Consumers’ perception of inflation is much worse than reality
Consumers think prices are rising more than they actually are, which could hurt operators’ pricing ability. / Image: Shutterstock.
If you ask a consumer what they think they paid for a menu item, they may remember a higher price than they actually paid. In the old days (i.e. 2019), the theory was that if consumers thought restaurant prices were higher than they actually were, it signaled operators that they could s get by by increasing prices (and revenue) with minimal impact on demand and traffic.
Technomic’s third quarter 2022 consumer survey found that on average, consumers think restaurant prices have risen 22% in the last 6 months alone, when in fact food out of home has increased by 8% over the past 12 months according to the Bureau of Labor Statistics.
In 2022, such a disconnect between perceptions and reality no longer indicates an opportunity to take price and instead highlights general pessimism in the economy. Whether it is true or not is irrelevant. The real and psychological impact of prolonged high inflation – and the belief that prices will continue to rise – is impacting restaurant spending, even for those in the highest income brackets.
As Rich Shank, Principal Principal at Technomic, noted in the inaugural column of Technomic’s Take, consumers are reaching the tipping point in their willingness to pay, so carriers need to carefully evaluate their pricing strategy. With little wiggle room on pricing, operators must ensure they convey perceptions of value that resonate with their customers.
Now, if you think, “Assess does not match my brand. Keep in mind that value has personal meaning to consumers and doesn’t always equate to price alone or require you to explicitly introduce a value menu. Consumers now weigh more factors than ever before when deciding whether to try or return to a restaurant – all of which are part of their unique value equation.
If repositioning a large portion of the menu doesn’t make sense for your operation, adding innovative new menu items offers a chance to signal what your guests appreciate and an opportunity to come up with an item. featured or a limited time offer at a higher price to start.
If food prices continue to climb, this will give you a cushion to maintain the price of new items and an anchor for small increases on low-margin items. Perceptions matter and increasing perceived value to match price, whether keeping prices static or increasing them, is key to retaining and winning customers in this environment.
Lori Rakoczy is Associate Director at Technomic. She joined the company in 2018.
For more information, please contact Technomic at [email protected] Where technomic.com. Technomic is a sister company of Restaurant Business.
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