The Design of the Tip Jar

Every coffee shop and bar you visit you usually notice one uniting element: a tip jar. Some are overfilled with bills while others have a few measly quarters. At times it makes you wonder. Why the inequality? What can a business do to improve? What lessons can we learn?

I step back and think: why do people tip?

  • Good service.
  • Customer loyalty.
  • You see other tips/peer pressure.
  • Person in front of you just left a tip.
  • You get some change back, you don’t want it.
  • Quality of product(more you pay for your coffee, the more you will tip).

I’ve listed these in order of importance. How can we optimize? Good customer service is hard, and customer loyalty takes time. The third point is by far the lowest hanging fruit. If I can’t see the tips/opaque then I will assume that no one else has tipped, if I do see the tips/transparent and there are a lot then there is communal pressure for me to leave something as well. The tipjar should be transparent. What if I just opened, how do I get better tips from my early customers? Bootstrap your business with money in the tipjar, even if it’s your own.

Wikipedia is a good example of a successful tipjar. They raised a lot of money in their annual fundraiser, by employing two strategies: being transparent about their overall fundraising progress, as well as people’s individual contributions(point 4 above).

This idea of course extends far beyond tips. If you have a story to tell (business, religion, history, fable) be transparent about the support, and create even artificial support if necessary to get started.

Advertisements

4 Responses to The Design of the Tip Jar

  1. Francesca says:

    I always give an extra tip for extra services, for example, when they rinse out my travel coffee mug for me.

  2. Shuchi says:

    I suppose life is full of examples of successful ‘tip-jars’ – well liked people are more likely to be liked / ‘tipped’. Same principle with ‘act rich to get rich’. If others think its worthwhile, it must be…

  3. Hemang says:

    Good observations. I know from personal experience that a lot of people who set up tip jars follow this advice ie. put in their own money first to create the illusion of tipping, making the tips easily visible(quite often to the point of filling the jar to the top so that it creates a momentum), etc.

    Good stuff!

    Though, I would argue that peer pressure plays the most important role in tipping, even more than actual quality of service. And, this applies to other things as well. People are more likely to invest in businesses(and people) in which a lot of other people are investing. The VC industry is fraught with examples of this.

    This is why creating the ‘illusion of success’ is critical to actual success (as Shuchi points out).

    We are most likely to tip at places where we are expected to tip even if the service wasn’t that good, and very unlikely to tip a lot where we are not expected to tip even if the service was exceptional. Restaurants are a common example where we tip even if service is not good.

  4. arturnt says:

    Yeah, it’s difficult to prioritize the list since it’s so subjective. A lot of people really do tip because of good service; I don’t often tip, but I feel if someone goes out of their way then I usually do.

    Restaurants are a little different because the tip is almost mandatory, if no tip was necessary then you would most likely tip depending only on service quality/loyalty. The tip jar in this case is opaque(I don’t know what the person sitting next to me is going to leave).

    Key here is transparency, if everyone can see how great you are(even if you aren’t), then they are going to be much more likely to recognize. It’s herd behavior, my decision is made easier if everyone else has made it.

    The initial amount of money in the jar affords putting more money. If the jar is empty, then people wouldn’t even be sure what it is for.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: