Don’t tell people how much to tip
Suggested gratuity amounts backfire. They don’t increase tips, and in experiments made people feel 8% worse about the company.
Thomas McKinlay
May 30, 2023
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📝 Intro
Many businesses give suggestions on how much customers should tip workers, for example, by printing it on a restaurant’s receipt.
The goal is usually to speed up the payment process, and help workers get more tips.
But do they actually work? And what effect do they have on your business?
P.S.: If you do want to increase gratuity amounts, turn tipping into a choice between two fun and ‘controversial’ options, such as “Cats or Dogs?”. People can tip in the jar of their choice, and will give more.
Previous insight: Price placebos are weaker than we thought (more insights here)
Suggested tip amounts backfire
Channels: Customer Service | Customer Experience | Reviews
For: B2C
Research date: February 2023
📈 Recommendation
Don’t include suggested tipping amounts on your receipts (e.g. $21.36 for 15% gratuity, $28.48 for 20% gratuity).
They make customers dislike your brand and less likely to return or recommend you. They also don’t improve the gratuity that customers leave, and actually reduce it if the service is bad.
🎓 Findings
People liked a restaurant less, and were less likely to return, recommend it, or leave a positive review if their bill had a suggested tip amount.
As part of a series of 6 experiments, researchers found that adding a suggested tip amount on a restaurant bill:
Reduced by 8% how much people rated the restaurant
Did not change the amount received in tips, unless the service was bad - then tips decreased
The negative effect disappears:
When a message is added on the receipt saying the suggested tip amounts are there for the customer’s convenience
With wealthy customers
For frequent customers
🧠 Why it works
We like to have freedom in decisions - this is especially true with tipping.
When a suggested tip amount is shown, we feel our freedom of choice is threatened. This also happens with promotions when we have to do a task before such as completing a questionnaire, and are denied a product return. The effect is known as reactance.
Because we feel our freedom to choose the amount we’d like to tip is threatened, we dislike the brand that causes this.
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✋ Limitations
The research only looked at consumers in the US, where the culture of tipping is prevalent. Including suggested tip amounts in countries where tipping is less common might have a different effect. For example, it could lead to even more negative opinions - if people weren’t planning on tipping in the first place - or could be taken positively, as a reminder to tip.
The experiments were at restaurants and a dry cleaner. The effect would probably carry into other contexts such as barber shops or taxis - but may be very different in contexts in which people would not expect to have to tip (e.g. a movie theater). In the latter case, the negative effect may be even stronger.
While this study didn’t look at online transactions, other research found that tipping guidelines in digital payments also reduce customer satisfaction.
🏢 Companies using this
Many restaurants, coffee shops, and dry cleaners do now include a suggested tip amount on their receipts. A few include a message that the suggestion is for the customer’s convenience.
From Ubereats to Doordash, displaying suggested tip amounts has emerged as a standard in food delivery apps. This may backfire.
Many restaurant POS systems, including Square offer the option to include tip suggestions on receipts. Tech company RoboJUICE, which makes robots that can make smoothies and other food and drink items even include suggested tip amounts for orders made by their robots (though tips are intended for human employees of the restaurants).
Digital payment terminals in stores often show automatic tip amounts on the screen.
Digital POS service Clover includes customized suggested tipping amounts on their checkout screens, with options for “No Tip” or a custom amount.
⚡ Steps to implement
If you don’t include suggested tip amounts in your receipt, keep it that way.
If you still want to give suggested amount, include a short message under the suggested tip amount saying that it’s included for the convenience of the customer
🔍 Study type
Online experiments and field experiment.
📖 Research
Don’t tell me how much to tip: The influence of gratuity guidelines on consumers’ favorability of the brand. Journal of Business Research (February 2023)
🏫 Researchers
Frank G. Cabano. College of Business Administration, University of Texas El Paso.
Amin Attari. University of Tehran.
Remember: This is a new scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.
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