Low Prices Signal Low-Quality

Shaan shares a story about how raising prices and changing menu descriptions dramatically improved his online sushi restaurant business.

"We started an online virtual restaurant before DoorDash and Uber Eats. We created a website where people would order sushi, we'd make it in a commissary kitchen, and deliver it in under twenty minutes.

We met with Dan Ariely, a behavioral economist who wrote 'Predictably Irrational.' Normally companies pay him six or seven figure contracts to consult, but he was willing to meet with us because we were Duke students and he taught there.

We told him we wanted to drive more sales, and he asked to see our menu. After looking at it, he said, 'You want to make more money? Raise your prices.' We were confused because our whole pitch was making sushi more accessible and affordable. We even won a business plan competition with that idea.

Dan explained, 'When somebody looks at this, they just see cheap sushi. And guess what people don't want? The worst sushi.'

Since we were an online restaurant, we could easily test different approaches. We weren't sophisticated enough to call it A/B testing, but we would show menu A one day and menu B the next, then compare results.

When we raised prices, not only did revenue go up, but conversion rate went up too. We converted more customers and made more money per customer.

Dan also suggested creating our own language around our products, like the wine industry does. We tested three models of language. Instead of simple descriptions like 'Philadelphia roll: salmon and cream cheese wrapped up, tastes great,' we used more elaborate language like 'fresh, never frozen, Atlantic hand-caught salmon.'

Same roll, same salmon, more words - and conversion rate went up again. We kept doing this with the whole menu and saw dramatic improvements. It wasn't just a 10% improvement - we got 2x or 3x improvements by stacking these changes on top of each other."