The point at which a tip is requested from a customer not only effects the likelihood a customer will tip, but also the amount of the tip, as well as the level of satisfaction the customer experiences. These ideas are explored in, “Feeling Manipulated: How Tip Request Sequence Impacts Customers and Service Providers,” a new paper published in the Journal of Service Research.
The paper is based on four studies conducted by Lundquist College of Business PhD candidate Nathan Warren, Robert P. Booth Associate Professor of Marketing and Research Scholar Hong Yuan, and University of Richmond Assistant Professor of Marketing Sarah Hanson.
With the rise of mobile payment options like the point of sale credit and debit card reader Square, the question of when best to request a tip is increasingly salient. Using systems such as these mean tips are most often requested at the beginning of a transaction, before services are rendered. The researchers wondered, could this have an effect on customers’ satisfaction or the amount customers are tipping?
To find out, Warren and his colleagues worked with a restaurant group on the East Coast. The group offered the same menu and even shared many of the same employees at two separate locations: the perfect environment for the trio to test their hypothesis.
“We collected their data and compared the two locations, one that asked for tips after service, and one that asked for tips before,” Warren said. “We found they were making more money if they were asking for tips after service.”
But that wasn’t all the researchers found. After collecting the data from the two restaurant locations, they returned to the lab to run an experiment. In the lab, subjects were presented with a variety of customer service scenarios. Again, tips were sometimes requested before service, and other times, they were requested after service.
Subjects were then asked whether or not they would leave a tip and if so, how much would they would tip. They were also asked how likely they were to go back to the business and how well they would rate the customer service experience on the consumer review website Yelp.
Findings showed that requesting a tip too early not only turns people off to tipping but makes customers more likely to leave a lower rating for the business. In this way, the question of when to request a tip is an important issue for both service industry professionals who make a large portion of their income through tips as well as business owners.
“The business itself is directly interested in whether people will come back, whether people will give a good rating.” Warren said. “They’re secondarily interested in tips because businesses have a hard time recruiting and maintaining their workforce. Higher tips often mean your employees stay with the job longer.”
Researchers also found customers worried that no tip or a lower than average tip requested at the beginning of the service could negatively affect the quality of their food, Warren added.
“People felt the establishment was being unfair by asking people to tip before doing anything for them,” he said. “It switches the narrative from a tip as a gratuity—an expression of gratitude—to a feeling like you have to tip. It takes the joy out of it.”
While systems like Square do allow some customization for how much of a tip is requested, it’s up to the business in question to adjust workflow so that tips can reasonably be requested after service is complete.
Helping businesses rethink their policies is next for Warren and his colleagues.
“We’re working with businesses in Eugene to figure out if these point of sale systems could be better used to make sure that they’re both making money in tips and that their customers are satisfied,” he said.