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RICHMOND, Va. — Is modern technology ruining generosity? In an era where digital payment systems are becoming ubiquitous, the simple act of tipping has transformed from a private moment into what many call “guilt tipping” — a potentially uncomfortable public display that may be influencing both how much we tip and our likelihood of returning to establishments. A new study reveals that when customers feel observed while tipping, they may leave higher tips but are less likely to return to the business or recommend it to others.
The research, conducted by Sara Hanson from the University of Richmond and Nathan B. Warren from BI Norwegian Business School, examines how the rising use of digital point-of-sale (POS) systems – those tablet screens that swivel to face customers – is disrupting traditional tipping norms and potentially harming businesses in unexpected ways.
The phenomenon is significant: Digital tipping is now practiced in over 100 countries, with tips in the United States alone totaling $153.4 billion annually, with $54.2 billion occurring through digital technologies. Many customers report feeling pressure when using these systems, particularly when employees are nearby during the transaction.
“While digital tipping can be convenient, it can also contribute to ‘tipflation‘ – the feeling that tipping expectations have gotten out of hand,” Hanson writes in an article published on The Conversation. “If companies want to make sure customers keep coming back, our research indicates they would do well to give customers privacy to tip.”
The study began with a real-world experiment at a local brewpub in the United States that used two different types of POS systems: a countertop system where customers could tip with relative privacy and a handheld system where employees stood close by during the transaction. The researchers analyzed 36,888 transactions from January 2021 to July 2022, providing robust data about how different payment scenarios affected both tipping behavior and customer return rates.
The results, published in the Journal of Business Research, were telling. Customers who used the more private countertop system were significantly more likely to return to the business, averaging 1.46 subsequent visits compared to just 1.10 visits for those who used the less private handheld system. However, when customers felt observed using the handheld system, they tipped more – averaging 17.1% compared to 15.8% for the more private system.
To understand these findings, the researchers conducted four additional controlled experiments with hundreds of participants. These experiments revealed that the issue stems from two key psychological factors: perceived control and generosity. When customers feel observed while tipping, they experience diminished feelings of control over their tipping decision, which leads to higher tips in the moment but reduces their desire to return to the establishment. Simultaneously, being watched makes customers feel less generous about their tips, as the act loses some of its voluntary nature.
This creates a challenging dynamic for businesses: While they might generate higher tips for their employees through less private payment systems, they risk damaging customer loyalty and word-of-mouth recommendations in the process. The research suggests that businesses might be trading short-term gains in tip revenue for long-term customer relationships.
“Interestingly, research shows that people enjoy being watched when they donate to charity,” writes Hanson. “So why does tipping feel different? Perhaps because 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.”
The study identified a potential mitigation strategy: allowing customers to modify their tips after the fact. When businesses provided the option to change tip amounts after the initial selection – a feature implemented by services like Instacart, DoorDash, and Uber Eats – it helped reduce the negative effects of being observed while tipping. This modification option appeared to restore customers’ sense of control over the situation.
The implications extend beyond restaurants and delivery services. As digital payment systems continue to proliferate across various industries, from coffee shops to hair salons, understanding how payment privacy affects customer behavior becomes increasingly crucial for business success.
For customers who have felt discomfort while selecting a tip amount on a tablet screen with an employee standing nearby, this research provides validation that this response has measurable effects on future behavior. For businesses, it offers important insights into the potential hidden costs of sacrificing customer privacy for short-term gains in tip revenue.
Perhaps the solution to modern tipping dilemmas lies not in reverting to old systems or pushing forward with new ones but in understanding that privacy and autonomy remain essential ingredients in customer satisfaction – digital or otherwise.
“For companies, striking the right balance between giving customers control and fostering generosity is crucial,” Hanson writes. “A business that trains its employees to give customers privacy to tip – and makes sure to pay those employees fairly, so they don’t need to pressure customers in the first place – will likely develop a better reputation and a more loyal customer base.”
Paper Summary
Methodology
The research employed a mixed-method approach consisting of five studies. The first was a field study at a brewpub analyzing 36,888 transactions across two different POS systems. This was followed by four controlled experiments involving hundreds of participants who were presented with various tipping scenarios. The experiments manipulated variables, including payment privacy and the ability to change tips, while measuring outcomes such as tip amounts, likelihood to return, and willingness to recommend the business. The researchers used statistical analyses to test for mediation effects through perceived control and generosity.
Key Results
The field study demonstrated that customers using more private payment systems were significantly more likely to return to the business (1.46 vs 1.10 subsequent visits). The controlled experiments revealed a consistent pattern: when customers feel observed, they experience decreased feelings of control and generosity, leading to higher immediate tips but lower customer loyalty. Statistical analyses confirmed that the ability to change tips after the fact helped restore customers’ sense of control and improved their likelihood of return visits.
Study Limitations
The field study was conducted at a single location, which may limit generalizability across different types of establishments. The controlled experiments relied partially on scenario-based responses rather than actual transactions. Additionally, the research focused primarily on U.S. consumers, and tipping norms vary significantly across cultures and countries.
Discussion & Takeaways
The research reveals an important tension between employee interests (higher tips) and business interests (customer loyalty). It suggests that businesses should carefully consider the privacy implications of their payment systems and potentially implement features that allow customers to modify tips later. The findings contribute to a broader understanding of how technology affects consumer psychology and behavior in service settings.
Funding & Disclosures
The research was supported by the Marketing Science Institute, the Harold and Muriel Berkman Charitable Foundation, the University of Oregon Law School Consumer Protection Grant, the Academy of Marketing Science Mary Kay Dissertation Proposal Competition, the University of Richmond Robins School of Business, and the BI Norwegian Business School Department of Marketing.
What frosts me is that most of these digital tipping systems start at 15% and the go up on 5% increments. I am not ok with that. I want the privacy to determine if the service is worth of a tip, then how much. The fact that it had infiltrated so much of the service sector is just annoying. I pay cash as often as I can now just to avoid all of that.
Another part of this is that a lot of those digital payment device tip calculators are using the afyer tax total to figure the tip amount i stead of the teaditional pretax subtotal. So they are both pushi g for higher than teaditional 15% and also tipping on tax. It feels shady…
I wouldn’t mind if CNN came and set up a camera to look over my shoulder! If the service was appalling (as it often is, these days), then the amount of the tip that I leave will reflect that fact. I don’t mind WHO knows it … and, I will make a mental note never to return!!! On the other hand, if the service is exceptionally good, which it occasionally is, I have been known to leave a 50% tip. It’s just a shame that servers are paid so abysmally (due to corporate greed) … and that they have to “count on” tips to pay their bills. I’m sure it’s hard, stressful work. You won’t see me EVER working in that capacity.
I’ve see these screens begging for a tip. I’ll tip the same every time I see one. No tip. If you have to beg for a tip. I will not give you one.
I can confirm these findings. I go out & order take away a fraction of what i used to. Between menu prices doubling over the past 4 years, expectations of a $2 tip for pouring me a black coffee to go, and the absolute worst service I’ve ever encountered, I just skip food outside the home unless I’m traveling. Regading bad service, the last 5 times I have gone out I’ve waited an average of 30 minutes just for a glass of water. Then we are begging someone to just take an order and forget drink refills! When food eventually arrives an hour later, someone’s order is always forgotten. Then i have to fiddle with their store app to process my own payment. No thanks!
I never tip anyone except waiters, waitresses, and my barber, and they usually get a generous unless the service is lousy, because they often don’t get paid minimum wage but are guaranteed at least minimum wage with tips. Everyone else gets a decent wage.
If there is any kind of digital display asking for a tip, they may get a tip, but I won’t be back. Pay your staff and it won’t matter whether people tip or not. I am bllsh1t whenI find out my tip,is split 6 ways – that is a firm no.
The rulers crystal clear and simple. If you’re being paid below minimum wage as wait people historically have been, then you deserve a tip and you have provided service. I wish we would go service compris, as in Europe but this is the way it is so I will tip probably 18 to 20%. If I go to a counter to take out a sandwich and I’m standing and waiting for my order. Fuck that zero tip I don’t care what screen you throw in front of me..
Frankly speaking it’s getting to be to expensive if you ask me. It becomes a burden for some of us. Not because you can’t afford to tip but rather a kind of greed. I don’t even know if it actually directly goes to the waitress or person that serviced well or does the owner have a cut? And it shouldn’t matter how much one should tip. It shouldn’t be according to a percentage. It should be left to the person being serviced or what a person could afford. You don’t know the current situations of people. The more restaurants starts to ask for tips the less people will likely to go out to eat.