Menu engineering

Menu engineering is an interdisciplinary field of study devoted to the deliberate and strategic construction of menus.^[1] It is also commonly referred to as Menu Psychology.

Definition

In general, the term menu engineering is used within the hospitality industry (specifically in the context of restaurants), but can be applied to any industry that displays a list of product or service offerings for consumer choice. Typically the goal with menu engineering is to maximize a firm's profitability by subconsciously encouraging customers to buy what you want them to buy, and discouraging purchase of items you don't want them to buy.

Fields of study which contribute most to menu engineering include:

• Psychology (perception, attention, emotion/effect)
• Managerial Accounting (contribution margin and unit cost analysis)
• Marketing & Strategy (pricing, promotion)
• Graphic Design (layout, typography)

Psychology of menu engineering

Perception & Attention - Visual perception is inextricably linked to how customers read a menu. Most menus are presented visually (though many restaurants verbally list daily specials), and the majority of menu engineering recommendations focus on how to increase attention by strategically arranging menu categories within the pages of the menu, and item placement within a menu category. This strategic placement of categories and items is referred to as the theory of sweet spots.^[2]

The reasoning being Sweet Spots stems from the classical effect in psychology known as the Serial position effect (aka. the rules of recency and primacy). The thought is, customers are most likely to remember the first and last things they see on a menu - hence, sweet spots on a menu should be where the customers look first and last. To date, there is no empirical evidence on the efficacy of the sweet spots on menus ^[3]

Customer perception of items offered on a menu can also be affected by subtle textual manipulations. For example, descriptive labeling of item names may produce positive effects, leading to higher customer satisfaction, and higher perceived product value.^[4] Similarly, the presence of dollar signs or other potential monetary cues may cause guests to spend less.^[5]

Managerial accounting

The primary goal of menu engineering is to encourage purchase of targeted items, presumably the most profitable items, and to discourage purchase of the least profitable items. To that end, firms must first calculate the cost of each item listed on the menu. This costing exercise should extend to all items listed on the menu, and should reflect all costs incurred to produce and serve. Optimally item costs should include: food cost (including wasted product and product loss), incremental labor (e.g., cost in in-house butchering, pastry production, or prep), condiments and packaging. Only incremental costs and efforts should be included in the item cost.

After an item's cost and price have been determined (see pricing in the Marketing section), evaluation of an item's profitability is based on the item's Contribution Margin. The contribution margin is calculated as the menu price minus the cost. Menu engineering then focuses on maximizing the contribution margin of each guest's order. Recipe costing should be updated (at least the ingredient cost portion) whenever the menu is reprinted or whenever items are re-engineered. Some simplified calculations of contribution margin include only food costs.

Marketing (price & promotion)

By using guest demand (also called the menu mix) and gross profit margins, the relative performance of each menu item is determined, and assigned one of the following terms (based on the BCG Matrix):

Stars Stars are extremely popular and have a high contribution margin. Ideally Stars should be your flagship or signature menu items.

Plow Horse or Cash Cows Plow Horses are high in popularity but low in contribution margin. Plow horse menu items sell well, but don’t significantly increase revenue.

Puzzles Puzzles are generally low in popularity and high in contribution margin. Puzzle dishes are difficult to sell but have a high profit margin.

Dogs Dogs are low in popularity and low in contribution margin. They are difficult to sell and produce little profit when they do sell.

In general, items within a relevant comparable set (for example, entrees, or chicken entrees) should be priced to have similar contribution margins - this way, the restaurant would make the same amount of money, no matter what item the guest chooses to order.

References

1. ^ In its truest sense, the term menu engineering refers to the specific restaurant menu analysis methodology developed by Michael L. Kasavana, Ph.D and Donald J. Smith at the Michigan State University School of Hospitality Business in 1982.
2. ^ Though the original reference of 'sweet spot' has not been found, it has been traced to repeated references in academic work and trade press. See Kelson, A.H. (1994) The ten commandments for menu success. Restaurant Hospitality, 78(7), 103.
   Kotschevar, L.H. (208). In Withrow D. (ed.), Management by Menu (4th ed.), Hoboken, N..: John Wiley.
   Miller, J.E., 1930-. (1992). Menu Pricing & Strategy. (3rd Ed.). New York: Van Nostrand Reinhold.
3. ^ Gallup Report (1987). Through the Eyes of the Customer. The Gallup Monthly Report on Eating Out, 7(3), 1-9.
   Reynolds, D., Merritt, E.A., & Pinckney, S. (2005). Understanding Menu Psychology: An Empirical Investigation of Menu Design and Consumer Response. International Journal of Hospitality & Tourism Administration, 6(1), 1-10.
   Kincaid, Clark S., Corsun, David L. (2003). Are Consultants blowing Smoke? An Empirical Test of the Impact of Menu Layout on Item Sales. International Journal of Contemporary Hospitality Management, 12 (4/5), 226-231.
4. ^ Wansink, B., Painter, J., & Van Ittersum, K. (2001). Descriptive menu labels' effect on sales. Cornell Hotel & Restaurant Administration Quarterly, 42(6), 68.
5. ^ Yang, S., Kimes, S.E., and Sessarego, M.M. (2009), “$ or Dollars?: Effects of Menu Price Formats on Customer Price Purchases,” Cornell Hospitality Report. 9 (8)

External links

• Menu engineering, Food Buyers Network
• Kershaw, Sarah (23 December 2009). "Using Menu Psychology to Entice Diners". The New York Times: p. D1. http://www.nytimes.com/2009/12/23/dining/23menus.html?_r=3. Retrieved 2010-08-21.