Digital Menu Board Mastery Series: Psychological Pricing Anchors

Welcome to the second installment of our "Digital Menu Board Mastery" series. In our first article, we explored how strategic item placement can significantly impact customer purchasing decisions. Now, we'll dive into another powerful menu engineering technique that can be implemented on your digital menu boards: psychological pricing anchors.

Concept 2: Strategic Price Anchoring

Price anchoring is one of the most potent yet underutilized tools in restaurant menu psychology. At its core, this concept leverages the human brain's tendency to rely heavily on the first piece of information it encounters (the "anchor") when making decisions about value. For restaurant operators, this creates a remarkable opportunity to influence how customers perceive your pricing and ultimately what they choose to order.

According to research published in the Journal of Consumer Psychology, the initial exposure to a price point creates a reference frame that significantly influences subsequent purchase decisions. In practical terms, this means that strategically positioning higher-priced items on your digital menu boards can make standard-priced items appear more reasonable by comparison.

How Price Anchoring Works in Restaurants

When customers view your menu, they're not just selecting food items—they're making value judgments. The ordering of prices and how they're presented creates a psychological framework that affects these judgments in predictable ways.

The Contrast Effect in Action

The contrast effect is the psychological principle behind price anchoring. When a higher price is presented first, moderate prices that follow seem more reasonable by comparison. This works particularly well on digital menu boards where you can control precisely what customers see and in what order.

Real-world example: A study of 271 restaurant menus published in the International Journal of Contemporary Hospitality Management found that strategic price anchoring increased average check value by 6.8% without changing actual menu prices (Parsa & Njite, 2014). The psychology is straightforward—after seeing higher-priced items, moderately priced options suddenly feel like a better value, even though the customer might have initially planned to spend less.

The psychology is straightforward—after seeing $14 beers, a $10 beer suddenly feels like a better value, even though the customer might have initially planned to spend less.

Key concepts and how to use them

As promised with this series, I will do my best to provide practical ways to implement each concept. Your digital menu boards offer unique advantages for implementing price anchoring that static menus simply can't match. Here are practical strategies to leverage this psychological principle:

1. Category Anchors

The key to this concept is to begin each menu category with a premium-priced item. This establishes a high initial reference point for all items that follow.

Implementation technique: Create a visually distinctive "Chef's Special" or "Premium Selection" item at the top of each category that's priced 20-30% higher than your category average.

Real-world example: Menu engineering expert Gregg Rapp documented a case with a major restaurant chain where placing a higher-priced specialty item at the top of each category resulted in a 15% increase in mid-range item selection (CBS Sunday Morning, 2017). Customers were anchored to the higher price point, making the target items seem like a better value.

2. Strategic Cross-Category Positioning

Arrange entire categories on your digital menu to create beneficial price contrasts.

Implementation technique: Position your highest-priced category (perhaps steaks or seafood) before more moderately priced categories like pasta or chicken dishes.

Research insight: A Cornell University Hospitality Research study found that when higher-priced menu sections appear first, spending in subsequent categories increases by an average of 8.2% compared to when lower-priced categories appear first.

3. Featured Item Anchoring

Use your digital menu board's ability to highlight and feature items to create deliberate price anchors.

Implementation technique: Create a "Featured Selections" section in a prime visual area that includes 2-3 premium-priced items before customers view the full menu.

Real-world example: William B's Restaurant implemented price anchoring by leading menu categories with premium items and reported a 10.2% increase in check averages without increasing menu prices (National Restaurant Association, 2018). By featuring higher-priced signature items prominently, they effectively framed perception of all other menu items.

4. Decoy Pricing

Create strategically priced options designed primarily to make your target items appear more attractive.

Implementation technique: Offer three versions of popular items where the middle option provides the best perceived value, making it the apparent "smart choice."

Dynamic Price Anchoring Using Digital Technology

The dynamic nature of digital menu boards opens up possibilities for price anchoring that simply aren't available with static menus:

Time-Based Anchor Rotation

Implementation technique: Program your digital menu to shift anchors based on daypart, featuring premium breakfast items during morning hours, lunch specialties midday, and dinner options in the evening.

Industry benchmark: According to Technomic's research across 87 restaurant operations, strategic price anchoring on digital menu boards resulted in an average 3.9% increase in average check (Technomic Menu Strategy Report, 2019). This study specifically noted that digital menu flexibility allowed for more effective implementation than static menus.

A/B Testing Price Anchors

One of the greatest advantages of digital menu boards is the ability to test different approaches.

Implementation technique: If you have multiple locations, test different anchor items or price points across locations to determine which creates the strongest positive effect on your target items.

Real-world example: Firehouse Subs reported that after implementing digital menu boards with strategic price positioning, they saw a 7.5% increase in sales of medium-priced sandwiches when premium specialty subs were positioned first on the menu (QSR Magazine, 2017). This systematic testing allowed them to identify the most effective anchoring strategy before rolling it out system-wide.

Practical Implementation Tips for Restaurant Operators

Visual Price Presentation

How you display prices on your digital menu boards can significantly impact the anchoring effect:

Size and prominence: Make price points for anchor items slightly larger or more prominent
Color psychology: Use color strategically to highlight certain price points and de-emphasize others
Positioning: Place prices in consistent locations for easy comparison

Implementation note: Always ensure prices are clearly visible. The goal isn't to hide or confuse but to strategically frame value perception.

Descriptive Language

Price isn't the only anchor—descriptive language can also establish value perception.

Implementation technique: Use more elaborate descriptions for your anchor items, highlighting premium ingredients, preparation methods, or origin stories.

Research insight: A study published in the International Journal of Hospitality Management found that items with descriptive, multisensory menu descriptions commanded price premiums of up to 27% compared to plainly described identical items.

Measuring Anchor Effectiveness

For price anchoring to be effective, you need to measure its impact:

Establish baselines: Before implementing, track:

Category sales mix
Average check
Target item performance

Monitor key metrics:

Shifts in sales distribution within categories
Changes in average check
Performance of items adjacent to anchors

Pro tip: Set up your POS reporting to track item proximity effects—how the sale of one item affects the sales of items displayed near it on your digital menu board.

Common Pitfalls to Avoid

Unrealistic Anchors

If your anchor prices are perceived as unreasonably high, they may be dismissed rather than serving as reference points.

Implementation guidance: Your premium anchor items should be approximately 25-35% higher than your target items—high enough to create contrast but not so high that they seem from a different value category altogether.

Anchor-Only Focus

Some operators become so focused on their anchor items that they neglect the optimization of their actual target items—the ones they most want to sell.

Implementation guidance: Remember that anchors exist to support the sale of your target items. Ensure your target items (not just your anchors) are well-positioned, visually appealing, and represent genuine value.

Neglecting Quality Expectations

Price anchoring sets expectations about quality that your food must meet or exceed

Implementation guidance: Ensure that every item, including anchors, delivers on its quality promise. A high-priced anchor that disappoints can damage credibility for your entire menu.

Your Price Anchoring Action Plan

Identify potential anchor items: Select items that can credibly command premium prices
Determine target items: Clarify which items you most want to sell (typically high-margin, popular items)
Design strategic positioning: Create a digital menu layout that establishes proper anchoring relationships
Implement visual distinction: Use design elements to properly frame both anchors and targets
Measure and refine: Track performance and adjust your approach based on results

According to the National Restaurant Association's study of 64 restaurants implementing price anchoring strategies, these techniques led to an average profit improvement of 4.1% on targeted menu items (NRA Technology Report, 2019). For a restaurant doing $2 million in annual sales, this could translate to tens of thousands in additional profit—simply by rethinking how you present what you already offer.

Combining Anchoring with Other Menu Engineering Techniques

Price anchoring becomes even more powerful when combined with other menu engineering strategies we'll explore in this series. Dairy Queen locations implementing digital menu boards with strategic price anchoring saw a 3.5% increase in average ticket value, with their most effective strategy being the prominent featuring of premium Blizzard treats at the top of dessert categories (Digital Signage Today, 2016).

In our next article, we'll explore how daypart menu engineering can help you maximize profit opportunities throughout different serving periods.

Academic Research:

Yang, S.S., Kimes, S.E., & Sessarego, M.M. (2009). The Effect of Menu Item Characteristics on Menu-Item Selection and Pricing. Cornell Hospitality Quarterly, 50(2), 161-168. DOI: 10.1177/1938965509332309
Parsa, H.G., & Njite, D. (2014). Menu Psychology: Using Anchoring and Psychological Pricing. International Journal of Contemporary Hospitality Management, 26(7), 1056-1076.
Sigirci, O., & Wansink, B. (2015). How does the presentation order of menu items influence the selection of healthy options? Journal of Consumer Behaviour, 14(6), 342-351.

Case Studies and Industry Research:

CBS Sunday Morning (2017). The Psychology of Restaurant Menus. Featuring menu engineer Gregg Rapp. Available at: https://www.cbsnews.com/news/the-psychology-of-restaurant-menus/
National Restaurant Association (2018). Menu Engineering Case Study: William B's Restaurant. Annual State of the Industry Report.
Technomic (2019). Menu Engineering and Digital Displays. Technomic Menu Strategy Report.
National Restaurant Association (2019). Price Psychology in Modern Foodservice. National Restaurant Association Technology Report.
Digital Signage Today (2016). Dairy Queen Serves Up Digital Signage. Available at: https://www.digitalsignagetoday.com/articles/dairy-queen-serves-up-digital-signage/
QSR Magazine (2017). How Digital Menu Boards Can Increase Check Averages. Case study featuring Firehouse Subs. Available at: https://www.qsrmagazine.com/outside-insights/how-digital-menu-boards-can-increase-check-averages