Inflation remains omnipresent, weakening consumers’ purchasing power and impacting interactions in the economy each day. One such interaction is tipping, and PYMNTS Intelligence finds that tipping norms have reached a tipping point. Data shows that 27% of consumers have been surprised that a merchant asked them to leave a tip in a new situation. Thirty-three percent noticed tip suggestions had increased. We deem this to be “tipflation.” Though tips have mainly been present in the service industry, the pressure to tip has spread, and more than one-third of consumers report that tipping expectations have gotten out of hand.
New point-of-sale (POS) technology makes tipflation a reality, increasing the perceived pressure to pay a tip and often suggesting larger tips by default. And even though consumers report disliking outsized tipping expectations, the measures are working. Social pressure increases tipping amounts by up to 50% on average, and data shows that consumers are tipping at fast food restaurant drive-thrus and even self-checkout kiosks.
This report is the 16th installment in the “Consumer Inflation Sentiment” series, exploring consumers’ sentiments, opinions and reactions about the changing economic landscape. For “Consumers Overwhelmed as Inflation Pressures Reach Tips,” we surveyed 2,000 United States consumers between Oct. 12 and Oct. 26 to better understand how they react to businesses in the service industry and beyond that are pressuring them to tip.
Key Findings
Inflation, new point-of-sale technology and social pressures have combined and led to tipflation.
The combination of technology, persistent rising prices, and social pressures have aligned to form a tipflation phenomenon. Consider that merchants calculate tips from cost subtotals, which have increased. If a rideshare bill now costs more than it did last year, for example, a theoretical 15% tip would correspondingly escalate in price. Suggested tip sizes are also swelling, with common automated options such as 10%/12%/15% changing to higher options such as 12%/15%/20%. One in three consumers has noticed that tip suggestions are higher than they used to be.
Tips are not just higher but seemingly more frequent, as 27% of consumers have had the merchant ask if they wanted to leave a tip in situations not requesting to do so previously. Twenty-five percent of consumers have been surprised as of late when prompted to tip during a checkout process.
The prevailing sentiment among consumers is frustration, and 34% say tipping expectations have gotten out of hand. Moreover, consumer frustration with tipping correlates strongly with income levels: as income levels rise, so do frustrations with tipping. Approximately 40% of higher-income consumers say expectations of tipping have gotten out of hand recently, far more than the 27% of those earning less than $50,000 saying the same.
Point-of-sale technology integrates tipping into the checkout experience, leading to a 50% increase in tipping.
The development of digital payments for goods and services has also expanded into tipping, adding another tipflation layer for consumers. Digital screens, for example, are increasingly the norm — and are increasing pressure on consumers by presenting higher percentage options. Survey data shows that consumers are likely to tip roughly 15% when a digital screen prompts them to tip, This share is 50% more than the tip they are likely to give when a tip jar prompts them. Thus, the proliferation of screens is increasing tips.
Digital screens are now the most common to ask a consumer to tip across 8 in 9 normal tipping scenarios we studied. The only holdouts are restaurants, where merchants often still prompt consumers to tip with a receipt. For example, a digital screen prompted 85% of consumers asked to tip during or after a recent taxi or rideshare service, and these screens prompted 70% of consumers to tip at a fast-food restaurant visit.
Social pressure also increases tips by up to 50%. These pressures are intensifying as public digital screens appear in more places and show higher tipping suggestions.
Tipflation is not solely a product of point-of-sale digitization. Social norms and accompanying behavior also play a significant role, increasing consumers’ willingness to tip and by how much. Data shows that consumers tip 10% on average if no one watches them but tip 12% when observed by a stranger. When relationships matter — when family and friends can see how much they tip or workers watch their co-workers — consumers are likely to tip approximately 15%.
This old-fashioned pressure connects with modern technology, as digital screens can indirectly broadcast how much a consumer is tipping in real-time, especially if others are waiting behind them. Overall, the goalposts to meet the social pressure to tip are moving, and consumers are paying the price.
The combination of digital screens and social pressure means people are leaving larger tips and tipping in more situations — but it is unclear how long this can continue without consumers pushing back.
Consumers feel pressured to tip in greater amounts and in more situations, namely unusual places where they have not tipped before, such as self-checkout kiosks. It may not be surprising that 75% of consumers believe it is not appropriate for a self-checkout to have a tip option. Forty-nine percent believe the same when a fast-food restaurant asks them to tip. Despite this, most consumers who face “inappropriate” tipping requests comply. Fifty-nine percent of consumers tipped when a fast-food establishment asked, as did 62% at a retail or grocery store. The fallout of these tips may linger, however, as 65% of consumers say they would be more likely to switch merchants if one asked them to tip an unreasonable amount.
Conclusion
Rising prices continue to be a thorn in the economy. The expansion of point-of-sale technologies has teamed with old-fashioned social pressure to create the phenomenon of tipflation. Consumers are now shown higher automatic options when they tip at digital POS systems, and some feel pressured to tip in places not common before, such as drive-thrus and self-checkout kiosks at convenience stores. Although consumers are frustrated with this reality, social pressure and digital screens can increase tips by up to 50%. Also, consumers tend to tip when a merchant asks, even if they perceive the tips to be unreasonable. Businesses must monitor the situation and how far they can press consumers, as nearly two-thirds would consider turning away from businesses that ask for unreasonable tips.
Methodology
“Consumers Overwhelmed as Inflation Pressures Reach Tips,” analyzes inflation in tips. We surveyed 2,000 U.S. consumers between Oct. 12 and Oct. 26 to better understand how consumers react to businesses in the service industry and beyond that pressure them to tip. Our respondents’ average age was 48.1 years old, 51% identified as female and 38% annually earned more than $100,000.
Read the October “Consumer Inflation Sentiment: Consumers’ Economy Concerns and the Price of High Prices” and other previous editions of the series for more.
