The Impact of Tipping and "Tipflation" on Customer Satisfaction with Forrest Morgeson

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Top Takeaways:

• The frequency of tipping, or “tipflation,” has increased across industries. Businesses should consider tipping practices’ impact on customer satisfaction and carefully evaluate when and how tipping should be implemented.

• Rising prices and increased pressure to tip can create a sense of guilt for consumers. This may lead some individuals to avoid experiences where they feel obligated to over-tip. Businesses should be mindful of these factors and strive to find a balance that doesn’t cause customer discomfort. 

• High customer satisfaction ratings contribute to the success of brands and can be indicators of financial performance. Companies that excel in simplicity, convenience, and NPS scores tend to outperform the market collectively. 

• Positive experiences in one industry can shape customer expectations in others. For example, exceptional customer service at an Apple store can set the bar for expectations in restaurants and other industries.

• While technology can enhance service delivery, it should be working well and dependable before implementation. Reliability is crucial to maintaining positive customer experiences and satisfaction. 

• Plus, Shep and Forrest discuss ways to increase your customer satisfaction scores. Tune in! 

Quotes:

“When tipping becomes a common expectation in service interactions, consumers will mentally factor it into the price and value perceptions.” 

“Customer satisfaction is the aggregate of all our experiences with the company over time. If we feel that tipping, in some industries, is now part of a business practice that we didn’t sign up for, it will inflate the perceived price, which may negatively impact the consumer.”

“There are brands out there that strongly impact our expectations, and we use our experiences with them as a benchmark when forming expectations for other brands, even those that are not in the same industry.” 

“Be customer-centric. Think about what your customers will be going through throughout their experience. If you can maintain that focus, you can improve customer satisfaction.”

About:

Forrest Morgeson is the Director of Research at the American Customer Satisfaction Index. He is an Associate Professor of Marketing at Michigan State University, where he teaches marketing management, marketing strategy, and marketing research courses to EMBA and MSMR students. 

Shep Hyken is a customer service and experience expert, New York Times bestselling author, award-winning keynote speaker, and host of Amazing Business Radio.   

This episode of Amazing Business Radio with Shep Hyken answers the following questions and more:   

1. What is the impact of tipping on customer satisfaction scores? 
2. How can businesses improve customer satisfaction? 
3. How can businesses ensure that technology improves customer satisfaction? 
4. What is the negative impact of “tipflation” on consumer perception and value? 
5. How does increased tipping impact consumer behavior?