When It Comes to Pricing, Language Matters

Sunday, January 15, 2017

When it Comes To Pricing, Language Matters

I recently found myself dining at an unfamiliar restaurant. What began as a pleasant outing soon took a turn for the worse, my blood pressure rising faster than the national debt.


It wasn't due to the food or the atmosphere. Both proved equally pleasant. The source of my angst was squarely centered upon the waiter's misuse of the English language. As my fellow diners and I perused the menus, the waiter dropped by and asked us to my horror, "Is tap water OK?".

Now, don't get me wrong. I've often described myself as cheap financially conservative and gladly offered to buy the first round for the entire table. Nevertheless, my act of generosity hid my disgust for the waiter's clumsy, and quite frankly, inappropriate question. It wasn't a matter of what he asked, but how he had asked it. This waiter had unknowingly presented us with a seldom-used business technique known as the downsell. The downsell is essentially the opposite of the far more common upsell - a technique that encourages customers to buy more expensive items in order to increase the vendor's profits.

For some reason, the waiter almost appeared to be pushing the tap water (a free option) rather than the restaurant's more expensive alternatives. Not only did his phrasing have the potential to significantly reduce the firm's income, but his own income as well. After all, the vast majority of his pay is derived from tips that are based upon the price of goods sold. That's why minimum wages for waiters tend to be lower than minimum statutory wages for other types of employees.

While some may believe that such quibbles with language might not add up - and I assure you that they do - a very influential group recently demonstrated that it agrees with me. I'm speaking of course about the Supreme Court of the United States. The group recently agreed to hear an appeal of Expressions Hair Design v. Schneiderman a case that made national headlines pits freedom of speech against requirement to describe a difference in pricing as a discount rather than as a surcharge. Apparently, ten states ban vendors from tacking on surcharges for paying bills via credit card, but each allows vendors to provide a discount to customers who agree to pay with cash. No matter the choice of wording (discount or surcharge), customers would wind up paying the exact same rates.

Some might wonder why the highest court in the land is spending its time acting as a pricing language referee, but I don't. Tiny changes in language can result in big changes in consumer behavior, because humans are not rational creatures.

Interestingly, the Supreme Court continues to remain oddly silent on another use of the English language in pricing: unlimited. Perhaps it will take the matter up next year.