Three Reasons Your Restaurant Needs a Competitive Pricing Analysis

By Alex Messeder
VP, Client Solutions

Pricing is one of the most critical elements of your restaurant’s overall strategy. Exactly how you position your price point isn’t just a deciding factor around overall success. It can influence a number of factors including your marketing strategy, menu options, and guest expectations. This makes pricing analysis deeply vital. 

To stay ahead, your restaurant needs a data-driven competitive pricing analysis. It’s one of a number of crucial processes that sharpen your edge over other restaurant establishments. Read on to discover three crucial reasons why your restaurant will always need it.

What Is a Competitive Pricing Analysis?

A competitive pricing analysis goes beyond simply looking into what your competitors charge.

While anyone can simply look at two menus and do the math to compare prices, it takes in-depth analysis to consider whether a chicken cutlet sandwich is really comparable to a fried chicken burger. 

With the right analysis in play, you can know exactly how to set competitive prices for a restaurant business. Here are three important reasons why you definitely want to do this.

First – Appeal to Price-Sensitive Customers

While there is obvious appeal in the idea that your restaurant’s unique design or the quality of the food would be at the top of your customer’s decision tree, the truth is that price is usually a more important factor. Large percentages of your customer base will prioritize pricing based on their own expectations. To meet these expectations, you need to understand how your pricing fits into their framework.

This naturally means you need competitive pricing analysis. Your pricing does not exist in a vacuum in the minds of your customers. They will consider other restaurant establishments both in your area and beyond. Customers are aware of these comparisons, and so should you.

To stay ahead, you need to seek out in-depth insights on pricing among your competitors and the industry as a whole. With this knowledge, you can better align your pricing with the expectations of price-sensitive customers. To make this happen, you need strong competitive pricing analysis.

Second – Practice Makes Profit

With such a high percentage of people’s decision making about eating out focused around price, getting it right is an obvious first step towards making your business more profitable. This goes beyond merely offering the lowest price, but rather instead offering the most competitive price.

Competitive pricing here means finding the right balance between price and the overall quality of the experience you provide. This involves a range of factors—from ambiance to personal preferences. By mastering this balance, you can attract more customers, leading to higher sales, increased satisfaction, and greater profitability.

Pricing is a key part of this equation, and needs to be framed in the context of what competitors are doing. To make that possible, you need a strong competitive pricing analysis.

Third – Stay On Top of Market Trends

Very few markets remain static and the restaurant sector is no exception. Everything from cuisine trends to social media strategies are in a constant state of flux and adaptive change. Pricing too is going to be something that shifts and is influenced by a number of factors.

Because of this, you need a level of competitive pricing analysis that can keep up with the wider market. It’s not enough to glance at a few local menus every couple of months, run some basic calculations, and adjust your prices. You need a comprehensive, up-to-date understanding of how pricing expectations are changing and what’s driving those shifts.

One example of the need for competitive pricing analysis can be seen in emerging trends like specialty beverages and plant-based foods. As these items grow in popularity, consumers expect to see them in a wider range of establishments. Along with attracting new markets, these specialized offerings can often command a premium price, making them more profitable menu items.

For forward-thinking restaurants looking to keep up with trends or stay ahead of competitors, it’s important to understand how to price these items effectively. Competitive pricing analysis makes it easier to explore pricing trends across the entire market, identify price points that resonate with your target customers, and make sure your menu items are both attractive and profitable.

What to Expect From Your Competitive Pricing Analysis

For a competitive pricing analysis strategy to work, there are a few key steps you’ll need to follow.

First, you’ll have to examine your own menu and look for the strengths, weaknesses, and opportunities it presents. 

Next, you’ll need to be able to take comparable pricing information from and about your competitors, and make it make sense in context. How does their pricing compare to yours, and why? Understanding these nuances will help you position yourself strategically.

Finally, how does your pricing stand in comparison to others in your area? Try to view it from your customers’ perspective, keeping in mind their expectations and preferences.

If all that sounds like a challenging task on top of running a successful restaurant, you would be right.

Which is why Revenue Management Solutions’ restaurant pricing software is here to help.

Discover Competitor Price Intelligence

See how RMS has developed a proven competitive pricing analysis solution that can contextualize your business, increase profitability, and reshape your restaurant pricing strategy. Stay ahead of the competition with a data-driven competitive pricing analysis that drives success.

Book a Demo for Yourself

See our competitive pricing analysis software in action.

RMS delivers solutions that are trusted by 50+ leading restaurant brands globally. We work to maximize profits and streamline costs for 150,000+ locations across the world. Our solutions deliver tailored insights to drive direct positive impact for your business.

Book a demo and see our competitive pricing analytics for yourself.