How about a tip?
With the widespread use of digital card readers, the prompts are now commonplace in a wide range of sales scenarios, from placing an order for coffee to making a payment for a packaged sandwich. Although automated requests for gratuities continue to cause confusion and complaints, new data indicates that customers easily ignore them.
As the economy recovered from the pandemic, many began to notice what is now known as “tippflation.” When patrons started going out to bars, restaurants, and stores again, they encountered what seemed like a new set of social norms. As a result, they started leaving tips more frequently, despite the fact that many of them complained loudly about it. However, those increases were slight and not widespread, and it now appears that some of the generosity of shoppers is waning.
According to a Pew Research Center survey conducted this month, 72% of American adults believe that tipping is now expected in more places than it was five years ago. However, that is about the only consensus that consumers have regarding tipping.
Many find it annoying when the tablets they are given suggest a certain amount for gratuity; according to Pew, 40% of respondents are against the prompts and only 24% are in favor of them.
On the other hand, when consumers are left to their own devices, they approach the decision of whether or not to offer an additional charge and when to do so. Just 61% of respondents said they always or frequently tip their taxi or ride-hailing drivers, compared to 78% who told Pew they always or often tip for haircuts. Furthermore, just 1 in 4 said they regularly tip baristas.
Even whether leaving a tip is more of a choice or a requirement, Americans cannot agree on this: 21% of respondents hold the first view, 29% the second, and 49% fall somewhere in the mushy middle, stating it depends on the circumstances.
According to Deidre Popovich, a professor of marketing and supply chain management at Texas Tech University with expertise in consumer behavior, it is understandable why consumers are feeling so split and irritated.
“I believe that with these automated payment systems, there are simply too many prompts in the market right now,” she remarked. “When we can assess the service, we are accustomed to leaving a tip, but in many of these circumstances, the service is unrelated to the tip. How do we proceed?
There has been some shift in Americans’ tendencies toward leaving gratuities.
In February, news reports claimed that tipping was on the rise. This could be due to the positive sentiment toward service workers that permeated the industry at the time, as expanding point-of-sale systems made it simpler for establishments to request tips.
The well-known point-of-sale platform maker Square, a payments processor, reported that its software has increased tip and overtime pay for its retail and restaurant employees. However, the business pointed out that the increases have coincided with larger pay increases and higher restaurant menu prices.
“Over the past few years, we’ve definitely noticed a slight increase in tipping,” Square’s research lead Ara Kharazian stated. However, I believe it to be much more modest than most people realize, and it is beginning to slow down significantly.
For instance, in October, restaurant employees who used Square made an average of $17.67 per hour, with a base pay of $13.80. The company’s payroll index shows that the $3.87 difference, which primarily represents tips, is only roughly 60 cents more than it was in October 2021.
Customers may be growing more accustomed to ignoring tip prompts as they become accustomed to seeing them in more locations on a regular basis. This is especially likely given that they have had to deal with sticker shock related to inflation for a number of goods and services over the past year.
Customers only add tips to 1.3% of in-store transactions at the retailers that have activated Lightspeed’s tipping feature, according to the other POS provider.
Certain settings have seen tip levels remain constant or even rise, while others are seeing a decrease.
According to Lightspeed, during the second quarter of this year, the median tip at all kinds of restaurants that use its service climbed from 16.9% in the previous year to 17.3%. However, since last year, tip percentages for online orders and delivery—where customers can choose to tip in private without service personnel present—have decreased from roughly 8.8% to 8.1%.
The average tips at full-service restaurants fell from 19.7% in the first quarter of this year to 19.4% in the second, according to a September report from Toast, another point-of-sale platform. This is the lowest level for that category since the pandemic began. Over the same period, gratuities at quick-service restaurants that use Toast barely increased, from 16.0% to 16.1%.
This year, a Bank rate survey discovered that tipping frequency has essentially continued a multiyear downward trend. The percentage of Americans who claim to always tip in service-related transactions, such as food delivery or hotel housekeeping, has been declining over time. This is also true for sit-down restaurants, where the percentage of patrons who said they always left a tip dropped from 75% in 2021 to 65% this spring.
Alternative approaches are being explored by certain businesses to encourage tipping. This month, DoorDash announced on its blog that it was experimenting with an in-app pop-up in the US and Canada to remind customers using its delivery service to tip rather than risk having to wait longer.
The test prompt says, “Orders without a tip might take longer to get delivered.” “Are you certain you want to go on?”
