Price Sensitivity Measurement A Tool For

Journal of Hospitality & Tourism
Research
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Price-Sensitivity Measurement: a Tool for Restaurant Menu Pricing

Carola Raab, Karl Mayer, Yen-Soon Kim and Stowe Shoemaker
Journal of Hospitality & Tourism Research 2009; 33; 93
DOI: 10.1177/1096348008329659
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PRICE-SENSITIVITY MEASUREMENT:
A TOOL FOR RESTAURANT MENU
PRICING
Carola Raab
Karl Mayer
Yen-Soon Kim
University of Nevada, Las Vegas
Stowe Shoemaker
University of Houston
Setting the correct price for hospitality products is a crucial management task that has
a major influence on a firm’s profitability. In general, there has been a lack of academic
interest in the area of pricing in services. The restaurant industry typically establishes
prices by marking up a variable cost percentage and by intuition, or by trial-and-error
methods. This study illustrates how restaurant managers can use price-sensitivity mea-
surement to assess their guests’ price sensitivity. By means of a relatively simple survey,
restaurant managers can gain insights about their menu pricing directly from their cus-
tomers. This study uses data collected from a Hong Kong buffet restaurant, but the tech-
nique could be applied in virtually any restaurant setting. The results reveal price ranges
that represent real value for dinner buffet patrons.
KEYWORDS: restaurant; profitability; price-sensitivity measurement; price; value
Establishing effective pricing strategies is critical to marketing managers.

The pervasive influence of price is in part because of the fact that the price cue
is present in all purchase situations, especially in services. At a minimum, price
represents to all consumers the amount of expense that must be incurred in the
given purchase transaction. Zeithaml, Bitner, and Gremler (2006) proposed that,
because price serves as a proxy for quality for customers, it must be determined
very carefully. Many authors have identified the importance of pricing for every
company’s profitability, mainly because it is the only element of the marketing
mix that generates revenues for a firm, whereas all other elements of the mix are
associated with costs (Kotler, Bowen, & Makens, 2006; O’Connor, 2003;
Shoemaker, Lewis, & Yesawich, 2006). Avlonities and Indounas (2006) suggested
that pricing decisions can be implemented easily and at low costs. In addition,
Shoemaker et al. (2006) suggested that pricing is a powerful force in attracting
attention and increasing sales and that it can also have major influence on cus-
tomer loyalty. Despite the aforesaid significance of pricing, several authors have
Journal of Hospitality & Tourism Research, Vol. 33, No. 1, February 2009, 93-105
DOI: 10.1177/1096348008329659
© 2009 International Council on Hotel, Restaurant and Institutional Education
Downloaded from http://jht.sagepub.com at UNIV OF NEVADA LAS VEGAS LIB on April 22, 2009 93
94 JOURNAL OF HOSPITALITY & TOURISM RESEARCH
indicated that pricing is the most neglected element of the marketing mix
(Avlonities & Indounas, 2006; Hoffman, Turley, & Kelley, 2002).
The marketing discipline of pricing grew out of the basic theory of economics,
which assumes that the economy responds to the customer (Shoemaker et al.,
2006). When it comes to setting prices in services, these basic economic theo-
ries need to be adhered to. However, prices also need to be established with the
concept of customer loyalty in mind, not just short-term profit maximization
(Shoemaker et al., 2006).
Abbey (1983) stated that pricing decisions should be based on solid market
research and a thorough understanding of the economics of price changes.
Drucker (1993) discussed the importance of pricing in listing his “five deadly
sins of business.” The first of these three sins relate directly to pricing: the worship
of high profit margins, mispricing of new products, and pricing concentrated
solely on costs. The next section of this article illustrates how prices are commonly
set in the hospitality industry.
TYPES OF PRICING APPLIED IN THE HOSPITALITY INDUSTRY
Hospitality firms use various methods to set prices for their products.
Hospitality managers often select different pricing approaches based on a combi-
nation of several factors: a firm’s cost structure, competitors’ prices, and customer
value perceptions of hospitality products. Cost-based pricing usually involves
marking-up techniques of actual variable costs (product costs) at a certain
desired product cost percentage. This pricing method is commonly used to set
menu prices in restaurants. Alternatively, pricing methods based on customers’
value perceptions of hospitality products exclude the consideration of costs and
attempt to provide value by offering high quality at low prices (Lewis &
Shoemaker, 1997; Shoemaker et al., 2006).
Furthermore, several price adjustment strategies, such as volume-based, time-
of-purchase discounting or discriminatory pricing, are also commonly used in the
hospitality industry (Kotler, Bowen, & Makens, 2003). Discriminatory pricing is
a method of setting prices at different levels based on the elasticity of demand of
individual market segments. Price differentiations are not sustained by a differ-
ence in costs or quality but rather are the result of the unique characteristics of
individual market segments. Discriminatory pricing methods permit charging
lower prices to price sensitive customers and asking full prices from inelastic
market segments (Kotler et al., 2003). Several basic conditions have to exist to
apply price discrimination successfully. First, various market segments must be
identifiable and the segments must value the services differently. Second, firms
practicing price discrimination should understand their costs very well not only
to maximize revenues but also to maximize profits. Third, a firm that deals in
perishable products must have the ability to sell products in advance according
to fluctuating demands. Finally, price discriminatory approaches must be well
comprehended and accepted by the firm’s guests.
Price discrimination methods have become standard operating procedures for
many hospitality firms. However, discriminatory pricing should always apply
Raab et al. / PRICE-SENSITIVITY MEASUREMENT 95
methods that are beneficial to both the customers and to the hospitality firm
(Kotler et al., 2003). Therefore, firms must always offer sufficient benefits in
exchange for any restrictions and provide sufficient information about how to
obtain price discounts. A popular example of discriminatory pricing is yield
management, which is a pricing approach that involves charging various room
rates to different market segments at the same time (Upchurch, Ellis, & Seo,
2004). Finally, many hospitality firms set their prices by considering guest
demand and costs only as secondary factors; they set prices according to the
“going rates” of their perceived competitors.
Parsa and Njite (2004) showed that the way a price is presented to the con-
sumer also has a significant impact on overall consumer perception of price and
value. An approach that captures guests’ perceptions of price and value is known
as price-sensitivity measurement (PSM). PSM is a powerful technique that
reveals how relationships between price and quality affect customers’ percep-
tions of value (Lewis & Shoemaker, 1997). In addition, PSM data can be com-
bined with activity-based costing (ABC) methods. ABC is a cost-accounting
process that traces overhead costs to individual products and services. When
ABC and PSM methods are combined, the resulting approach is defined as
activity-based pricing (ABP; Daly, 2002). This study contributes to the literature
on restaurant pricing by presenting the first part of a two-part ABP study that
combines market-derived price points with ABC estimates of all restaurant costs
(except income taxes). This study applies PSM methods to establish optimal
price points for a buffet restaurant by adapting the PSM methodologies used by
Lewis and Shoemaker (1997) for the association meeting market.
PSM
In services, price often plays an important role in a consumer’s expectation

of quality. Thus, if price is used as a primary marketing tactic, operators must
take into account at least two roles of price. First, when price acts as a dominant
indicator of quality, the pricing aspect of the marketing mix can be used to
position the product. Alternatively, when price acts as a relative indicator of
quality, it can be used to alter guests’ perceptions of value. A guest’s price–value
relationship usually extends beyond the simple monetary price of a service and
includes other aspects of value, such as search, credence, and experience costs
(Zeithaml et al., 2006).
PSM can be used to investigate how consumer perceptions of value are
affected by the interaction of price and quality. Taco Bell’s value-pricing menu is
an example of the application of PSM. Usually, value pricing is misconstrued as
offering deep discounts, which can lead to a downward spiral of price cutting.
However, when value pricing is based on PSM, value pricing becomes a technique
that actually establishes a balance of price with product or service value (Lewis
& Shoemaker, 1997). PSM was first explored by Gabor and Granger (1966), who
asked retail customers about upper and lower price limits in their minds when
considering a product purchase. They determined that, within certain limits, price
acts as a quality indicator, but not as a purchase barrier; however, although outside
these limits, price may become a barrier to purchase.
The concept of price limits was further developed by Travers (1983), a Dutch
economist who determined the level of consumer price resistance over a range
of prices in relation to customers’ perceptions of value.
The fundamental premise of PSM incorporates two basic goals: to determine
the threshold range in price and to determine the stress price level (Lewis &
Shoemaker, 1997). The threshold range of acceptable prices incorporates both
the lowest price (i.e., the one below which the consumer will question the qual-
ity of the product) and the highest price, above which the consumer feels that
the product or service is too expensive. On the other hand, the price stress range
refers to the difference between the prices points at which an equal number of
customers feel that a product is cheap as think it expensive (Lewis &
Shoemaker, 1997). They also pointed out that PSM is a far more realistic
approach than reference pricing. Reference pricing consists of “the price last
paid, the price most frequently paid, or the average of all prices paid for similar
offerings” (Zeithaml et al., 2006, p. 514). Reference pricing for services can be
confusing in the mind of the consumer and can produce a lack of a specific ref-
erence point and price limits for a service. Next, this study discusses how PSM
can be applied to the restaurant industry, using a Hong Kong buffet restaurant
as the research setting.
METHOD
The research setting for this study was a 200-seat buffet restaurant in
Kowloon, Hong Kong. The restaurant had been losing money and customers; as
a result, management wanted to investigate whether the operation could afford
to cut prices to attract new customers. The restaurant was situated in a hotel in
Kowloon and served breakfast, lunch, and dinner. Lunch and dinner were served
buffet style. Because management felt that the food operations’ loss was attrib-
uted mainly to the dinner meal period, the study was conducted for the dinner
buffet only. The regular price for a dinner buffet was HK$128, and the price for
occasional discounts was HK$99. When management discounted the buffet
price on certain occasions, the restaurant was busy, but it apparently did not
realize any profits.
Given this situation, five research questions were posed in this study:
1. Is there a point at which the dinner buffet price is considered to be cheap?

2. Is there a point at which the dinner buffet price is considered to be expensive?
3. Is there a point at which the dinner buffet price is considered to be too cheap and
quality is questioned?
4. Is there a point at which, no matter what the quality, the dinner buffet price is too
expensive and purchase is beyond consideration?
5. Is there a point at which it will be feasible to sell the dinner buffet at a discount
to attract additional business?
Figure 1
Price Sensitivity Measurement Questionnaire
Q 1. Within the past six months, how many times have you been to any buffet
restaurant, including this one?
Q 2. Within the past six months, how many times have you been to this buffet
restaurant?
Q 3. At what price would you consider this dinner buffet to be so inexpensive that
you would have some doubts about its quality?
Q 4. At what price would you still feel this dinner buffet is a good deal, and you have
no doubts about its quality?
Q 5. At what price would you think that this dinner buffet is kind of expensive, but
still worth buying because of its good quality (e.g., ingredients, freshness,
etc.)?
Q 6. At what price would you feel this dinner buffet is so expensive that it is not
worth purchasing in this restaurant regardless of its good quality?
Q 7. In your opinion, what is the most appropriate price for this kind of dinner
buffet______?
Q 8. Place of Residence:
a) Local Resident ❑ b) Mainlander ❑ c) Macao Resident ❑
d) Overseas Visitor ❑
Q 9. Gender:
a) Male ❑ b) Female ❑
Q 10. Age:
a) 20 or below ❑ b) 21-30 ❑ c) 31-40 ❑
d) 41-50 ❑ e) 51-60 ❑ f) 61 or above ❑
Q 11. Education Level:

a) Primary or below ❑ b) Secondary ❑ c) Tertiary ❑
d) Graduate or above ❑
These research questions and several demographic questions were addressed in

the questionnaire (Figure 1), which was handed out to dinner buffet customers
during a one month period. The study applied a simple random design by asking
every second customer to answer the questionnaire. Customers who answered
received a choice of a free alcoholic beverage as an incentive. Because it was
crucial that the sample of respondents was representative of the target market of
the restaurant and familiar with the buffet dining product, qualifying questions
were asked to determine whether customers had purchased a dinner buffet at least
once before and whether they had frequented the restaurant at least once in the
past. The study was conducted only on days when no discounts were applied.
Respondents were able to choose between Chinese and English versions of the
Table 1
Significant Differences Regarding Age
Survey Item Number F Statistic p Value
Q5: expensive; 196 3.88 .005

but worth it
Q6: expensive; 195 4.58 .001
not worth it
survey. The researchers, management, and a graduate student from a local univer-
sity assisted respondents in filling out the questionnaires properly.
A total of 350 surveys were collected, of which 247 were usable. The
Statistical Package for the Social Sciences (SPSS), Version 11.0, was used to
determine whether data were normally distributed and to identify any nonsensical
responses. SPSS also provided the cumulative distributions necessary to graph the
responses, which are presented as Figures 2 to 5 in the next section of the article.
RESULTS AND DISCUSSION
The results from a descriptive analysis of the respondents’ demographics

data are presented below, which is followed by the results of ANOVA testing.
However, only significant results from the ANOVA are presented in Table 1.
This study used a significance level of 5%, which is appropriate for exploratory
research of this type.
The demographic information in this study revealed that 88.5% were local
residents whereas the rest of the respondents (11.5%) came from China, Macao,
or overseas. Furthermore, 70% of the sample population was male. The respon-
dents’ age was distributed as follows: 14.8% were 20 years and younger, 26.3%
were between 21 and 30 years of age, 29.2% were between 31 and 40 years old,
21.0% were between 41 and 50 years old, and a smaller group (7.7%) was older
than 51 years. With regard to education levels, most of the respondents (66.0%)
had at least achieved a secondary education level, and 18.2% had received
undergraduate degrees. Furthermore, 11.0% of the sample had only a primary
school level of education or below, and a very small percentage (3.3%) had
earned graduate degrees. Overall, this demographic distribution was believed to
be reasonably representative of the typical guests who patronized the restaurant
involved in this study.
The results of the ANOVA indicated that the only difference that existed on
a demographic basis was because of the age variable; there were no significant
differences among the participants on the other three demographic variables.
Subsequently, post hoc tests were run to determine where the differences
between the age groups came from. It turned out that respondents in different
age categories reported differently on only two of the survey questions—Q5
(“At what price would you think that this dinner buffet is kind of expensive, but
still worth buying because of its good quality [e.g., ingredients, freshness,
etc.]?”) and Q6 (“At what price would you feel this dinner buffet is so expensive
that it is not worth purchasing in this restaurant, regardless of its good quality?”).
In both cases, the p values for these questions were statistically significant, as
shown in the last column of Table 1. These two questions involved the respon-
dents’ perceptions about the trade-off between price and quality of the buffet.
Those respondents who were 20 years old and younger had a significantly
different opinion about these two questions than did the portion of the sample
that was either 31 to 40 years old or older than 51 years of age. Furthermore,
there was also a significant difference between the 31 to 40 and the older than
51 age groups on these two questions. The 31 to 40 age group displayed an accep-
tance for a higher price level in terms of what was acceptable as a maximum
price limit, whereas the older group apparently did not.
Four graphs were plotted from the data, as recommended by Lewis and
Shoemaker (1997). All prices displayed in the four graphs are expressed in
Hong Kong dollars and were rounded up or down to the nearest whole dollar
value. Figure 2 plots the cumulative distributions of responses for “cheap”
(Question 4) and “expensive” (Question 5) from the guest survey. The intersec-
tion of the two graphs (at approximately HK$130) represents the indifference
price (IDP), which is the pricing point at which an equal amount of customers
feel that the price is as cheap as it is expensive (Lewis & Shoemaker, 1997).
In addition, an IDP percentage was established, which is the subsequent
cumulative distribution percentage at the IDP. A low IDP percentage indicates a
high level of price consciousness, whereas a high IDP indicates a lot of vari-
ability in the data with regard to price (Lewis & Shoemaker, 1997). The IDP
percentage in this study is approximately 15%, which indicates a fairly “high”
level of price consciousness by dinner buffet guests.
Figure 3 depicts the optimal pricing point (OPP), or the point at which the
purchase resistance is at its lowest. It is plotted by combining the cumulative
distributions of “too cheap” (Question 3) and “too expensive” (Question 6)
responses from guests. The OPP for this sample was HK$139. The OPP is posi-
tioned to the right of the indifference point, which may indicate that there is less
price consciousness in this market than first assumed because the OPP is HK$9
higher than the IDP.
Figure 4 combines the cumulative distribution of guest responses to Questions
3 to 6 in the survey to determine whether the respondents are experiencing
“stress” over the price they paid for the buffet. In general, it can be assumed that
the closer the OPP and the IDP are, the lower the price consciousness of the
respondents is. The results illustrate that the indifference point (HK$130) is
lower than the OPP (HK$139). These results indicate that “stress” levels over
price are low because the price that guests are likely to pay for a dinner buffet is
somewhat higher than the indifference point. The results suggest that price
sensitivity for dinner buffet guests is relatively low at this establishment.
According to Lewis and Shoemaker (1997), the basic idea of the PSM tech-
nique is the reinterpretation of the data in a way that reverses the distribution of
Figure 2
The Cumulative Distributions of Responses for “Cheap” and “Expensive” With
the Intersection of the Two Graphs Representing the Indifference Price
Cheap
Expensive
100%
90%
80%
70%
Cumulative Distribution
60%
50%
40%
30%
Indifference Price
20% = $130
10%
0%
0 20 40 60 80 100 120 140 160 180 200
Price (Hong Kong $)
“cheap” and “expensive” to be portrayed as “not expensive” and “not cheap.”

The fourth plot (shown as Figure 5) depicts this idea and establishes a range of
acceptable prices by combining the first three plots (Figures 2, 3, and 4). Figure
5 combines the reversed cumulative distribution of “cheap” and “expensive” from
Figure 2 with the distributions of “too cheap” and “too expensive” from Figure 3.
The range of acceptable prices is the distance between the points of marginal
cheapness and marginal expensiveness; the larger the range, the less price
sensitive customers are. Figure 5 shows that the range of acceptable prices is
fairly “wide” at HK$48; thus, the point of marginal cheapness was found to be
HK$100, and the point of marginal expensiveness was HK$148. This analysis
suggests that the buffet dinner guests are not very price sensitive.
IMPLICATIONS AND CONCLUSIONS
The results of the study show that the PSM technique can be successfully
applied to a restaurant. Thus, it supports and extends the prior work of Lewis
and Shoemaker (1997). This study was able to establish an indifference point,
Figure 3
The Cumulative Distributions of Responses for “Too Cheap” and “Too Expensive”
With an Intersection of the Two Graphs Representing the Optimal Pricing Point
Too Cheap Too Expensive
100%
90%
80%
70%
60%
50%
40%
30%
20% Optimal Pricing Point

= $139
10%
0%
0 20 40 60 80 100 120 140 160 180 200
Price (Hong Kong $)
an optimum pricing point, a stress level, and a range of acceptable prices, all of
which serve as indicators for levels of price sensitivity in a market. Therefore,
the study provided management with a number of insights about the restaurant’s
pricing structure. First, the price at which customers are least resistant to pur-
chase the dinner buffet is HK$139, which is HK$11 higher than the regular buf-
fet price of HK$128. Second, the point of marginal cheapness was determined
to be is HK$100. Thus, it can be assumed that dinner buffet guests perceive the
price range between HK$100 and HK$138.99 as cheap but without major
doubts about food quality. On the other hand, the point of marginal expensive-
ness was established at HK$148, indicating that the price range from HK$139
to HK$148 is considered expensive by customers, but they still perceive that it
is worth it for the quality they receive. In addition, a buffet price above HK$148
is considered to be too expensive and beyond their purchase consideration.
Furthermore, dinner buffet guests indicated that a dinner buffet price below
HK$100 would introduce possible doubts about its quality.
Taken together, the above information allowed restaurant management to
draw some useful implications for pricing the dinner menu. For instance, several
indicators were identified that determine price sensitivity in this restaurant. The
degree of price sensitivity depends on the interplay of stress level and the range
of acceptable prices. This study found a low stress level (i.e., an OPP close to
the indifference point) along with a large acceptable price range (HK$48),
Figure 4
Combined Cumulative Distributions of Responses for “Cheap” and
“Expensive” and for “Too Cheap” and “Too Expensive”; The Intersections
Between the Four Graphs Establish a Stress Price Range—The Difference
Between the Indifference Price and the Optimal Pricing Point
100%
Too Cheap
90% Too Expensive
80% Cheap
Expensive
Cumulative Percentage
70%
60%
50%
40%
30%
20% Indifference Price Optimal Pricing Point

= $130 = $139
10%
0%
0 20 40 60 80 100 120 140 160 180 200
Stress Price Range Price (Hong Kong $)
= $9
which suggests that the market overall is not very price sensitive at this estab-
lishment. To minimize resistance to purchase because of price, the recom-
mended price for the dinner buffet would have to fall within the threshold limits.
It was established that the price where the resistance to purchase was the lowest
was HK$139, which is higher than the price actually charged (HK$128); thus,
management appears to be able to raise menu prices without encouraging sub-
stantial customer defections.
On the other hand, because of the low sensitivity to price, the restaurant has
some measure of pricing flexibility within this market. An excessive emphasis on
price as the component of the marketing mix would be a wasted effort and might
damage future marketing efforts. This information provides a framework within
which the management can frame an advertising campaign. For example, the
restaurant’s existing promotional efforts to advertise the dinner buffet of HK$99
were detrimental, as the threshold of marginal cheapness far exceeds this price
point, which implies that potential customers may feel that the quality of the
buffet may be so questionable that they avoid purchasing it. On the other hand,
customers attracted by the promotion may purchase only the buffet for the promo-
tional price, and they might not return when they have to pay the regular price.
Ironically, regular customers will gladly purchase the buffet and only spend
HK$99 when they were perfectly willing to spend the regular (higher) price.
Figure 5
Combined Cumulative Distributions of Responses for “Cheap” and “Expensive”
and for “Too Cheap” and “Too Expensive”; The Intersections Between the
Four Graphs Establish a Stress Price Range—The Difference Between
the Indifference Price and the Optimal Pricing Point
100%
Not Cheap
90%
Too Cheap
80% Too
Expensive
70% Not
Expensive
60%
50%
40%
Point of Marginal Expensiveness
Point of Marginal Cheapness
30% = $148
= $100
20%
10%
0%
0 20 40 60 80 100 120 140 160 180 200
Range of acceptable
prices = $48 Price (Hong Kong $)
The restaurant’s regular customers apparently do not perceive the price of

HK$128 for the dinner buffet as being too high. In addition, it could be the case
that loyal customers do not patronize the restaurant on very busy days when
promotions are run because they may want to avoid the crowds. Therefore, the
restaurant should concentrate on identifying and offering cues that influence the
guests’ perception of the buffet’s quality, given the customers’ expectations
about the range of acceptable prices.
The ANOVA test revealed only minor differences with regard to age of the
restaurant’s cliental. No differences were observed regarding the other major
demographic variables (education, gender, and place of residence). From man-
agement’s perspective the differences between the different age groups deserve
some attention, as management promotional efforts, such as price discounting,
could be geared toward the youngest and the oldest age groups, which appear to
be more price sensitive.
Overall, this study was able to demonstrate the utility of the PSM technique
and how it can be used to identify the price sensitivity of the target market for a
restaurant. However, even though the PSM method appears to be very useful in
this case, there are some key limitations of the study that must be noted.
First, the study results cannot be widely generalized because it was conducted
at a single Hong Kong–based restaurant, where guests’ perceptions of price and
value are “culture based and inherently localized in nature. Furthermore,

although the study applied a simple random design for data collection, it never-
theless used a convenience sampling procedure, so the study’s results are not
generalizable.
Second, the study failed to test price sensitivity levels at different customer
loyalty levels. This limitation suggests that more research that tests price sensi-
tivity at different customer loyalty levels is needed. Also, guests’ price sensitivity
should be investigated to see whether it differs according to key demographic vari-
ables. In addition, it would be useful to conduct a study for all meal periods of a
restaurant and to perform studies in similar restaurants to compare price sensitivity
levels between similar target markets. Finally, the PSM technique should also be
tested in other hospitality settings, such as spas, casinos, and hotels, to determine
if it also provides useful pricing insights in these settings.
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Submitted January 29, 2007

Final Revision Submitted June 20, 2007
Accepted September 27, 2007
Refereed Anonymously
Carola Raab, PhD (e-mail: raab@unlv.nevada.edu), is assistant professor in the Tourism &
Convention Department of William F. Harrah College of Hotel Administration at the
University of Nevada, Las Vegas in Las Vegas, NV. Karl Mayer, PhD (e-mail: karl.mayer@
unlv.edu), is associate professor in Tourism & Convention Department of William F. Harrah
College of Hotel Administration at the University of Nevada, Las Vegas in Las Vegas,
NV. Yen-Soon Kim, PhD (e-mail: Yen-Soon.Kim@unlv.edu), is assistant professor in
Food & Beverage Department of William F. Harrah College of Hotel Administration at
the University of Nevada, Las Vegas in Las Vegas, NV. Stowe Shoemaker, PhD (e-mail:
sshoemak@central.uh.edu), is associate dean of research and Donald Hubbs Professorship
of Conrad N. Hilton College of Hotel and Restaurant Management at the University of
Houston in Houston, TX.

Price Sensitivity Measurement A Tool For

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Price Sensitivity Measurement A Tool For

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Journal of Hospitality & Tourism

Price-Sensitivity Measurement: a Tool for Restaurant Menu Pricing

The online version of this article can be found at:

International Council on Hotel, Restaurant, and Institutional Education

Email Alerts: http://jht.sagepub.com/cgi/alerts

KEYWORDS: restaurant; profitability; price-sensitivity measurement; price; value

Establishing effective pricing strategies is critical to marketing managers.

TYPES OF PRICING APPLIED IN THE HOSPITALITY INDUSTRY

In services, price often plays an important role in a consumer’s expectation

1. Is there a point at which the dinner buffet price is considered to be cheap?

Q 11. Education Level:

These research questions and several demographic questions were addressed in

Survey Item Number F Statistic p Value

Q5: expensive; 196 3.88 .005

RESULTS AND DISCUSSION

The results from a descriptive analysis of the respondents’ demographics

“cheap” and “expensive” to be portrayed as “not expensive” and “not cheap.”

IMPLICATIONS AND CONCLUSIONS

Too Cheap Too Expensive

20% Optimal Pricing Point

20% Indifference Price Optimal Pricing Point

The restaurant’s regular customers apparently do not perceive the price of

value are “culture based and inherently localized in nature. Furthermore,

Abbey, J. (1983). Is discounting the answer to declining occupancies? International

Submitted January 29, 2007

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