Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a Single High-End Menu Item Anchors Your Entire Restaurant Bill
Transcript
- Lucas: If these marketing conversations have sparked something you've actually used in your business — maybe a pricing tweak or a smarter way to present options — the way this stays ad-free is listener support. It's buy me a coffee dot com slash fexingo. Luna: Yeah, genuinely. We hear from listeners who've applied an anchoring trick and seen their average order value go up. That's the whole point. Lucas: Exactly. And today we're going to look at one of the most effective anchoring setups in the wild: the restaurant menu. Specifically, how a single outrageously priced item — like a $1000 burger — makes everything else feel like a bargain. Luna: I love this topic because we've all experienced it. You open a menu, see a $200 steak, and suddenly the $45 pasta doesn't seem so bad. Lucas: Right. And it's not an accident. It's a deliberate pricing strategy that goes back decades. The classic example is the 'decoy' item — a product that isn't meant to sell much, but exists to make the real target look cheaper. Luna: So the $1000 burger isn't really about selling burgers. It's about selling the $38 burger. Lucas: Bingo. Let's talk about a real case: a few years ago, a restaurant in New York City — Serendipity 3 — introduced a $1000 frozen hot chocolate. It was made with rare cocoa, gold leaf, the whole thing. The press coverage was enormous. But what mattered was the effect on their regular menu. Suddenly, a $12 frozen hot chocolate felt like a steal. Luna: And the $1000 version probably sold, what, maybe a handful a year? But the PR and the anchoring effect paid for itself. Lucas: Exactly. The decoy doesn't need to sell. It needs to be seen. And that's the key insight for any pricing marketer: the anchor item's job is to shift the reference point, not to generate revenue. Luna: So how do you choose the right anchor? Should it be something realistic, or totally absurd? Lucas: Great question. There's a spectrum. On one end, you have the 'aspirational anchor' — like a $500 bottle of wine on a list where most bottles are $50 to $100. That anchor is still in the realm of possibility; someone might order it for a special occasion. On the other end, you have the 'absurd anchor' — like that $1000 burger — which is clearly a publicity stunt. Both work, but they work differently. Luna: The aspirational anchor feels more believable. If I see a $200 steak, I think 'that must be amazing,' and the $60 steak next to it seems reasonable. The absurd anchor feels like a gimmick, but it still shifts my perception. Lucas: There's research on this. A study by Dan Ariely and colleagues showed that when people were offered a subscription to The Economist — online only for $59, print only for $125, or print plus online for $125 — the majority chose the print plus online. Remove the decoy, and most people chose the cheaper online-only option. The decoy made the combined option look like a great deal. Luna: That's the classic decoy effect. And it translates directly to menus. The $200 steak is the decoy for the $60 steak. Lucas: Let's get specific with numbers. I was looking at a popular steakhouse chain menu recently. They have a 12-ounce ribeye for $52. Then they have a 24-ounce tomahawk for $110. And in between, a 16-ounce New York strip for $62. The tomahawk at $110 is clearly the anchor. It makes the $62 strip look moderate, and the $52 ribeye looks like a bargain. But notice — the $52 ribeye is probably their highest-margin item. Luna: So they're using the anchor to drive people toward the mid-priced item, or even the lower-priced one, which might be the real profit driver. Lucas: Exactly. The anchor doesn't have to make the most expensive item sell. It can make the middle option the winner. In fact, most fine-dining restaurants design their menus so the second-most-expensive item is the one they want to sell most. The most expensive is the decoy. Luna: What about wine lists? They're notorious for this. You see a $300 bottle, then a $120 bottle, then a $60 bottle. The $300 anchors the $120, and the $60 feels like a steal — but the $120 is probably where the markup is highest. Lucas: Wine pricing is a perfect example. There's a well-known strategy: put a very expensive bottle first on the list, then a moderately expensive one, then a reasonable one. The expensive bottle doesn't sell, but it makes the moderate one look like a good deal. And the reasonable one looks even better. But the moderate one is where the restaurant makes its margin. Luna: I've also seen the opposite: a cheap anchor. Like a $5 glass of house wine on a list where most glasses are $12 to $15. That $5 glass anchors you to think 'wine is cheap here,' and then you might be more willing to order a $15 glass because you're already in a cheap mindset. Lucas: That's a different mechanism — it's called 'price contrast' rather than 'decoy anchoring.' The cheap item sets a low expectation, and then everything else feels like a premium upgrade. It's common in fast-casual chains. Think of a $1.99 value menu item next to a $6.99 combo. The $1.99 anchors you to the brand as affordable, but the combo is where the profit is. Luna: So the anchor can be high or low, depending on what behavior you want to drive. High anchor for upselling, low anchor for volume. Lucas: Right. And it's not just about the price itself — it's about the context. A $50 pasta dish in a casual Italian restaurant feels outrageous. But a $50 pasta dish in a Michelin-starred restaurant feels expected. The anchor has to be consistent with the brand's positioning. Luna: One thing I find fascinating is how the presentation of the anchor affects its power. A decoy item that's highlighted, boxed, or described in lavish detail will anchor more strongly than one that's buried in the middle. Lucas: Absolutely. Menu design is a science. Eye-tracking studies show that diners' eyes go to the top-right corner of a menu first, then the top-left. That's where you often see the most expensive items. The center and bottom are where the value items go. And the use of boxes, borders, and fonts can draw attention to the anchor. Luna: There's also the 'goldilocks' principle: three options where the middle one is the target. For example, small, medium, large — but the medium is priced very close to the large, so you feel like you're getting a deal by upgrading to large. Except large is the anchor for medium, not the other way around. Lucas: That's a classic decoy setup in pricing tiers. In restaurants, you see it with combo meals. Small fries for $2.50, medium for $3.50, large for $4.00. The medium looks like a rip-off compared to large, so you buy large. But large's margin might be lower than medium's — the real profit might be in the small, which now looks cheap relative to the others. Luna: So the anchor doesn't even have to be the most expensive. It can be the middle option, if it's positioned as a decoy. Lucas: Exactly. The decoy can be any item that makes another option more attractive. The key is to understand what you want to sell most and then design the menu so that item looks like the smart choice. Luna: Let's talk about a practical takeaway. If I'm a restaurant owner, how do I decide what my anchor should be? Lucas: First, identify your highest-margin item — the one you want to sell the most. Then create a decoy that's slightly more expensive but clearly less value. For example, if your target is a $25 burger, put a $35 burger with a fancier name and a few extra toppings. The $25 burger will look like a better deal. You might even sell fewer $35 burgers, but the $25 burger sales will increase enough to offset. Luna: What about testing? Should you just try it and see? Lucas: Absolutely. A/B test your menu. Run one version with a $35 anchor burger and one without. Track the mix of sales. You might be surprised. I've seen cases where a decoy increased sales of the target item by 20 to 30 percent, even though the decoy itself sold almost nothing. Luna: There's a caution, though. If the anchor is too absurd, it can backfire. If customers feel manipulated, they might leave a bad review or feel tricked. Lucas: That's a real risk. The anchor needs to feel plausible within the context. A $1000 burger at a casual diner would feel insulting. But a $1000 burger at a luxury hotel restaurant? That's just marketing. The key is authenticity — the anchor should be something you can justify, even if you don't expect to sell many. Luna: So the anchor must be credible. It can't be a transparent gimmick. Lucas: Right. And it should be something you'd be proud to serve if someone ordered it. The anchor isn't a lie; it's a legitimate product that happens to be priced higher than the rest. It's the same principle as luxury brands having a $10,000 handbag that makes the $2,000 handbag look affordable. Luna: That's a good parallel. In restaurants, the anchor is often a signature dish — something that's famous, labor-intensive, or uses rare ingredients. It's not just a random high price. Lucas: Let's circle back to a number. In a study by Cornell University, researchers found that when a restaurant added a $50 lobster dish to a menu where the highest previous price was $30, sales of the $30 dish increased by 15 percent. The lobster sold poorly, but it did its job as an anchor. Luna: So the anchor doesn't have to be a decoy in the sense of being unwanted. It can be a premium product that some people buy, but its main effect is to raise the perceived value of everything else. Lucas: Exactly. And that's the takeaway for any pricing marketer, not just restaurants. Whether you're selling software, consulting, or physical products, you can use a high-priced 'prestige' option to make your core offering look like a great deal. Just make sure the anchor is credible, visible, and aligned with your brand. Luna: I think the biggest lesson is that pricing is never just about the number. It's about the context you create around it. A $50 steak in isolation might seem expensive, but next to a $100 steak, it's a bargain. Lucas: And that context is something you can design. It's not manipulative — it's just helping customers make a decision they'll feel good about. The anchor sets a reference point, and then the customer chooses the option that feels right to them. Luna: So next time I see a $1000 burger on the menu, I'll know exactly what's happening. And I might still order the $20 burger, but I'll feel like I won. Lucas: And that feeling of winning is exactly what the pricing marketer wants. You walk away happy, they walk away with a profitable sale. It's a win-win when done right. Luna: Alright, Lucas. So what's the one thing you want listeners to remember from this episode? Lucas: That the most expensive item on your menu isn't there to sell. It's there to sell everything else. Choose it deliberately, price it boldly, and watch your mid-range items fly off the shelf. Luna: I'll drink to that. With a $12 glass of wine that feels like a steal next to the $50 bottle. Lucas: Cheers to that. And if today's episode sparked an idea for your own pricing, you know where to find us: buy me a coffee dot com slash fexingo.