By Quentin Fottrell, MarketWatch
Some shoppers appear to be getting wise to digital tipping.
More businesses such as Starbucks /zigman2/quotes/207508890/composite SBUX +1.44% and Whole Foods have tried out tipping apps like Square for iPads and other tablets to make it easier for customers to part with their money. And some studies have shown that when people are presented with three tip choices — 20%, 25% or 30%, for example – they’re more likely to choose the middle option even if it’s more than the traditional 20%, according to an analysis of 13 million New York City taxi rides by the University of Chicago’s Booth School of Business.
But new research shows that at least some consumers are losing patience with digital tipping in coffee shops and other retailers. Some 29% of respondents say they would actually be more likely to leave a tip if they were presented with a “no tip” button to allow them to opt out of leaving a tip, according to a study released Thursday by Software Advice , which helps businesses choose software. That said, other respondents still tip what they want regardless of suggested tip amounts or the presence of a “no tip” option.
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While digital tipping has yet to go mainstream, people are more likely to touch-type a tip if the staff member is standing expectantly nearby. Some 41% of respondents say close proximity to the server/cashier while entering a tip amount would make them more likely to tip. “There’s definitely a social pressure there,” says Justin Guinn, market research associate at Software Advice, and author of the digital tipping survey. Traditionally, non-gratuity industries like bakeries, coffee shops, delis and ice cream shops are introducing digital tipping.”
And customers can sometimes be tricked into thinking they’re leaving a digital tip when, in fact, they’re paying a service charge to the restaurant. The Internal Revenue Service changed its rules last year about what actually constitutes a tip. Service charges are “non-tip wages,” according to the IRS. While some restaurants have phased out auto-gratuities to allow customers to give money directly to the staff, others are acting as the middle man and essentially pocketing the money.
One restaurant worker in Manhattan told MarketWatch that the staff is losing out on valuable tips with large parties. “The service staff made a recent attempt to advocate for a change in the restaurant’s handling of these situations and they are now essentially trying to fire everyone for raising these concerns,” she said. (She requested that MarketWatch withhold her name for that reason.) The restaurant collects this charge as income, but it’s not reflected in the hourly wage of the workers.
Still, there are advantages to digital tipping for both the retailer and the customer. It relieves customers of the pressures of doing the math on a tip – especially in front of others – and helps them avoid what psychologists call the “pain of paying” when they don’t have to rifle through their wallet for cold hard cash to leave a tip. “The more cognizant we are of paying, the harder it becomes,” says Nir Eyal, author of “Hooked: How to Build Habit-Forming Products” and a researcher on consumer behaviors.