Over 500,000 people visited Farnam Street last month to expand their knowledge and improve their thinking. Work smarter, not harder with our free weekly newsletter that's full of time-tested knowledge you can add to your mental toolbox.

How Menu Engineering Hacks Your Brain

Have you ever walked into a restaurant and found an item on the menu that is ridiculously priced?

Of course you have. I'm also quite sure that you didn't buy it. After all, you're no sucker.

Or are you?

On The Today Show, Gregg Rapp, a menu engineer, discusses how he hacks the menu using common flaws in human decision making to make sure you pay more.

For example, by simply removing “$” signs from prices, people are less intimidated by them. And he advises against listing items from least to most expensive, because that focuses the consumer on price. Instead he mixes up items, making it hard to find their price — thereby encouraging the customer to emotionally commit to something before finding out what it costs. But my favorite strategy of his is that of putting some absurdly expensive item on the menu. Rapp doesn't expect many consumers to buy it, but having it there makes expensive items appear cheap by comparison. Think about it: How many times have you ordered a bottle of wine in the middle of the price range?

Let's give the strategy a try. We'll assume that two companies are offering the same product to the same customer, but are using two different price lists to do so.

Company A: Silicon Valley Pricing Model
Widget — Basic : $10,000
Widget — Premium: $20,000

Company B: Menu Engineer Pricing Model
Widget — Silver: 10,000
Widget — Gold: 20,000
Widget — Platinum: 50,000

See the difference? My hunch is that most companies could increase revenue by simply adding a very high-end offering, even if they never sell a single one of those expensive units.

This explains why having high MSRPs is so important. Conventional wisdom is that high list prices allow sales organizations to engage in price discrimination through discounting. There's definitely some truth to this assumption, but there's more to it than that. High list prices can actually increase perceived value — even in businesses in which the marginal cost of production is low.

If you're looking for practical wisdom on how to influence others, I recommend reading Yes! 50 Secrets from the Science of Persuasion.

Still curious? Learn how Williams and Sonoma Sold More Bread Machines using this technique. Or, if you prefer to read an academic paper explaining this, try Extremeness Aversion and Attribute-Balance: Effects in Choice.