‘The Big Money Show’ panel discusses a decline in fast food sales and how it is affected by inflation, conscious consumerism, weight-loss drugs and more.
Fast food is often seen as one of the cheapest ways to get a meal, but some deals that seem like bargains may do more to boost restaurant profits than protect consumers’ wallets.
Central to the strategy is a pricing tactic known as the “lure effect,” a psychological phenomenon in which a less attractive third option subtly pushes customers toward a more expensive choice, the magazine said. Research and applications in electronic commerce.
Fast food chains often use this tactic to steer customers toward more expensive items. Chowhound reported.
Chinese pork producer swallows up iconic American hot dog maker
A chef puts together a cheeseburger. (iStock / iStock)
A common example of the lure effect in fast food occurs with small, medium and large menu options, where the price of the medium is only slightly below the large.
A medium order of fries might cost $4.70, while the large only costs $5, making the larger size seem like the obvious choice, according to Chowhound.
Ford noted that the strategy extends well beyond fast food.
“This is also happening with restaurant wine lists,” Ford said. “Consumers are offered expensive bottles, so the second most expensive bottle seems like the smart choice, even though it is still three to five times the normal price.”
However, some marketing experts warn that the strategy could come at the expense of long-term loyalty.
Two men order at a fast food restaurant. (iStock / iStock)
MCDONALD’S PLANS HUGE OVERHAUL WITH MAJOR CHANGES TO RESTAURANTS AND MENUS
However, Jeffrey L. Degner, an economist at the American Institute for Economic Research, argues that price is only one factor driving fast-food decisions and that the lure effect is “far from deceptive.”
“The term ‘decoy’ implies that the customer is not getting what he really wants,” Degner said. “But what some customers want most at the drive-through is ordering convenience, speed or just a little more caffeine from a large drink, instead of a few extra nickels.”
IN-N-OUT TO ENTER A NEW MARKET WITH MULTIPLE RESTAURANTS BY THE END OF THE YEAR: REPORT
A customer picks up a bag of food at a drive-thru. (iStock / iStock)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Degner also pointed out that restaurants sometimes lose money on individual items — a strategy known as a “loss leader” — and rely on extras like fries and drinks to make a profit.
“A customer always has the option to purchase the sandwich themselves, resulting in a potential loss for the restaurant,” Degner added. “Far from being a deceptive practice by fast food restaurants, consumers have a multitude of choices and motives when entering a drive-thru.”
