The rise of digital tipping systems is changing the way customers tip. From point-of-sale devices held by employees to countertop screens that display your selection, these systems can make customers feel scrutinized. Marketing professors Sara Hanson and Nathan B.
Warren conducted a study to find out how customers respond to this “tip surveillance.” They analyzed 36,000 transactions and did four experiments with over 1,100 participants. They compared tipping setups with less privacy to those with more privacy. The study found that customers who felt watched while tipping were less likely to return or recommend a business.
Privacy made customers feel more generous and in control of their decisions. Feeling scrutinized led to resentment and reduced loyalty. Tipping isn’t entirely voluntary – it’s often seen as an expectation.
When customers feel pressured, they lose the sense of control that makes tipping a positive experience. Digital tipping can streamline transactions, but it can also contribute to “tipflation.” If companies want customers to keep coming back, they should give customers privacy to tip.
Impact of tipping privacy on loyalty
The study didn’t find a straightforward relationship between tipping privacy and tip amounts. Privacy empowers customers to tip less if they choose, but it often encourages them to feel more generous. This means customers tend to tip similar amounts whether they have privacy or not.
For companies, striking the right balance between giving customers control and fostering generosity is crucial. A business that trains its employees to give customers privacy to tip – and pays those employees fairly – will likely develop a better reputation and a more loyal customer base. Tipping can be a feel-good experience, enhancing customer satisfaction.
It can also be a source of stress. Digital technology is expanding the range of services for which tipping is expected. As businesses, customers, and policymakers debate how best to integrate digital tipping into our world, the research shows the importance of thinking holistically.
Customers, workers, businesses, and society should consider creating a system of tipping that protects workers’ rights and dignity while guaranteeing fair pay. This system should also allow customers and business owners to reward employees for providing excellent service.
