I recently dined at a restaurant in Southern California that, on the receipt, included in small font what 15% of the bill was, as a guide for tipping. I’ve never seen this done before. It was helpful.
But they’re leaving money on the table. If I ran a restaurant, on each tab I’d include a "Tip Guide" suggestion with three percentages:
15%
17%
20%
If most of your patrons usually tip 15% (the standard in restaurants in the U.S.), by making 15% the lowest of three, more will choose 17%. Persuasion research shows that people tend to choose the middle of three options and are heavily influenced by relativity — ie, what a number/option is relative to other numbers/options.
Naturally, this is a concept not limited to restaurant tabs. In any kind of negotiation, framing your desired outcome in the context of other choices is key.
Is the service truly worthy of this extra money?
It was actually 15, 20 or 25% at the bottom of the receipt… so Kazama usually gets an even bigger tip.
I have seen this on a number of restaurant bills, usually presenting 10-15-20 or 15-20-25 breakdowns. It is pretty useful. Given that most people will pick the middle or more moderate option most of the time when given three choices, I wonder if restaurants using a 15-20-25 guide see average higher tips than 10-15-20.
I saw exactly what you describe here when I got my credit card bill last night at a bar. Very nice to have.
LP, I bet they do. My gut says {15%, 25%, 30%} would be the optimal combination, but I’d test them to see.
Y’all are solving to maximize short-term tips.
How would this manipulation affect mid- and long-term sales?
If I quit going to the restaurant because a) my billing statement always seems to show a higher cost than similar competition; or, b) I’ve seen enough of this technique and resent your reaching deeper into my pocket; or, c) manifold other reasons related to the tipping concept; your sales–and tips–fall.
17% would strike me as a goofy calculation to put on the check, and at 30%, you’re clearly pandering.
10-15-20 might be a value-added service. I don’t have to do multiplication after martinis. If the service is so great I want to leave more, I can work addition or rounding on the figures you provide.
Foxmarks, that may be true (I’m totally in favor of focusing on long-term potential), but I think you’re assuming people are rational.
They’re not, especially in a tipping situation. Think of all the external factors: people are nervous about getting the math wrong, wondering what other people will think of you when tipping, and the contrast effect of having a relatively high offer (30%) on the receipt. And as we know from social psych, when anxiety is high, people are more susceptible to persuasion.
Coming back to the contrast effect, nonprofits do this very well when they offer three choices — it’s a classic persuasion technique. And if you can test it, you can quickly see what will happen to short-term and long-term sales.
17% might be “goofy” and 30% might be “pandering” (not sure what that means), but the only way to know is to test it.
Btw, Nudge is a great new book that talks about similar things.
This seems unethical to me. Adding those options just to manipulate people into paying more is NOT adding value.
Where does the customer experience fall? Does it matter at all? What if she didn’t like the food or service? How will she hit back?
I think it would be wise to leave it to the customer to tip as she liked. After all the it is an acronym for “To Insure Prompt Service”.
Equity demands offering the customer a choice of discount as well (Say -10,-15,-20% discount if the ambience, service or food sucked).
Ramit, I agree, all sales strategies must be tested. The three-choice technique is well proven in a wide array of circumstances.
30% is pandering because it seems so obvious that you’re trying to manipulate my choice dramatically upward. To me, anyway. Who tips 30%? That’s outside custom in the USA.
I’m not sure I suggest people are rational. The factors which lead to those mid- and long- outcomes are probably not as simple or explicit as I state. Manipulating tips upward, if that also didn’t lead to better average service, should lead to lower sales. The price of a fixed good rises, quantity demanded falls.
The actual micro/personal factors leading to individual choice need not be rational for the general rule of demand to apply in a decent-sized aggregate sample.
Anybody go to national chain restaurants? They’ve probably tested this. What’s on the bill at Applebee’s or Red Lobster?
They do this in NYC cabs, if you pay with your card (how cool is that, to pay a cab with the card on a touchscreen that was displaying your location through GPS just a second ago)
The options are 15%, 20% and 25%. Very quickly, you find yourself picking 20%.
Why are restaurants thinking they need to print this info on the bills?
Do they assume people can no longer do basic maths in their heads?
Could they be _right_?
“leaving money on the table” is a sad set of words… with a wider vision you would say leaving money in the customer’s pocket