Pay what you want?

November 20, 2008

A recent Seattle Times article talked about the success of a “Pay what you want” promotion at a local restaurant.

The idea is to allow the guest to decide what they want to pay for the food.

I like the idea – – a lot! The owners generated buzz (and business) during an otherwise slow time of the year.

Obviously, the PR and goodwill created by something like this is priceless, but I also find the results intriguing. Considered a branding exercise, the numbers might be viewed differently.

In the particular example mentioned in the article, 80% of the guests paid less than the menu price, a few paid the same, and a few paid more. What does this say about the “value” that diners find in this restaurant’s menu? To me, it says that only 20% of diners feel that they are receiving a good value for their money.

There is no magic formula for pricing. Owners and chefs that use a food cost percentage to determine pricing usually over or under charge. Competitors provide a benchmark, but there is no proof that their information is any better than yours. Ultimately, the market decides what your products are worth. Restaurant owners do not often have a method to ask their customer “What do you think my food is worth?” Perhaps a promotion such as this allows answers that many would not want to hear.


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