Adversity drives innovation. It forces us to seek creative solutions and develop new tools to overcome escalating problems with restaurant menu pricing. As the foundation of restaurant operations crumbled in the wake of the pandemic, restaurants turned to artificial intelligence to control the damage. In a survey conducted by Algorithmia, 76% of businesses said that AI and machine learning are top priorities—ranking higher than all other IT initiatives.
We’ve embraced the power of artificial intelligence because of its proven effectiveness. And now, as inflation and supply chain fluctuations trigger a nearly 9% increase in menu prices, industry leaders are turning to machine learning to help direct their pricing strategies.
If you’re unfamiliar with machine learning and its potential to optimize restaurant menus, we’re going to explore how this technology helps avoid pitfalls while implementing revenue-boosting price increases.
What is Machine Learning?
Machine learning is a more advanced form of artificial intelligence. It uses complex algorithms to analyze large data sets, identify trends, and extrapolate real-world meaning. As the program takes in more data, it develops an increasingly nuanced understanding of its subject. This allows it to make quantified, accurate projections about potential decisions.
Essentially, machine learning works the same way as human learning but with accelerated speed and accuracy. This analytical efficiency is why machine learning programs like FB Menu hold exciting potential for restaurants making calculated changes to their menu pricing.
How Machine Learning Increases Revenue and Reduces Risk For Restaurant Menu Pricing
Raising prices is one of the easiest ways to boost profit and support fluctuating overhead costs. However, it comes with a risk that a price increase will lose customers. Sure, we’d love to increase the ROI of each dish, but does raising prices make sense if it drives away business? Developing a dynamic pricing strategy built around machine learning is the best way to minimize risk while increasing menu prices.
Dynamic pricing strategies allow menu pricing to evolve with changes in your customer’s psychology, the perceived value of menu items, market demand, and local competition. It’s the responsibility of restaurant professionals to understand what customers want and the price they’re willing to pay. But how do we quantify those variables?
Enter Machine Learning.
You’re sitting on a treasure chest of profit. The data collected by your POS system can reveal information about your customer behavior and buying psychology that will change the way you raise prices. Machine learning software offered by FB Menu is your key to the treasure chest.
FB Menu integrates with your POS system, harvesting data from thousands of customer interactions. The magic of machine learning happens right here. The program internalizes this information to develop a nuanced understanding of your customer’s psychological profile. We’re talking about calculated intuition in the mind of the people who come to your restaurant. This insight allows FB Menu to compose accurate, data-driven projections about theoretical purchasing scenarios. You’re pretty much working with a superhuman cross between a psychologist and a data scientist.
And, as one part of the machine learning program manifests this psychological framework, another part methodically weighs every menu item for its capacity to increase in price. This component is your statistician, crunching numbers to unearth gems of potential profit within your menu.
FB Menu’s machine learning program then runs these revenue-rich menu items through the filter of customer empathy developed by the hybrid psychologist/data scientist. The result is a list of risk-reduced menu item price suggestions–delivered in seconds.
Now you have a golden list of pricing recommendations less likely to trigger a purchase trade down or scare away customers. But, before implementing any changes, you’ll need to evaluate this list within the local market context.
Manually checking competitor menu prices is a tedious process that steals hours from higher-value tasks. To make matters worse, your findings will soon become irrelevant as competitor prices fluctuate due to industry volatility. That’s why FB Menu streamlines market research by automating competitor price analysis. Simply choose a menu item from your risk-reduced list, adjust the radius of your target market, and FB Menu delivers a comprehensive list of your competitor’s prices. Now you’re working with a clear picture of how much you can raise prices without taking on risk. And, thanks to automated alerts whenever your competitor changes prices, FB Menu gives you the confidence to make pricing decisions with the most up-to-date information.
You’re not the only restaurant raising prices right now. That’s why ensuring you’re doing everything possible to expand profit margins without taking on unnecessary risk is critical. FB Menu’s machine learning technology presents the opportunity to develop a calculated dynamic pricing strategy optimizing your restaurant menu for profit.