You may recall a recent post where I talked about top ten lists . There is a much greater perceived difference between #10 and #11 on a “Best of” list than between #3 and #4 or #12 and #13. The reason is that we have a specific mental schema of the top ten (smaller but similar effects for the top 5 or top 20). We remember which options are in the top ten, but the specific order is not as well recalled. So we may forget which was #8 and which was #9. But we do remember that option X was in the top 10 or not in the top 10.
Long lists of ranked items, such as Bloomberg Businessweek’s rankings of MBA programs, are ubiquitous in Western culture, and they are often used in consumer decision making. Six studies show that consumers mentally subdivide ranked lists into a smaller set of categories and exaggerate differences between consecutive items adjacent to category boundaries.
So that brings me to today’s topic, the Dollar Menu. We see these are many fast food restaurants. But it turns out, it was a big mistake to create these. It was inevitable that inflation would make anything in this category as a losing proposition for the restaurant. We saw the serving size get smaller and smaller, but there is only so far that can take us. But the restaurants found themselves unable to change the menu to the “Dollar and ten cents menu.” The round number of the Dollar had created a strong mental schema of the value proposition that a dollar ten just couldn’t match. It just smacked the customer in the face with the price increase. A “Two Dollar” menu would also be a nice round number, but it is too great a price increase to justify with inflation that has been running just a percent or two for years.
I learned about just how problematic this has been in the December issue of Fortune Magazine, which had a feature article about McDonalds. The article covered many of McDonald’s recent travails, and the Dollar menu is one of them. They tried adding an “Extra Value Menu” but customers noticed that everything was priced more than a dollar. Sitting next to the Dollar Menu, it caused cognitive dissonance. So they tried recombining the items and calling the whole thing the “Dollar Menu & More” but all that did was highlight that some of the items were more than a dollar, and not a round number either. It wasn’t just confusing, but it broke a simple mental model of the restaurant’s pricing.
This might seem trivial, but it really hurt sales. Marketing experts are pretty insistent that companies need to have a clear value proposition and these changes made McDonalds pricing too ambiguous. On the other hand, I can’t think of a better idea except to invent a time machine and convince the previous management not to launch anything called a “Dollar Menu” in the first place. Start off with “Extra Value” menu would have been fine.
What do you think? Do you eat at McDonalds? Did you experience any dissonance when the Dollar Menu went through these changes or did you never even notice? Do you have a suggestion now that we have the Dollar schema etched into our minds?
Image credit: Victoria Henderson