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Tipping and its alternatives: business considerations and directions for research

Tipping and its alternatives: business considerations and directions for research Purpose – The purpose of this paper is to outline the business issues surrounding tipping and its alternatives, to summarize what is known about those issues, and to identify questions in need of further research. Design/methodology/approach – Objectives are achieved via conceptual analysis and review of relevant literature. Findings – The paper finds that voluntary tipping, service charges, and service‐inclusive pricing offer different sets of costs and benefits, so that no one policy is always the best. The principal benefits to service firms of voluntary tipping are that it lowers nominal prices, increases profits through price discrimination, motivates up‐selling and service, attracts talented workers, and lowers FICA tax payments. However, tipping also motivates discrimination in service delivery, gives servers surplus income that could go the firms' bottom line, increases the risk of income tax audits, and opens firms up to adverse impact lawsuits. Practical implications – No one tipping policy is always the best. Service industry executives and managers should carefully weigh each of eight different issues (outlined together for the first time here) to identify the best tipping policy for their circumstances. Originality/value – Tipping has received little attention in service marketing. Furthermore, there is no good, published source of guidance to help service industry executives and managers make decisions about tipping policies. This paper addresses these voids by providing and discussing a comprehensive list of the pros and cons of tipping and its alternatives from a business perspective. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Services Marketing Emerald Publishing

Tipping and its alternatives: business considerations and directions for research

Michael Lynn; Glenn Withiam
Journal of Services Marketing , Volume 22 (4): 9 – Jul 4, 2008
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9 pages

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0887-6045
DOI
10.1108/08876040810881722
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to outline the business issues surrounding tipping and its alternatives, to summarize what is known about those issues, and to identify questions in need of further research. Design/methodology/approach – Objectives are achieved via conceptual analysis and review of relevant literature. Findings – The paper finds that voluntary tipping, service charges, and service‐inclusive pricing offer different sets of costs and benefits, so that no one policy is always the best. The principal benefits to service firms of voluntary tipping are that it lowers nominal prices, increases profits through price discrimination, motivates up‐selling and service, attracts talented workers, and lowers FICA tax payments. However, tipping also motivates discrimination in service delivery, gives servers surplus income that could go the firms' bottom line, increases the risk of income tax audits, and opens firms up to adverse impact lawsuits. Practical implications – No one tipping policy is always the best. Service industry executives and managers should carefully weigh each of eight different issues (outlined together for the first time here) to identify the best tipping policy for their circumstances. Originality/value – Tipping has received little attention in service marketing. Furthermore, there is no good, published source of guidance to help service industry executives and managers make decisions about tipping policies. This paper addresses these voids by providing and discussing a comprehensive list of the pros and cons of tipping and its alternatives from a business perspective.

Journal

Journal of Services Marketing – Emerald Publishing

Published: Jul 4, 2008

Keywords: Money; Employee attitudes; Recruitment; Incentives (psychology)

References

  • To insure racial prejudice: racial disparities in taxicab tipping
    Ayres, I.; Vars, F.; Zakariya, N.
  • Self‐efficacy: The Exercise of Control
    Bandura, A.
  • Tip payments and the quality of service
    Ben‐Zion, U.; Karni, E.
  • Tipping your waiter: a useful formula for employee compensation
    Brauer, J.
  • Food and beverage serving and related workers
    Bureau of Labor Statistics