Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

How to… influence customer spend

09 May 2011
How to… influence customer spend

In these times of austerity, customers are increasingly price-conscious. Market competition gets stiffer, as operators opt for price cuts in a bid to win more customers. But are there any viable alternatives to constant discounting?

To understand how catering professionals can encourage their customers' spending without compromising their margins or service quality, Mountainview Learning undertook a review of psychological literature on consumer behaviour in the catering sector.

It found that, while price contributes to the perception of product or service value, it is not the only, or the main, driver. Value can also be signalled through the presentation of the premises, food, menu, promotional offer and product packaging. Hence you can signal that your bar, restaurant, café or hotel is good value for money by employing heuristics in the presentation of your offers. Heuristics are the rules of thumb that simplify and quicken decision-making.

Whenever we are faced with a choice, instead of weighing the pros and cons of each available option, we reach a decision by surveying the offer for the presence of value-signalling cues. For example, most customers are aware of the standard tip size of 10% of the bill and follow this rule closely unless other ‘enhanced value signals' are present. By using heuristics in the presentation of a price, product or service, catering professionals can instantaneously convey value to the customers.

Evgeniya Petrova & Patrick Fagan,Applied psychologists, Mountainview Learning

using heuristics to encourage customers to spend

Be friendly and open Customers are more likely to leave a tip if they like the staff who served them. Unsurprisingly, likeability can be induced through these behaviours: repeating customers' orders back; addressing patrons by name; and using open-mouthed smiles. In controlled experiments, these signals of friendliness have shown tip uplift of anywhere up to 140% compared with when no such behaviours are shown.

Make small but significant gifts Staff can also encourage tipping by using the "reciprocity" heuristic: people tend to help those who have helped them before.

Research shows that tips can be significantly increased by giving customers small things like a puzzle, joke or interesting fact with their bill.

Giving customers complimentary sweets is also a very effective strategy. One piece of chocolate can get your staff tips of 19% of the total bill; two pieces of chocolate will raise the bar to 21%, and two pieces at two different times can help your staff pocket 23% of the bill in tips.

Bundle items together Heuristics can also stimulate spending when applied to the menu. Bundling items together (eg, a burger and fries) increases sales because multiple painful losses are bundled into one, and the exact costs of items are not clear.

Costs can also be made less salient. If you put prices in a single column, you encourage customers to compare and choose on price. The same principle goes for using "leader dots" (they draw attention to prices) and using pound signs.

It's all about perception Value-signalling heuristics can enhance the ambience of the restaurant and influence subsequent spending behaviour. In one study, diners were given a complimentary glass of wine stated to be from California or North Dakota. Diners who received a glass of what they thought was Californian wine went on to eat 11% more food and stay for 10 minutes longer, even though both groups had exactly the same wine to begin with.

Ask questions Heuristics can even be used to reduce the number of no-shows. Next time your customers call to make a booking, instead of saying, "Please call if you have to cancel," ask them, "Will you call if you have to cancel?" This will force the customer to say yes - and make a commitment. In the study we reviewed, the proportion of no-shows fell from 30% to 10% after this heuristic was implemented.

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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.

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