In the previous post, I argued this:
When customers don’t know much about a menu item—its ingredients, cooking method, or actual cost—they stop analyzing details and instead rely on the higher-level category the dish reminds them of. Price acceptance becomes emotional, not rational.
[See:“Why Do Things Sell Better When Customers Don’t Know Much?”]
1. From Pork Cutlet to Jägerschnitzel
I noticed something interesting at German-Style Restaurant in Seoul.
- Jägerschnitzel: $27–30
- Basic pork cutlet: $15–20 (Casual Korean Dining)
In reality, both dishes often share a similar base. But once you call it “Jägerschnitzel”, and frame it with a touch of German tradition, it suddenly feels more premium than:
“Pork cutlet with creamy mushroom gravy.”
Same meat. Different category. Different emotional response. That’s pricing psychology in action.
2. Generalizing the Idea: Emotional Pricing
This post takes that idea one step further.
My focus here is emotional pricing—how people are more willing to accept higher prices for things they like, but don’t fully understand.
Unfamiliar names. Foreign brand flavors. Cultural distance. All of these reduce rational scrutiny and increase emotional acceptance.
3. Why Price Increases Matter in Pub Operations
Behavioral economist Richard Thaler introduced the concept of mental accounting.
His core insight: People spend “found money” easily, but are cautious with money they feel emotionally attached to.
Let’s translate this into a small business mindset.
(1) How Owners Think About Money
Every month, we deal with fixed costs: Rent, Utilities, Wages. And they keep rising. That forces us into planned, rational thinking. For example:
“We’re launching a new fried chicken menu. Oil usage will increase. We might need a grease filter machine. We need to boost revenue and reinvest.”
This is logical. Goal-oriented. Predictable.
(2) What Happens With Unexpected Money
Now compare that to unexpected income—like a government grant. During COVID, I used part of a relief payment to: Pay rent (rational choice), Buy a game item (completely irrational).
Why? Because that money wasn’t emotionally tied to a clear operational plan. It felt separate. Disposable. That’s mental accounting.
(3) What This Means for Price Increases
So when we talk about raising prices, it’s not about greed. When we raise prices, our brain implicitly assumes that the extra profit will be reinvested back into the business. That assumption is mental accounting at work. It’s the same reason money earned by selling items in an online game often disappears on more in-game purchases—or a drink later that night. That money doesn’t feel “real” or tied to long-term goals. This is why learning how to raise prices matters. The margin generated by raising prices is used for business operations and reinvestment. Money obtained for free is not like that. It determines long-term survival.
4. Korean Fried Chicken vs. Five Guys in Korea
(1) The Fried Chicken Backlash
In Korea, a major fried chicken chain—BBQ Chicken—sparked outrage when its CEO said:
“30,000 KRW ($22) for fried chicken is still cheap.”
People exploded. The government stepped in. The company was eventually audited. Why such backlash? Because Koreans:
- Love fried chicken
- Know the ingredients
- Know the cost of raw chicken
- Even cook it at home
So when prices rise, customers switch to rational analysis: “That doesn’t add up.” Emotion disappears. It becomes a math problem.
(2) Why Five Guys Was Different
Now look at Five Guys entering Korea. Crowds lined up. Some even resold burgers online. Was the burger objectively special? Not really. Korea already has:
- McDonald’s
- Burger King
- KFC
- Shake Shack
- Dozens of gourmet burger shops
So why the hype? Because Five Guys isn’t just a burger. It’s America. It’s Obama’s Burger. Someplace exotic. That foreign authenticity created emotional distance. Customers couldn’t easily compare costs.
Even though:
- Five Guys is more expensive in Korea than in the U.S.
- Korea’s GDP is significantly lower
People still paid. Even after price hikes, the lines stayed. The same thing happened with McDonald’s and Shake Shack. But once you strip away the branding, it’s just a burger. The sense of mystery doesn’t last long. Within a few months, the lines disappear.
Core Insight
When people understand a product too well, price increases trigger resistance. When they don’t fully understand it—but like it— emotion takes over. That’s the hidden engine behind emotional pricing.
Japan vs. the U.S.: Omakase Pricing
Let’s look at one last example: sushi omakase. In Tokyo, lunch omakase often starts around $20–30.
In the U.S., lunch is closer to $70–80, and dinner easily goes $150+. Even after adjusting for income differences, that gap is massive.
Why does it exist? Because Japanese customers understand sushi. They can judge:
- Fish quality
- Freshness
- Knife work
- Handling and aging
If the price doesn’t make sense, they simply walk away. In contrast, many Americans experience sushi as: Exotic, Artistic, Almost mystical. They’re less equipped to critique it technically, so they respond emotionally instead. Add a performance element—the chef’s gestures, explanations, atmosphere—and a premium feels justified.
Summary
These price gaps aren’t just about supply and demand. The real story begins at the menu table. When customers don’t fully understand a dish—but associate it with something positive—they stop calculating and start trusting their gut.
That’s the moment pricing shifts from logic-driven to emotion-driven.
Conclusion
Across cultures, the pattern is consistent. When people: Don’t fully understand a product But feel good about it, They’re more willing to accept higher prices. With no clear benchmark to judge against, they rely on emotion, association, and branding. That’s why, in Part 1, I argued that naming matters.
A good dish name connects to something:
- Higher-level
- Slightly vague
- Positively charged
Not something customers can easily dissect and compare
Limitations
This strategy isn’t universal. It works best for: Small pubs, Independent restaurants. In large, high-traffic venues, the opposite is true. Customers make snap decisions. Confusion slows flow. In those environments: Simple names, Fast turnover work better. And in fine dining? Explanation is the luxury. The logic flips completely.
Which means: 👉 a different strategy is required.
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