Price Engineering an essential tool that not everyone applies

It often happens that many administrators of restaurants apply the Menu Engineering and react intuitively to the results, which, in the author's opinion, is not the most appropriate solution, since the trend is to increase the Prices of the most popular dishes and withdraw from the offer those that do not offer benefits, leading this to the insertion of new offers that will require aging in the menu menu to start a new study that may lead to the same results.

A dish Perro It does not necessarily have to be eliminated immediately, perhaps a privileged location on the menu is enough for the customer to choose it and increase their sales levels. The same happens with a plate cowNot because it is highly popular is it a reason to increase its price.

In all the Insights The average level of customers that come to the facility must be taken into account. Logically, if there are few clients, the general expenses incurred are high, so the Prices They must be high, the opposite occurring if the volume of clients is high allows reducing these general expenses, which facilitates the reduction of Prices.

Closely linked to the engineering of the Menu is the Engineering of Prices. This tool allows determining the maximum and minimum levels at which prices can be varied, allowing to balance the offer, increase sales or improve the contribution margin.

This tool requires, and in fact is based on the sociological concepts suggested by the OMNES principles in relation to the behavior of demand before a price list of different products, which states that any variation made at these prices should not exceed the 10% of its current price, avoiding that the client feels cheated or perceives the quality of what is offered to him, since it is common for him that, for periods of time, the offer prices are adjusted motivated by inflation.

It may interest you: Restaurant capacity measurement

The calculation methodology is not complex, once each of the dishes is classified, it is easy to determine the actions to follow. What is not convenient is to change prices to change them, it requires cunning on the part of the administrator and business domain. A clear example is that the rotation rate of the products that make up a plate and the level of stock in inventory must be studied, to be able to issue it, as well as the technical data sheet of the plate to evaluate the grammage of each of the ingredients and its operational cost.

The calculation system that must be followed is as follows: For this purpose, the table prepared for the Menu Engineering is useful, the data that must be used is already incorporated:

a) The Weighted Average Offered Price is determined by the number of times the dish is presented

engineering

b) The Weighted Average Price for Units Sold is determined

engineering

c) Once these two indicators are obtained, the coefficient that establishes the relationship for the oscillation that can be given to the price is obtained from the division of the Weighted Average Price (PMP) over the Average Offered Price (PMO)

Taking into account the following:

engineering

a) If the result is between 0.85 and 1.05, it is suggested to maintain prices.

b) If the result is greater than 1.05, it is suggested to increase the prices and obtain the new price from the following calculation

engineering

c) If the result is less than 0.85, it is suggested to decrease the prices and obtain the new price from the following calculation

It may interest you: Service Administration

engineering

d) Determine the price bandwidths equivalent to the new average price offered by 0,25:

engineering

engineering

Once all the calculations have been carried out, a graph is drawn up that allows the location of each of the dishes analyzed at their corresponding levels to be visualized and the taking of strategic which must be supported by the results obtained in both engineering companies, since it may be the case that a dish is highly popular and has a low contribution margin (Cow), however it is not convenient to increase its price.

Although the Price Engineering informs us that it may be higher, since the price of the competition must be taken into account, in this case the most logical thing would be to evaluate the technical sheet of the plate and reduce the weight in order to reduce its cost and obtain a adequate contribution margin.

engineering

Another case may be that a product is Star, since it has a high popularity index and offers an adequate contribution margin, however, among Stars products it is the least popular, so the Insights It would allow us to define that, far from increasing prices, we should decrease them in order to achieve greater popularity.

Another example would be that of a Dog product, which has the lowest popularity index, although it is the one with the lowest unit cost within the group of plates, so the possibility of increasing the weight of the offer could be evaluated and applying the techniques merchandising would be located in a privileged position on the menu.

There are many actions that emerge from Insights of the results of Menu Engineering and Price Engineering, what is clear is that they are important sources of information for decision-making in the restaurant if we know how to interpret them correctly.

It may interest you: Mr. Management: The Work of Peter F. Drucker

Un deals is not based on the mechanical application of toolsthey only tools research; it is up to the manager to combine them appropriately, to use studies of the competition, Insights periodic inventory, the application of satisfaction surveys, the study of suppliers, among other issues.

I am a dreamer and in my dreams I believe that a better world is possible, that no one knows more than anyone, we all learn from everyone. I love gastronomy, numbers, teaching and sharing all the little I know, because by sharing I also learn. "Let's all go together from foundation to success"
engineering
Last entries of MBA Yosvanys R Guerra Valverde (see everything)