Is it a meal or an 'experience'?
Well known Chicago restauranteur Grant Achatz of Alinea has announced plans for a new restaurant with a what he calls a ‘unique pricing model’. The restaurant is to be called Next Restaurant and their pricing model is combined with a equally unique reservation process. According to the restaurant’s website, here’s how it works:
A meal at Next will represent a great value. Depending on the menu AND what day and time you are dining, food will be $40 to $75 for the entire prix fixe menu. Wine and beverage pairings will begin at a $25 supplement. Next’s goal is to serve 4-star food at 3-star prices.
Yes. Instead of reservations our bookings will be made more like a theater or a sporting event. Your tickets will be fully inclusive of all charges, including service. Ticket price will depend on which seating you buy – Saturday at 8 PM will be more expensive than Wednesday at 9:30 PM. This will allow us to offer an amazing experience at a very reasonable price. We will also offer an annual subscription to all four menus at a discount with preferred seating. The tickets will be available via our website, and we are building the reservation system from scratch to ensure the best customer experience. It will be simple to use, efficient, and familiar to anyone who has booked a show or travel online.
So first of all, the pricing model is not so unique. Restaurants have been differentiating their prices for years - the best examples being charging higher for for chef’s-table seating and offering discounts for‘early-bird specials’ that have become so popular with seniors today. The key to this differentiated pricing strategy is to take advantage of the fact that customers value your product differently - some are willing to pay more and others less for your service.
It’s actually the reservation process that’s more interesting. Here, the restaurant is hoping to move the diner’s experience up a notch or two so that it becomes similar to the theater or perhaps, high-end travel. The key here is that it becomes an experience, not just a good meal. It’s value-based pricing at its best. Meals are meals, but experiences are something to pay for (“Priceless” as the wildly successful MasterCard advertising campaign has reminded us over and over).
Here’s the takeaway. Differentiated pricing is nothing new. The key is finding the proper mix of pricing that allows you to serve the fullest range of your customer base. For those who can do this successfully, higher profits will soon follow.