The Case of the $38 Fast-Casual Chicken Dinner
There’s a place in Downtown Portland called Pine Street Market. It’s set up like a food court at a mall: there’s a collection of restaurants at the perimeter, and seating in the middle.
There’s a wide selection, too. Pizza, ramen, burgers, hot dogs. But my favorite place serves rotisserie chicken, and it’s not cheap.
My wife and I got a chicken dinner at a place called Pollo Bravo for $38. It was a whole chicken with salad and fries. This is by far the most expensive thing meal we could buy. So why were we willing to pay $38 for a chicken dinner, when we could pay $20 for hamburgers and fries?
As a service provider, you probably ask the inverse question: ”How could I charge 2X when the market price is X?”
Well, many reasons. Let’s go back to the chicken dinner to illustrate:
Higher Quality: the food is amazing. The dinner includes sauces, a delicious salad, and french fries. It’s much better than any ramen or hot dog option, which leads me to the next point.
Highly Targeted: chicken dinners are perfect for the type of people who like chicken dinners or who eat at least somewhat healthy. That’s me! This particular chicken dinner isn’t good for people who have to eat for $10 or less, are vegetarian, or aren’t very hungry.
Well-Packaged: everything has a fancy name, which contributes to the perceived valueof the dinner. They serve “papas fritas,” not “french fries.” They serve a “Whole Bird Familia Dinner,” not a “Chicken Dinner.”
No Competition: there’s only one place I can get a chicken dinner at Pine Street Market. If I want it, I have to pay $38 for it.
Notice that the factors that allow Pollo Bravo to charge $38 for the chicken dinner are all built into the product. If Costco decided to raise the price from $5 to $20 tomorrow for their rotisserie chicken, no one would pay it. Altering price typically requires a reconfiguration of the product itself.
So next time you think “I can’t charge that price,” perhaps ask a question instead: “What do I have to do to charge that price?”