxury mindset, right? They're commodity goods and luxury goods.
[00:24:03] Commodity mindset says all things being equal, a consumer will make their decision based on one of three criteria. Again, all things being equal, they'll choose based on familiarity, convenience or price. The gas station analogy is the best example of this. It doesn't matter if you're loyal to a specific gas company, right? To buy gasoline, to put gasoline in your car.
[00:24:27] If you're on the highway and you're running out of gas, you have no loyalty. You get off at the nearest exit and you're looking for the very first gas station. That's convenience.
[00:24:36] On the other side. Yeah, maybe you are loyal.
[00:24:39] So if you're at home, maybe you just go to the same place you always go to because you're a rewards member or because you like the guy who owns the shop or because it's just convenient.
[00:24:49] That's based on convenience, but it's also based on familiarity. Right? You go with the one you know.
[00:24:55] And then if you're at a, in a strange town and you need gas and you pull up to an intersection and there are two or three gas stations in the, at the intersection, guess what you do? You do what most people do. They look up at the signs, check the price and go to the one that's cheapest.
[00:25:11] That's because gasoline is a commodity product. It really doesn't matter whether you put BP gasoline in your car or Exxon or Sunoco. Really doesn't matter. Gasoline is gasoline for most of us. For the average consumer, that's an important thing to understand.
[00:25:33] So now how does that relate to the restaurants?
[00:25:36] If we play the commodity game, we lose. We do not have the purchasing power of the big chains.
[00:25:41] We do not have the familiarity because we can't run big, big ads every Saturday and Sunday during sports. Sports games.
[00:25:49] You will never be the most well known, you will never be the cheapest, and you'll never be the most convenient. Right? You got a burger place, Burger King, McDonald's, Shake Shack, all these places are more convenient, I'm guessing, to most of the people in your market than your place.
[00:26:09] People have to seek you out, go probably a little bit out of their way, and I'm guessing pay a little bit extra for your product as compared to, let's say, McDonald's.
[00:26:17] So your job then is to play the luxury game, to adopt a luxury mindset. Now, I'm not saying create a luxury burger. I'm not saying, hey, make a $32, you know, fast food burger. That's not what I'm saying.
[00:26:30] I'm saying that adopt the luxury mindset, apply those principles. Because really what you need to do is convince someone that your burger is worth going out of their way for and it's worth paying a little bit extra for.
[00:26:45] It's not convenient. You're not the most well known and you're certainly not the cheapest. Everyone I'm guessing that's listening to this podcast falls into that category because you don't run McDonald's, you don't run Red Lobster or Outback. You are never going to be the most famous, the closest or the cheapest option out there. So we have to play a different game. This gets to the heart of what I believe about our industry.
[00:27:11] If we try to play the commodity mindset, it's a race to a bottom and we lose.
[00:27:15] Even if we can compete, our margins are so narrow that if we don't have economies of scale, meaning we don't have 20, 30, 50, 105,000 locations, we cannot win that game.
[00:27:28] If you're at a 5% profit margin where the restaurant does about a million dollars a year, that's a really tight window.
[00:27:36] Now, if you got 40 locations, okay, that's fine, that's a good living.
[00:27:41] If you can get 5% from 40 locations, right, that's fine, you can do it. I'm guessing most of the people listening here do not fall into that category. So you need to make the most of your place. Part of this is understanding the psychology, again, psychology of a transaction, the psychology of how we price our products.
[00:28:03] Not saying to gouge people, but we can't play this commodity game. We can't do the race to, to the bottom.
[00:28:10] So when we talk about pricing, let's understand that the way we price things helps anchor that sense of value in the consumer. Like I talked about right before the, the break, right, we're talking about how if you price things higher, the consumer will try to supply answers that explain why something is more expensive. Likewise, if it's cheaper, they'll try to explain that, well, McDonald's is a cheap burger. Why? Well, it's mass produced and there's so much filler in the burger. Burgers and their frozen patties, they're supplying the answer as to why they can get a burger for so cheap.
[00:28:43] Likewise, if they go to Shake shack or a five, you know, a Five Guys burger, and it's roughly twice as much as a McDonald's burger. They're also saying, well, they're all, you know, it's fresh ground beef, it's never frozen. There's, there's. The portions are larger, the fries are so generous. They're supplying answers as to why something is more expensive or less expensive.
[00:29:06] Here's the important thing when you look on your menu, here's how we take things really tactical, right? Think really deeply about how you price your product and how your servers then talk to the staff or talk to the diners about the product, how they help anchor that price.
[00:29:23] They can help supply answers. The way you describe things on your menu, the way you talk about it, the way your servers talk about it.
[00:29:31] All of that, right? The way you plate the dish, all of that can communicate something about why it might be more expensive to go to you as opposed to one of the others.
[00:29:41] Here's something really important and again, very tactical.
[00:29:44] Every section in your menu should have a premium offering, right? Every section on your menu should have a premium offering. So if you've got eight entrees on your menu, make one of them be much more expensive than the others. So if all your entrees are, let's say, between 25 and $30, you should also offer a 45 or $47 option. Number one, somebody is going to buy it. Somebody wants to get the most expensive thing. Somebody wants to splurge, to celebrate, to show off.
[00:30:15] Somebody can just afford it and they always want the best thing.
[00:30:19] So again, if all your entrees are between 25 and 30, you should have a 45, a 47, a $49 option. Just one, because somebody will buy it. Number two, when you anchor your menu with a higher priced item, it makes everything else look really reasonable. Because maybe somebody's looking at it and going, Whoa, $28 for the chicken. Well, the duck is 47.
[00:30:43] Suddenly it makes the items that are 25 to 30 look much more reasonable.
[00:30:49] Same thing works on a wine list. If the most expensive bottle on your wine list is, let's say, one $25 bottle of wine, I'm going to tell you to go out and get a bottle of Opus 1 and just put it on the menu, list it for 325 or 390 or whatever you need to do.
[00:31:03] Suddenly you're going to sell more of the $125 bottles of wine.
[00:31:08] If125 is your most expensive bottle, it will not get sold as much as if you have a couple of other options anchoring the price higher. It's going to make the 125 option look so much more appealing and reasonable.
[00:31:24] Super, super important. Do that in every section of your menu. You should have a premium appetizer, premium entree, premium side dish, premium options on the wine list, even on the wines by the glass, even on your cocktail list, even on your dessert menu. So if all your dessert menu dessert items are eight bucks, offer some fancy one for 14 or 16 or 18.
[00:31:48] Maybe it's a dessert for two, which is great because a lot of people at the end of a rich meal, just get one dessert to split. But if you got all your desserts at eight bucks and then you have one for 14 or 15 that serves two.
[00:32:02] And it's really good. People will get that. And then you're basically selling two desserts instead of just one. You will generate more sales.
[00:32:09] And ultimately, this goes back to what I said earlier in the episode.
[00:32:13] People want to be sold to because they want to know the best way to experience your restaurant. And if you are not doing that, if you are not showing them the best way to experience your restaurant, you are missing out.
[00:32:25] Now, we also talk about pricing. We have to understand the importance of upselling. And this goes exactly with what I was just saying.
[00:32:31] You have to understand that people want to be upsold to.
[00:32:37] Right? They're on the wine list, and they picked us. I said, so I was looking at. I was looking at. I think we want to do this bottle of wine. There's such an easy opportunity to say, hey, have you ever had that wine before?
[00:32:47] And I said, no.
[00:32:49] Well, they're just deducing based on the price, based on the name, based on the location, and based on sort of the pricing of the whole page. They made a choice. Unless they really do know it, and then they'll say it. So when somebody picks a wine, right, you come over, say, hey, have you made a selection? You say, yeah, we'd like to do this bottle of wine. You should always ask, that's great. Have you ever had that wine before?
[00:33:10] No, I haven't. Well, maybe you can offer some more information about it. Or you can say, right, oh, well, it's interesting. It's really this kind of style. Is that what you were looking for? What do you typically like to drink?
[00:33:22] What you might find is that they didn't pick the wine that actually they're gonna like best.
[00:33:29] They made a. They made a guess.
[00:33:32] You might be able to guide them to somewhere that's better, that's closer to what they're looking for.
[00:33:38] You might be able to do one of two things, either the upsell or the down sell. So the upsell, we all know, they point to a bottle of wine that's $75, you say, oh, that's really good. But you know what's really great right now? This other wine. So a couple of bucks more, maybe. It's $85.
[00:33:55] This wine is drinking so beautifully right now. You're gonna love it. I think you're gonna like it more than the one you just pointed to.
[00:34:01] A lot of times, if you convince them, you give them quantifiable ways as to why they should get one over the other, they'll trust you. They'll do it right. Goes back to that time, attention and trust. People want to know the best way to experience this, so they point to one. Now, I'm not saying do this all the time.
[00:34:20] Ask a question, have a conversation, Especially with wine. Let's say, oh, I think we're going to do this bottle of wine. Oh, great, absolutely. This wine's really great because it's x, y and z. But, you know, it's a really similar style and drinking even better. Right now, it's this one over here. I cannot recommend this other one strongly enough. And oftentimes they'll do it likewise. You can also do the opposite, which is the down sell.
[00:34:43] So they pick something at $75. You say, that's really great choice. Have you had this wine before? They said, no, but we were looking for something. Blah, blah, blah. There's an opportunity to take them to a 65 or a $55 bottle. I say, you know what? It sounds like you're going to like this one even more. And it's cheaper, but it drinks even. I think it's a better wine than the one you picked, man. You want to build trust, Go for that casual downsell. Take someone to something that's cheaper. They'll go, whoa, they really just want me to have a great time. Now, in the long run, what's going to happen is, psychologically speaking, they're putting in their mind that they're going to be more apt to get maybe a second bottle of wine. So at $75, maybe they're only going to order one bottle of wine, but at, let's say, 55 or $60, maybe they go, well, yeah, we might be able to do two. I mean, yeah, we could do two bottles because the one they sold me was actually cheaper.
[00:35:36] This is a really great way to build trust if it's actually true, right? There's an opportunity if it's actually true.
[00:35:45] So know that upselling provides an opportunity to make a better experience for the guest and generate more revenue. And the downsell, again, is another way to build trust, Create a better experience for the guest and in the end, in the long run, probably generate more revenue. To speak nothing of all the return visits that are going to come out of the fact that they now trust you. You didn't try to gouge them.
[00:36:07] So that downsell is just as powerful as the upsell. There are opportunities to do that, and it all comes back to that trust thing, right?
[00:36:17] In the end. I just want to hammer home this one point again.
[00:36:22] Our dinner out, right? A meal out, dining out is a luxury.
[00:36:28] The definition of luxury is an indulgence.
[00:36:31] It's not necessary, it's not required.
[00:36:35] People do it because they want to, because they have to, because they ran out of time, because they've got nothing to cook.
[00:36:42] So it's really important to understand that, that people could go to the supermarket, prepare food for a fraction of what it costs to dine at your restaurant. They dine at your restaurant because it is a superior product and it's worth the extra money.
[00:36:59] I want to get us all out of this commodity mindset and into this luxury mindset and to do this.
[00:37:06] Today's episode is all about understanding the psychology of a transaction and therefore then the psychology of how we price things. Because price is so closely connected to worth, which is really all about value. What the guest values, right? That becomes a really important thing.
[00:37:23] Appreciate you taking the time to tune in today. One final reminder. If you are struggling with with profitability, if you're struggling to generate consistent, predictable 20% profits, then please set up a call with someone from my team. We will get on a call, learn about you and your restaurant. We'll talk to you about the P3 mastermind, the program I run. To date, we've got almost 100 people in the program across three different groups.
[00:37:46] We do that because it works. People are in that program because of the impact we're making. They stay in the program because of the impact we're making.
[00:37:56] So please set up a free call restaurantstrategypodcast.com schedule I look forward to chatting with many of you. I will see you next time.
[00:38:21] Sam.
[00:38:47] Sa.
