The Effect of Loss Leader Pricing on Restaurant Menus' Product Portfolio Analysis

Abstract Drawing from economic and consumer behavior theories, this study outlines four theoretical reasons for menu item dependency, asserting that the assumption of item independency is violated in menurelated product portfolio analysis. Acase study of actual restaurant figures from two consecutive periods is analyzed. The data demonstrate how one such item dependency, namely loss leader pricing, affects the way in which the performance of several dishes is portrayed by two types of menu engineering models: the traditional, matrix-based approach and the multidimensional menu mix model. The results underscore theneed for a better menu product portfolio model, one that adequately addresses the interdependent nature of restaurants' product portfolio.

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