But here’s a caveat: your guests need to perceive a correlation between price and quality. If they don't associate price with quality, the effect diminishes.

This is not just true of beer and wine but is usually the case with food too where a higher priced plate is assumed to have better quality ingredients.

Conclusion/TL:DR: Increase revenue by listing menu items in descending order. (i.e from highest to lowest)

Anything you can do to reduce the pain of paying is a huge benefit to your restaurant and will raise your average ticket price.

Each time we purchase something, we feel a sense of pain — often referred to as the “pain of paying” (Prelec & Loewenstein, 1998).

More specifically, the pain emerges from two factors:

The SALIENCY of the payment (e.g., we feel more pain if we see money leaving our hands)

The TIMING of the payment (e.g., we feel more pain if we pay after we consume)

Considering those two factors, you can see why Uber — a ride-sharing service — revolutionized the taxi industry.

In traditional taxi rides, the saliency of payment is very high. You see a meter constantly rising. Each minute evokes an increasingly painful sensation. Every moment spent stopped at a red light while the meter ticks causes anxiety. Plus, at the end of the ride, the taxi driver makes you pay by cash or credit card. So. Much. Pain.

Uber is different. No visual meter. No physical payments. Everything is automatically charged to your card. Much less pain.

This is the reason casinos give you chips, because they know that a "disassociation" is created and you're more likely to throw a "red chip" in the middle than a "$5 bill".

Dave and Busters, the well known restaurant and arcade chain uses this principle to raise their PPC (Profit per Customer) by having guests charge a "card" that can be swiped to play games because they've tested it and know that people spend more money when they swipe a card than when they're feeding actual "dollars" into a machine and seeing the money leave their hand.

Credit card processing is one tactic to reduce the pain of paying, but you can reduce that pain in other ways too..

The pain of paying can be triggered pretty easily. In fact, the dollar sign in your price can remind people of that pain, and it can cause people to spend less (Yang, Kimes, & Sessarego, 2009).

This is something that even global chains get wrong as you can see in the image below.

When people see those positive results, they often credit the 9’s in the price. However, there’s another culprit responsible: the left digit.

Charm pricing is most effective when the left digit changes. A one-cent difference between $3.80 and $3.79 doesn't make much of a difference. However, a one-cent difference between $3.00 and $2.99 will make a huge difference.

Why is the left digit so important? Because it anchors the perceived magnitude.

Our brains encode numbers so quickly (and beyond consciousness) that we encode the size of a number before we finish reading it.

Bonus Tip: You could emphasize the new base digit by visually minimizing the digits after the decimal.

If you're selling a 16oz Ribeye at a casual family restaurant, then that buying decision is based on rationality and the price of $19.99 seems pretty reasonable.

If you're selling a 16oz Dry Butter Aged Japanese Kobe Beef Steak at a high-end Michelin Star Restaurant, then that buying decision is based on emotion and the price should be rounded to $240 not $239.99. 

No amount of logic or rationale can justify the decision to spend $240 on a steak, that decision is made on pure emotion and the perceived status boost one receives from buying an expensive steak of such quality.

Conclusion/TL:DR: use charm pricing to lower the left digit by one (i.e $19.99 vs $20) when your menu items are rational and use price roundedness to increase perceived quality (i.e $240 vs $239.99) when your menu items are high-ticket and emotional. 

Another thing to consider is price location. Lower prices should have a barrier on the left and higher prices should have a barrier on the right. 

Wait, what?

Let me explain. 

Dehaene, Bossini and Giraux (1991) found that people conceptualize numbers on an imaginary horizontal line, with numbers growing larger from left to right.

This is because we read from left to right and so you should use this psychological trigger when pricing your menu.

In their study, they presented participants with digits ranging from 0 and 9, and they asked participants to indicate its parity (i.e., whether it was odd or even). As expected, people responded faster to smaller numbers when using their left hand and bigger numbers when using their right hand. In other words, people responded faster with the hand that matched the same side of their mental ruler.

How does that finding relate to pricing psychology?

Since we perceive of smaller numbers as belonging on the left, positioning prices toward the left can trigger people’s conceptualization for a smaller magnitude (Coulter, 2002).

However, don’t jump the gun. You shouldn’t position ALL prices on the left…only prices that people associate with the left (i.e., low prices).

Conclusion/TL:DR: use multiples of your price in the description whose sum or product equal your price. (i.e 2, 4, 6, 8, and 10 for $12)

Let's talk about 2 tactics to instantly boost sales right now. 

These are obvious but misused and so I've included them to make sure you aren't making these two mistakes on your menu in your restaurant.

Raise your prices! So many of my clients are so reluctant to raise their prices. Why? Because they haven't done it in so long...

They've waited as long as possible while rising food costs have eaten in to their profit margin driving up their CoGS and now that they're finally FORCED to raise prices it has to be a noticeable increase.

The easiest way to control price perception is through the just noticeable difference (JND).

Just Noticeable Difference – The minimum amount of change that triggers detection (i.e., the difference that’s just noticeable)

If your price is $11.99, an increase to $12.99 will be WAY less noticeable than an increase to $14.99.

Duh.

In theory, that concept is intuitive. Obviously people notice larger price increases.

In practice, however, that principle is very counterintuitive. I see my clients make this mistake year after year hesitant to raise prices until they're forced to by rising food cost.

Since businesses avoid price increases, they save that tactic as a last resort. They wait until it’s absolutely necessary to raise their price.

However, if you reach that point, then you’ll usually be desperate for revenue. You won’t be able to increase your price by a tiny amount. You’ll need to increase it by a noticeable amount.

So…what should you do?

If you know that you’ll need to increase your price eventually, you should use more frequent (yet smaller) changes. Avoid waiting until the moment of desperation.

With more frequent price increases, you also avoid reinforcing a concrete reference price. If your price stays the same for years, then people will become accustomed to your price at that specific level. Once you change your price, people will be more likely to notice.