Shopping: 'Tip creep' is pushing some customers to leave smaller tips, and driving others to avoid businesses that ask for them

Why it is the topic trending:

• Emerging Economic Phenomenon: The term "tip creep" describes a noticeable increase in tipping requests across various industries, impacting consumer spending and habits.

• Consumer Backlash: The article highlights a growing resistance from customers who feel pressured to tip more frequently or in higher amounts.

• Debate on Fair Wages for Service Workers: The issue of tipping is intertwined with discussions about whether service workers should rely on gratuities for a living wage.

• Potential Legislative Impact: The article mentions the "No Tax on Tips Act," indicating potential government involvement in the tipping landscape.

• Shifting Business Practices: More businesses are implementing tipping prompts at point of sale, even in situations where it wasn't previously customary.

Overview:

The article discusses the phenomenon of "tip creep," where consumers in the US are increasingly prompted to leave tips in a wider variety of situations than in the past, from self-checkout kiosks to mechanics. This trend is causing some customers to tip less or avoid businesses that pressure for tips. While many consumers are still willing to tip for good service in traditional settings like restaurants and salons, there's growing tension and debate around expanding tipping expectations. The article also touches on potential legislative changes that could further influence tipping practices.

Detailed Findings:

• A Morning Consult survey found that Americans are getting requests for tips in more and more places.

• Some customers are fighting back by avoiding businesses that request tips or tipping less.

• 33% of people surveyed said they're expected to tip more now than five years ago.

• Tipping prompts are appearing at self-checkout kiosks and for services like car repair where tips weren't always expected.

• This phenomenon is called "tip creep" by Morning Consult.

• Over 25% of respondents use services requiring tips less frequently.

• 23% focus on visiting businesses that don't pressure for more tips.

• 16% are giving smaller individual tips due to the frequency of requests.

• The US Senate passed the No Tax on Tips Act, which could incentivize more tipping if enacted.

• Consumers still find tipping necessary or expected in traditional service settings like haircuts, valet service, and food service.

• 69% said tipping at local restaurants is necessary, and 64% said it's the norm for food delivery.

• Domino's CEO reported increased tips at new locations with faster delivery times.

• 44% of respondents believe service workers should not have to rely on tips for their income.

• Most consumers oppose mandatory service charges, preferring tipping to be optional and based on service.

• There's an overall tension around tipping, with people wanting workers to earn a fair living wage but preferring tipping to remain discretionary.

Key success factors of product (trend):

• Convenience (for businesses): Implementing tipping prompts can be an easy way for businesses to potentially supplement employee income without directly increasing wages.

• Social Norm Pressure: The presence of tipping prompts, especially on screens, can create social pressure for customers to leave a tip.

• Potential for Increased Employee Earnings: In some cases, expanded tipping can lead to higher earnings for service workers.

Key Takeaway:

The increasing prevalence of tipping requests across various sectors, known as "tip creep," is creating tension with consumers who feel pressured to tip more often and are responding by adjusting their spending habits and preferences, highlighting a growing debate about fair wages and the role of tipping in the service economy.

Main Trend:

The main trend is "Expanding Tipping Culture and Consumer Resistance," where the practice of tipping is extending to a wider range of businesses and service interactions, leading to noticeable consumer pushback in the form of reduced tipping amounts and avoidance of establishments with aggressive tipping prompts.

Description of the trend:

"The Gratuity Inflation" describes the current situation where requests for tips are becoming increasingly common in various service industries, extending beyond traditional tipping scenarios. This expansion is driven by businesses seeking to supplement employee compensation or increase revenue without directly raising prices. However, this trend is being met with growing resistance from consumers who feel overwhelmed by the frequency and range of these requests, leading to changes in their tipping behavior and where they choose to spend their money.

What is consumer motivation:

• Feeling Pressured and Annoyed: Consumers are expressing frustration with the increasing number of tipping requests, especially in non-traditional settings.

• Budget Consciousness: With rising costs, consumers are more mindful of where their money goes and may be less inclined to add extra costs like tips in every situation.

• Belief in Fair Wages: Some consumers believe businesses should pay their employees a living wage rather than relying on customer tips.

• Desire for Control Over Spending: They prefer tipping to be discretionary and based on the quality of service, not an expectation for every transaction.

• Avoiding Guilt and Social Pressure: Some consumers may tip out of feeling obligated by the prompts but resent the pressure.

What is driving trend:

The trend is being driven by:

• Businesses Seeking to Supplement Wages: Tipping can be a way for employers to attract and retain staff without significantly increasing their labor costs.

• Technology Facilitating Tipping: Digital payment systems and self-checkout kiosks make it easy for businesses to include tipping prompts.

• Changing Economic Landscape: Businesses may be looking for additional revenue streams in a competitive market.

• Normalization of Tipping in More Sectors: As more businesses adopt tipping, it can create a sense of expectation.

• Potential Incentive from Legislative Changes: Tax benefits for tipped workers could encourage more widespread tipping.

What is motivation beyond the trend:

Beyond the immediate reaction to "tip creep," consumers are motivated by:

• Appreciation for Good Service: Many are still willing to tip generously when they feel they have received excellent service.

• Supporting Service Workers: Some consumers understand that tips often make up a significant portion of service workers' income.

• Fairness and Transparency: Consumers generally appreciate clear pricing and fair wages for workers.

Description of consumers article is referring to:

The article refers to a broad range of consumers in the United States who are:

• Experiencing an increase in tipping requests in various settings.

• Feeling pressure to tip more often or in higher amounts.

• Becoming more resistant to these expanded tipping expectations.

• Adjusting their spending habits by tipping less or avoiding businesses with aggressive tipping prompts.

• Holding varied opinions on whether service workers should rely on tips for a living wage.

Conclusions:

The phenomenon of "tip creep" is creating a tension between businesses seeking to expand tipping and consumers feeling increasingly burdened by these requests. This trend is leading to a reevaluation of tipping habits and where consumers choose to spend their money, highlighting a broader discussion about fair compensation for service industry workers.

Implications for Brands:

• Consider the Impact of Tipping Prompts: Businesses need to be mindful of how frequent or aggressive tipping requests might affect customer perception.

• Explore Alternative Compensation Models: Some businesses might consider increasing wages and eliminating or reducing reliance on tips.

• Be Transparent About Pricing: Clear pricing structures might be preferred by some customers over added tipping expectations.

• Train Staff to Provide Excellent Service: Outstanding service justifies tipping in traditional settings.

Implication for Society:

• Ongoing Debate About Tipping Culture: The role and fairness of tipping in the US economy will likely continue to be discussed.

• Potential Changes in Wage Structures: The pushback against "tip creep" could contribute to a broader movement towards higher minimum wages for service workers.

Implications for Consumers:

• More Conscious Spending Choices: Consumers may become more selective about where they spend their money based on tipping expectations.

• Potential for Smaller Individual Tips: The frequency of requests might lead to a decrease in the average tip amount.

• Increased Awareness of Service Worker Wages: Consumers may become more informed about the compensation of service industry employees.

Implication for Future:

The future of tipping in the US is uncertain. The trend of "tip creep" and the consumer response suggest a potential shift in expectations and practices. Legislation and business model innovations could further reshape the landscape of service worker compensation.

Consumer Trend:

"Tipping Fatigue." Consumers are experiencing growing weariness and resistance towards the increasing prevalence of tipping requests across various service sectors.

Consumer Sub Trend:

"Value Transparency in Pricing." Consumers are increasingly seeking clear and transparent pricing structures upfront, potentially preferring businesses that incorporate service costs rather than relying heavily on tipping.

Big Social Trend:

"The Fair Wage Debate." Ongoing discussions and activism around ensuring a living wage for all workers.

Worldwide Social Trend:

"Varying Tipping Norms." Tipping customs differ significantly across countries, highlighting the culturally specific nature of this practice.

Social Drive:

"The Desire for Fair Exchange and Clear Expectations." Consumers want to feel that they are paying a fair price for goods and services with clear expectations about any additional costs.

Learnings for brands to use in 2025:

• Be Mindful of Tipping Etiquette: Understand the potential negative reactions to unexpected or excessive tipping prompts.

• Consider All-Inclusive Pricing Models: Explore the benefits of incorporating service charges into prices.

• Focus on Service Quality as a Justification for Tips (in traditional settings): Ensure staff are providing exceptional service.

Strategy Recommendations for brands to follow in 2025:

• Evaluate the Impact of Tipping Prompts on Customer Satisfaction.

• Research and Consider Alternative Compensation Strategies for Employees.

• Clearly Communicate Pricing and Any Expected Gratuities to Customers.

Final sentence (key concept) describing main trend from article:

In 2025, "tip creep" is pushing some customers to leave smaller tips and driving others to avoid businesses that ask for them, highlighting an expanding tipping culture met with consumer resistance.

What brands & companies should do in 2025 to benefit from trend and how to do it:

Brands and companies should carefully evaluate their tipping practices in 2025 by:

• Assessing the potential for "tip creep" to negatively impact customer satisfaction and loyalty.

• Considering alternative compensation models for service workers that may reduce reliance on customer gratuities.

• Ensuring transparency in their pricing and clearly communicating any expectations regarding tipping to their customers.

Final Note:

• Core Trend:

  • Expanding Tipping Culture and Consumer Resistance: More tipping requests leading to pushback.

• Core Strategy:

  • Evaluate and Be Mindful of Tipping Practices: Consider the impact on customer perception and explore alternatives.

• Core Industry Trend:

  • Debate on Service Worker Compensation: Ongoing discussions about fair wages versus reliance on tips.

• Core Consumer Motivation:

  • Seeking Fair Value and Transparency: Wanting clear pricing and feeling in control of discretionary spending like tips.

Final Conclusion:

The rise of "tip creep" in the US service industry presents a complex challenge for businesses. While it offers a potential avenue for supplementing employee income, it also risks alienating customers who feel pressured and may opt for businesses with more transparent or traditional tipping models. Navigating this tension will be crucial for businesses in 2025 as they seek to balance employee compensation, customer satisfaction, and overall profitability.

Core Trend: Expanding Tipping Culture and Consumer Resistance

• Description: This trend describes the current situation where the practice of requesting tips is extending beyond traditional service settings to a wider array of businesses and interactions, such as self-checkout kiosks and services like car repair. This expansion is being met with growing resistance from consumers who feel pressured by the increased frequency of these requests, leading to adjustments in their tipping behavior, a preference for businesses with less pressure to tip, and a broader debate about fair wages for service workers.

• Key Characteristics of the Trend (summary):

  • Increased Tipping Prompts: Customers are being asked to tip in more diverse situations.

  • Consumer Frustration: Many feel pressured to tip more often or in higher amounts.

  • Resistance to "Tip Creep": Some consumers are pushing back against the expanded tipping culture.

  • Changes in Spending Habits: Consumers are tipping less in individual instances or avoiding businesses that pressure for tips.

  • Debate on Fair Wages: The issue of tipping is linked to discussions about adequate compensation for service workers.

• Market and Cultural Signals Supporting the Trend (summary):

  • Technological Facilitation: Digital payment systems and self-checkout kiosks make it easy for businesses to add tipping options.

  • Businesses Seeking to Supplement Wages: Tipping can be a way to increase employee earnings without raising base pay.

  • Normalization in New Sectors: As more types of businesses implement tipping, it becomes a more common expectation.

  • Consumer Surveys Indicating Pressure: Reports like the Morning Consult survey highlight the growing consumer sentiment around tipping.

  • Potential Legislative Influence: Proposed laws regarding the taxation of tips could further shape tipping practices.

• How the Trend Is Changing Consumer Behavior (summary):

  • Tipping Less Frequently or Smaller Amounts: Consumers are becoming more selective about when and how much they tip.

  • Avoiding Businesses with Strong Tipping Pressure: Some are choosing establishments with clearer pricing or less emphasis on gratuities.

  • Increased Awareness of Service Worker Compensation: Consumers are more conscious of how service workers earn their income.

  • Preference for Optional Tipping: Many believe tipping should be discretionary and based on service quality.

  • Growing Support for Fair Wages: A significant portion of consumers believe service workers should earn a living wage without relying on tips.

• Implications Across the Ecosystem (For Brands and CPGs, For Retailers, For Consumers, summary):

  • For Brands and CPGs: Businesses need to be mindful of customer perception regarding tipping prompts and consider alternative compensation strategies.

  • For Retailers: Retailers in various sectors are implementing tipping options, but need to balance potential revenue with customer satisfaction.

  • For Consumers: Consumers are facing increasing pressure on their spending due to expanded tipping expectations and are reacting by being more discerning about their tipping habits and choices of businesses.

• Strategic Forecast: The tension between expanding tipping culture and consumer resistance is likely to continue. Businesses will need to carefully consider the long-term impact of their tipping practices on customer loyalty. There may be a growing movement towards more transparent pricing models or increased base wages in the service industry to address consumer concerns.

• Final Thought: The phenomenon of "tip creep" underscores a growing discomfort among consumers regarding the expanding role of tipping in the service economy. Businesses need to navigate this carefully, considering the potential for backlash and the ongoing societal debate about fair wages for service workers.

Source: https://www.businessinsider.com/tipping-culture-customers-cut-back-survey-says-2025-5