Last week there were some interesting surveys circulating about tipping. Tipping, a traditionally ingrained practice in many societies, is lately under the lens of critical scrutiny. A Bankrate survey has recently revealed that 66% of Americans now have a negative view of tipping, a sentiment fueled by a perceived overreliance on gratuities and a barrage of tipping requests. Furthermore, the number of individuals who tip servers has dropped significantly, declining from 77% in 2019 to just 65% in 2023. As more Americans express disapproval of the culture of tipping, I think it’s important to understand what drives this behavior: both the one stated by people and the underlying forces that allowed this (admittedly odd) behavior to persist. Finally, I will try to explain why we see a decline.
This is the first good explanation to the tipping behavior I have seen in US (I moved here 12 months back from London). I have found at some places it is earned and at some it’s downright odd...the individual did not provide me any service. My sense so far is it is driven by the inherent culture of ‘impatience’. In this case it is...the need to be seen to be generous...feels like a shortcut to buy success. I wonder if there is any research on impatience as an economic driver and it’s side effect on mental well being of the society.
From the business’ side, there are stuck in a prisoner’s dilemma. If they don’t offer it, their staff thinks it’s a missed opportunity to earn more. But if they all do it, they put off the end consumer, who is getting asked for tips morning to evening and eventually throws in the towel.
After a year of confusion, I have taken an approach of frugality - if I am going to come back to this outlet or the service has been particularly good, I don’t tip 20%. If the tip is a social norm (like a bar or a restaurant) and the service was barely okay, I tip 10% and everywhere else I think twice (often walk away without tipping). I have been surprised by the expectation/entitlement of the tip and it feels like the businesses are passing their obligation to the consumer to look after their own staff. Or worse still, is the societal capitalist contract starting to breakdown...
I meant impatience to seek status + impatience to be served. I’ve had an old school brought up where I was repeatedly taught - True status is earned, not bought
I would be curious if any research has been done on the design and experience elements of tipping.
One elements that I think about is the move to Digital tipping vs. Cash/coins + Average price of services/good as compared to the tip percentage.
With cash the interaction is very personal and satisfying: You tell the barista to “Keep the change” making you feel directed generous, they say thanks and toss it in the change in the jar which gives a satisfying jingle, and that change constituted 20% of the purchase.
With digital the interaction is awkward: the barista spins around the screen, you are given preset options based off the norms or “other,” the barista avoids eye contact or busies themselves with another tasks so they don’t make you feel awkward, you select one of the presets which is now far greater than the change you would have received and quickly get out of the line.
2) On this point in particular: "Consumers have been trained, basically, not to tip when it comes to rideshare," he said. "But I think it should be the opposite way around. When was the last time you were in a cab, you got out without a tip? So to me, rideshare drivers are getting stiffed on this deal."
I remember when Uber first launched, one of the selling points was precisely that you did not have to tip, so that you knew exactly what you were going to actually be paying for your fare, and could also avoid the social awkwardness around tipping. If ridershare drivers are getting stiffed, it seems to me like the fault lies in Uber and Lyft baiting and switching the consumer (and also probably running out cheap money to subsidize ride costs in order to compete for market share), not consumers deciding to stiff rideshare drivers vs taxis.
This is the first good explanation to the tipping behavior I have seen in US (I moved here 12 months back from London). I have found at some places it is earned and at some it’s downright odd...the individual did not provide me any service. My sense so far is it is driven by the inherent culture of ‘impatience’. In this case it is...the need to be seen to be generous...feels like a shortcut to buy success. I wonder if there is any research on impatience as an economic driver and it’s side effect on mental well being of the society.
From the business’ side, there are stuck in a prisoner’s dilemma. If they don’t offer it, their staff thinks it’s a missed opportunity to earn more. But if they all do it, they put off the end consumer, who is getting asked for tips morning to evening and eventually throws in the towel.
After a year of confusion, I have taken an approach of frugality - if I am going to come back to this outlet or the service has been particularly good, I don’t tip 20%. If the tip is a social norm (like a bar or a restaurant) and the service was barely okay, I tip 10% and everywhere else I think twice (often walk away without tipping). I have been surprised by the expectation/entitlement of the tip and it feels like the businesses are passing their obligation to the consumer to look after their own staff. Or worse still, is the societal capitalist contract starting to breakdown...
Thanks for the response. I am curious why you tie it to impatience (rather than status-seeking)?
I meant impatience to seek status + impatience to be served. I’ve had an old school brought up where I was repeatedly taught - True status is earned, not bought
:)
I would be curious if any research has been done on the design and experience elements of tipping.
One elements that I think about is the move to Digital tipping vs. Cash/coins + Average price of services/good as compared to the tip percentage.
With cash the interaction is very personal and satisfying: You tell the barista to “Keep the change” making you feel directed generous, they say thanks and toss it in the change in the jar which gives a satisfying jingle, and that change constituted 20% of the purchase.
With digital the interaction is awkward: the barista spins around the screen, you are given preset options based off the norms or “other,” the barista avoids eye contact or busies themselves with another tasks so they don’t make you feel awkward, you select one of the presets which is now far greater than the change you would have received and quickly get out of the line.
I am not familiar with such an experiment, but this is a very good point. It will be interesting to convince a chain to run such an experiment.
Hi Gad, been awhile but I've been enjoying all your recent posts! A couple of comments:
1) This is another interested related study on in-app tipping which seems to suggest that higher defaults seems to result in a strict increase in tips with no decrease in customer return or satisfaction: https://www.researchgate.net/publication/341808586_The_Effects_of_Tip_Recommendations_on_Customer_Tipping_Satisfaction_Repatronage_and_Spending Though I am curious to see if it would eventually result in lower *tips*.
2) On this point in particular: "Consumers have been trained, basically, not to tip when it comes to rideshare," he said. "But I think it should be the opposite way around. When was the last time you were in a cab, you got out without a tip? So to me, rideshare drivers are getting stiffed on this deal."
I remember when Uber first launched, one of the selling points was precisely that you did not have to tip, so that you knew exactly what you were going to actually be paying for your fare, and could also avoid the social awkwardness around tipping. If ridershare drivers are getting stiffed, it seems to me like the fault lies in Uber and Lyft baiting and switching the consumer (and also probably running out cheap money to subsidize ride costs in order to compete for market share), not consumers deciding to stiff rideshare drivers vs taxis.