As the old joke goes, there’s nothing mini about mini-bar prices and while I’m typically too tight to buy anything on offer, this mini-bar menu helpfully illustrates four behavioural principles you should consider for your business.
1. How you sequence your prices
The beer list on this menu starts at $6.50 and ends at $8.50. For customers loyal to a brand, the price point might not matter but for those who are happy to choose one beer over another, price will likely be a consideration.
The behavioural principle of anchoring has shown that the first number is the most important, against which all other prices will be judged. By having the lowest priced beer first, the other two seem more expensive. Had they reversed the order and started with $8.50, then the two options to follow would have seemed inexpensive in relative terms.
(By the way, this goes for the whole menu – it would have been better to list wine first as the most expensive products on offer.)
The lesson: When sequencing prices in a list it is better to start high. (You can read here my more detailed article on when you should start high and when you should start low.)
2. The impact of including decimals
Decimals have the impact of elongating the number, so the brain perceives it as larger than it may actually be. When you are charging someone, you want to minimise the perception of size whereas if you are giving money away, the bigger the better.
The lesson: Unless you need them for accuracy, ditch the decimals.
3. How to stop your customer from price shopping
The best thing on this menu is the simple statement “Wines at bottle shop prices”. Why? Knowing that people usually have their guard up about mini-bar prices, this statement has cleverly addressed loss aversion, our fear of the downside of our decision outweighing the benefit.
In one little statement, this business has overcome that nagging doubt in the mind of the customer that they would be better leaving the hotel to find a bottle shop instead. It works in a similar way to “lowest price guarantees” which reduce customer propensity to price shop.
The lesson: Stop your customer thinking they can do better by telling them why they can’t.
4. The impact of including a dollar sign
A study by Cornell University concluded that using $ signs in menus triggered negative associations with money and people purchased less food.
The lesson: Consider the design of your collateral and whether including dollar signs next to the price is necessary.
Who would have imagined? If we can extract four lessons about how to influence customers from something as simple as a mini-bar menu, just think of all the opportunities in your business going begging. The potential upside for you is enormous simply by tweaking how you communicate with your customers, so drop me a line with any questions or to find out how I can audit your comms for leaks.
P.S. For more on price anchoring, check out my article from last week on the importance of contextualising value for your customer.
Bri Williams runs People Patterns, a consultancy specialising in the application of behavioural economics to everyday business issues.
You can help us (and help yourself)
Small and medium businesses and startups have never needed credible, independent journalism and information more than now.
That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.
Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.
Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.