Do you tip more on-line?

by on October 16, 2012 at 6:44 am in Economics, Food and Drink | Permalink

David Popkin writes to me:

I hope all is well. I was having a heated discussion and thought of you and your blog.

Do people tip more/less/same via online delivery services compared to phone orders where they pay cash?

Possible reasons for bigger tips on seamlessweb/online services

-tip disclosed before delivery=pressure to put up or deal with cold food

-credit card money less “real”

-no excuse of rounding (i.e. if $3 is norm, can’t escape it because you only have a $20 to pay the 17.75 order total)

Possible reasons for bigger tips in cash

-looking someone in the face

-poor math skills/rounding

-more willing to tip more after the fact based on speed etc.

I would be most interested to hear what the best and brightest have to say about this.

1 Joel October 16, 2012 at 6:55 am

1) a large number of seamless orders are paid for by employers. FREE DINNER.

2) the tip is preset at 20%

2 Nickolaus October 16, 2012 at 7:39 am

I refuse to tip online. Even if I choose to pay by CC, I always reserve the tip for cash.

3 Lupis42 October 16, 2012 at 8:27 am

I never tip before I have food – only after. I tip well, but I’m not willing to tip on expectations.

4 paul October 16, 2012 at 8:47 am

the preset “15%” and “20%” buttons definitely set a minimum standard. On some services, those are the only choices other than cash.

5 jeff October 16, 2012 at 9:28 am

seems like “no excuse of rounding” would cut both ways and doesn’t necessarily belong in the first category

6 Jay October 16, 2012 at 9:30 am

I worked as a delivery driver and I’m an economics student. In my experience, the tip was based on any number of things, even if they had nothing to do with the driver. I can’t tell you how many times I wouldn’t get tipped because the person on the phone was “rude,” or because we didn’t serve pepsi products. One time I didn’t get tipped because the previous guy who delivered to them “didn’t have any small bills” to make change with. That’s never the case. Because they were scammed the first time around, they characterized all of us the same way and I recieved no pay.
If customers purchased their meals online with a credit card, they had a slip they’d need to sign that we would ask them to sign upon delivery. On many occasions, the customer would cross out the tip on the slip and raise/lower it accordingly before signing. At the end of the night when we “tipped out,” our managers would give us the amount of money the customer changed the amount to.
Being a delivery driver is a very high cost job- it’s not uncommon to drive anywhere from 100-300 miles a day, and company’s generally don’t cover gas or routine maintenance. If a customers pays by percentage on a cheap order, because the company’s fail to calculate gas and maintenance into the bill, many times the customers estimation only increases the costs of the job and not the benefits. One time, I was giving a customer change back, but they told me to “Keep the change” meaning that they meant to only give me a .60 cent tip. Their location was 6 miles from my starting location. My car gets 7 mpg, thus I can only conclude that I lost $2 or $3 on the trip, instead of gaining income.
Generally if you get to a location faster you recieve a bigger tip. But if you are getting there slower, you could be lost- wasting more gas. Many times, you might be going to a location 10 miles a way, and be trucking at a 50-60mph pace through a neighborhood. Even though you were using more gas to go faster and get to the customer sooner, customers would catch you speeding and not pay you any tip money. Thus, in the name of customer service-you have an even bigger loss.

7 Jay (again) October 16, 2012 at 9:58 am

Also, I made slightly less than minimum wage, and it was a big deal that I made more than most of our drivers. The average pay before tips was $5 an hour. I made $6.50.

8 dead serious October 16, 2012 at 10:28 am

Just curious what you’re driving that gets only 7 mpg.

9 Rahul October 16, 2012 at 11:16 am

It’s the discarded fryer oil……

10 Jay October 16, 2012 at 11:34 am

An old 1990 BMW… It has adbout 300,000 miles on it at the time, so the hypothesis is that we’re going at about 7 mpg, but apparently my dad got it when it was cruising at 11 or 12

11 brone October 16, 2012 at 11:42 am

This was my first thought too! Just how heavy are these pizzas? Is this car towing the kitchen? Every time somebody has delivered me pizza round my way, they’ve turned up in a hatchback or a moped, which would make much more sense. 7mpg! That’s, like, a bus. Probably towing another bus.

Don’t assume for a moment that I’m telling anybody what to do, but were I asked for my advice, I would suggest that for somebody earning $6.50/hr a more cost-effective choice of vehicle could be made.

12 Rahul October 16, 2012 at 12:02 pm

Terry Pratchett explains why not everyone drives high mpg cars:

“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. This was the Captain Samuel Vimes ‘Boots’ theory of socio-economic unfairness.”

13 brone October 16, 2012 at 12:47 pm

Indeed. My advice is made on a TCO basis too; you don’t have to improve that much on 7mpg before the savings start to mount up enough to not only justify but actually pay for a change of vehicle (even at US petrol prices).

14 brone October 16, 2012 at 12:50 pm

Please ignore my 12:47 post in response to this one, as my post makes no sense (sadly I had to see it in situ before I figured it out). Thanks!

15 Nikki October 16, 2012 at 9:31 pm

“We are not so wealthy as to buy cheap stuff,” my grandfather used to say.

16 dan1111 October 16, 2012 at 11:38 am

If you drive 250 miles a day on average, then you would make an additional $100 a day merely by upgrading to a vehicle that averages 25mpg. Perhaps the tipping wasn’t the problem.

17 Jay October 16, 2012 at 11:48 am

You’re right, but that doesn’t factor in the cost of affording the new car on top of all of the standard maintenance of the current car. A driver who makes less than minimum wage and inconsistent tips probably won’t be able to make a down payment anytime soon.

That said, I made a solid 30-$50 in tips a day after gas. That on top of the paycheck could have been more rationally spent towards a more efficient mode of transportation.

Eventually the cost of continuing was more than the benefit. I left the job and a few months later got an internship at a bank that pays the bills these days. If I could afford the job again, I would go back.

18 JWatts October 16, 2012 at 3:35 pm

I was a pizza delivery driver and sometimes shift manager for years during high school and then college for two different degrees. So I spent roughly 8 years delivering pizza’s and my experience was completely different than yours.

On average, I made anywhere from $8 to $12 per hour, working anywhere from 15 to 50 hours per week with the average probably being around 25 hours per week. That was from around 1985 to 1995, so it was significantly above minimum wage. Generally, I did my best to avoid managing shifts, since it only paid around $10 and was effectively a pay cut for harder work. I never worked at a place that didn’t reimburse for mileage and if you didn’t choose the obviously bad places to work (Domino’s being notorious) I could generally make out fairly well driving an economical car. Quite often I would work at places that paid a straight commission (6%) on the delivery. Since it was easy to take 3 or 4 orders at a time, a typical trip was $50+ and thus $3 per trip. I also average around $1 per order, so a typical multiple delivery taking around an hour round trip amounted to $3 trip fee + $3 tip + $4/hour wage = $10 per hour.

Overall pizza delivering was an awesome job. I easily kept my car up, had gas money, free pizza to eat, good pay and listened to the radio all night. A good driver keeps his car running and is in the store less than 5 minutes between runs. I’d often try to be back in the care in 2 minutes on a busy night, when the orders were stacked up.

If an order was late, I would always explain to the customer that it wasn’t might fault. This is generally true with experienced drivers. Often the order was 45 minutes old before I took it off the stove. Most of the time people are pretty understanding if you just explain the issue and give them a chance to vent. And if they were still upset, I’d offer to give them a couple dollars off, assuming it was late. If you are working for a decent business, the manager was always willing to give experienced drivers the discretion to give discounts. Indeed, if the pizza was really late, I’d give it to them for free.

Also, when a customer would say keep the tip, which happened all the time in a college town, I’d always ask for a $1 tip and give a polite smile. If the customer was a male, that resulted in getting the requested tip plus the change over half the time. Single females were generally smaller tippers, but they were generally a small percentage of customers. A favorite female tactic was to have a check made out for the exact amount. If you didn’t ask for something extra, you’d get bumpkus.

Pizza delivery was all about customer relations, making sure the order is right and rapid delivery. Nothing else really mattered much.

Of course that’s probably the recipe to success for most jobs. 😉

19 Spencer October 17, 2012 at 1:44 pm

100-300 miles a day? And in a later reply you state that you made 30-50 bucks a day. How long were these shifts? Your numbers don’t add up at all. If your shifts were 6 hours long it’s very difficult to average even 20 miles per hour during a delivery shift when you’re stopping to pick up orders, waiting for customers to pay, stopping at traffic lights, etc…

300 miles in a day? Sorry that’s simply impossible, even in a more rural area.

And on top of all this you drove a car that got 7 miles to the gallon?! That’s just insanity, you should have never taken this job or quickly gotten a different vehicle.

Finally if I saw you driving 50 miles per hour through my neighborhood in order to get my food to me seconds faster I would be pretty angry as well.

20 Neal October 16, 2012 at 9:32 am

As a regular user of SW in Manhattan, I have no belief that the tip actually goes to the bike rider, and no belief that the person who takes the order works harder when she sees a tip. So I always tip cash and a bit over the suggested amount (via rounding up). But then my family is boring so we are in a repeated game with a very few places. But is an interesting question about market structure and how the delivery guys actually get their tips when not paid directly in cash (and we won’t even discuss pre- and post-tax tips).

21 Michael Stack October 16, 2012 at 10:30 am

I used to work as a delivery driver, and our customers paid either in cash, or via credit card. Usually tips were higher when folks paid with cash. A typical scenario: food totalled $17.50; the customer would prefer to tip $2 but doesn’t care enough about the change, so would tip $2.50. With a credit card, it’s easy to tip exactly $2 so that is what they would do.

My recollection is that tips via cash were higher than via credit card. I realize this isn’t exactly what the OP was asking, but I think it’s informative.

The other weird thing I noticed is how consistent customers were in their tipping habits. I would receive $1 plus the change from customer A, or $2 from customer B, etc. However, when my girlfriend worked with me, she would consistently get higher tips from those same customers, and this was true whether the customer was male or female, though the effect was much larger for males.

22 Rahul October 16, 2012 at 11:08 am

Why would people tip online rather than hand cash over to the driver?

23 Artie Z October 16, 2012 at 12:52 pm

Like Jay, I was a delivery driver, though it was long enough ago that I we could take credit cards but the tips were written in at the time of delivery rather than pre-specified.

Normally I would say tip in person, but there is one case in which tipping online would definitely be advantageous. If you live in a neighborhood/subdivision/apartment complex where you believe tipping is NOT the norm, then making a tip online sends a signal that (1) you understand about tipping, (2) you would like your food quickly, and (3) you would like people not to mess with your food (I think it’s BS to do that, but I have heard stories) just because you are guilty by association by living in the same proximity as others who do not tip.

Overall I really don’t think that an online tip will affect your service. I think too much is made of drivers seeing a tip and then taking their time – the only way they make money is to take more deliveries, so taking your time really doesn’t help. People think it is shirking on the driver’s part that is causing the delay, but really it is much more likely a result of being understaffed. I recall the night of the last Seinfeld episode we had 4 really good drivers (the norm for a weekday in May when classes had ended) and we were still running 45 minute delivery times because the volume was so high. The one way in which an online tip might affect your delivery time is if the driver has multiple stops, because then the driver knows how much he is getting from you but possibly not from the other stops so he might stop at the other stops first hoping that a quick delivery time will get a higher tip. But then again, it’s possible if you gave a $6 tip online you would get your food first because it is unlikely the other person gives $6 and the driver would like you to order again and tip $6 again. Plus, if the driver is trying to minimize trip time he plans his trip using the right-hand turn rule as much as possible (it takes longer to make left turns because you have to cross traffic and possibly sit at red lights) so who tipped what amount really doesn’t matter if one stop is on the way to the other.

Note that a driver seeing a tip and a server (waiter/waitress) working for a set hourly amount and pooled tips (which we have at a restaurant on campus) are two different things. The waitress gets the same amount regardless of how quick the tables turn over, while the driver typically wants to get back to the store as quickly as possible to take more deliveries.

24 Sam October 16, 2012 at 2:12 pm

Because I don’t have cash. Seriously – I almost never spend cash, and there isn’t a bank on the direct route to anywhere I usually go, so I have to go out of my way to get cash, so I don’t. I’ve gone for a month or more before now without carrying cash on my person.

25 Richard Gadsden October 16, 2012 at 11:11 am

Tip for food orders online?

Mine doesn’t even have a facility for a tip, and the drivers hand over the food and disappear before you have the chance to offer one.

26 ETPH October 16, 2012 at 11:14 am

I always wondered what effect having the taxi tips set to 20% minimum in NYC had. Also, because seamless works tip into overall price for delivery minimums and corporate maximums, I’m sure it varies with the price of the meal as well.

With those economics, I don’t understand why someone with other service industry options would work as a delivery driver. You would be substantially better off waiting tables in a diner. My experience with delivery drivers validates this, most of them speak terrible English.

27 Thor October 16, 2012 at 11:20 am

I tip 20-25% minimum, in cash, to the person who (most probably) needs it and (probably) deserves it. I.e., the driver.

In coffee shops / espresso bars, I tip even more. That’s to ensure that I get a carefully made cappuccino, which is important to me as I only have one coffee a day. Cappuccinos need to be made fairly carefully (e.g., foam). The large tip ensures that I’m remembered. However, I’m also a coward. If the quality really declines, instead of speaking to the barista, I pay my big tip but after my coffee, go to another place for a few weeks.

28 alex October 16, 2012 at 11:25 am

I will tip more on online orders and when paying with credit cards in cabs to try to compensate for the leakage to the credit card companies. This doesn’t work perfectly, but it does justify it in my head. I try to tip in cash when I can.

29 Urso October 16, 2012 at 12:01 pm

“Do you tip more on-line?”
I always tip my bloggers 20% minimum.

30 Brian Donohue October 16, 2012 at 1:11 pm

“I don’t tip because society says I have to. Alright, I tip when somebody really deserves a tip. If they put forth an effort, I’ll give them something extra. But I mean, this tipping automatically, that’s for the birds. As far as I’m concerned they’re just doing their job.”

31 Alex October 17, 2012 at 10:13 am

You should have used the name “Mr. Pink”.

32 chris October 16, 2012 at 1:29 pm

The tip amount should be a function of the quality of service, which can only be known ex post. When tipping prior to the service I hedge my bets and tip according to the expected value of the service (admittedly I probably tip lower than the expected value because I find it difficult to rationalize paying someone for something of unknown quality). This is counterproductive because it may decrease the incentive that the delivery person has to deliver in a timely manner. For these reasons I think all pre-service tipping should be abolished.

This is also very similar to the information asymmetry problem described in Akerlof’s “The Market for Lemons”

33 Rahul October 16, 2012 at 2:16 pm

I used to think like you too until I discovered that in America at least most restaurant staff pool together their tips and split up evenly.

I still think tip pooling is a pretty stupid practice; perhaps selfishly because it impairs my ability to reward or penalize particular servers based on quality of service.

34 Strick October 16, 2012 at 3:57 pm

I travel for business and more often than not order online for delivery to my hotel room. I generally tip with the credit card, generally about the same. Three reasons, first, the tip’s going to be reimbursed, two, it shows the receipt for reimbursement, and three, by trial and error I find I get better service that way.

Don’t know what the last bit, but I’ve been assuming it’s because the driver knows he isn’t going to be stiffed.

35 ShaneM October 16, 2012 at 6:09 pm

To the pizza delivery drivers: I’ve wondered about this. Let’s say I have an order for $20 and put a $5 tip on the online purchase. Does that mean I get better service? Or does it matter? thanks

36 Artie Z. October 16, 2012 at 8:02 pm

I have a post above, but I would say, on average, yes you would get faster service. If you are in a neighborhood that doesn’t normally tip (so you are guilty by association) a $5 tip on a $20 order should get you faster service. If your order and an order from a neighborhood that generally doesn’t tip are taken at the same time by a driver then the driver will probably drop yours off first regardless of who ordered first (even the most clueless drivers remember the really good tippers and the really bad ones, and no driver wants to upset the good tippers). If your order and one in an equally good area are taken at the same time by a driver and you tip $5 and the other hasn’t tipped yet the driver will probably deliver them in the order that is fastest for the driver, and so the tip doesn’t really help or hurt (if you both didn’t tip and both were in a good neighborhood then the driver would still take them in the fastest order for the driver).

As I mentioned in the post above, the biggest reason for long delivery times is being understaffed, not that “I’m guaranteed to get $5 so I don’t care”. The driver always has the incentive to get back to the store to take more deliveries and make more money. And yes I know about the cab driver studies where cabbies stop working once they hit a certain level of income for the day, but delivery drivers are scheduled to work until a certain time (they are hourly workers who have to do things like clean the store and “make” sauce) so they can’t really “go home early” if they make their income target for the day. They can of course shirk (go sit at home or run errands while on a delivery) but you should probably still get your food before they do that if you tip $5, and if they see there is another $5 tip waiting for them they will probably get back quickly to try to snag that delivery as well.

Granted, my experience involves a very poorly run pizza place (the managers kept losing the store keys so they gave the last one to me and my roommates – who were drivers – because we wouldn’t lose it), and so we kind of had free range to do what needed to be done as far as the delivery end to make sure we got tipped well. Places with better management probably won’t let you take a 7-pie (that’s 7 different deliveries at once) for a $1 bet that you can do it in 35 minutes (made it in 34). But I’m guessing the incentives are still similar in a better run store so that drivers want to get back and take more deliveries. Maybe I am misremembering, but in the 2 years or so that I worked as a driver I don’t really remember anyone slacking off when it was busy. People slacked off when it was slow and people certainly delivered to non-tippers after they delivered to tippers even when it was busy.

37 Spencer October 17, 2012 at 1:32 pm

As a former driver I’d say usually, especially if you’re a repeat customer.

38 Mike October 16, 2012 at 9:29 pm

I know this isn’t directly on topic, but i’ve got to ask; why do I (in austin, tx) get charged a delivery fee AND i’m expected to tip? Seems like i’m being charged for not taking up space at a table. I still tip the drivers reasonably well (15% if it’s delivered on-time and hot) but always feel like i’m being scr*wed.

Oh, i always tip cash when it’s delivered.

39 Shane October 17, 2012 at 10:21 am

15% for good service is not “reasonably well.” That’s average for average service.

The reason why you are expected to cover the same percentage as if you’re in the restaurant is because the logistics of serving a dining room full of patrons is much easier than the logistics of covering a delivery footprint typical for cities. At the restaurant where I worked as a delivery driver, the wait staff would usually get about $800-1200 in sales in a shift while I’d get around $400-600. Also, it costs the driver money to maintain his vehicle and to pay for fuel. Plus there’s the much higher risk of injury as a delivery driver than in waiting tables.

40 Rahul October 17, 2012 at 1:25 pm

Average service gets 10%. (at least in a restaurant)

41 Sam October 17, 2012 at 2:10 pm

I am a delivery driver at a chinese restaurant and have thought about this exact question before.

I don’t have any good hard data on this but I can give you some rough estimates.

I deliver in an urban area. Customers pay by one of three ways. Cash, credit or through 3rd party online ordering sites. The split is probably 40/40/20. Our restaurant is somewhat unusual in that the drivers do not know how much the online orders have tipped until the end of the night. This information is kept from us because we use 3 or 4 drivers a night and there have been a few bad apples in the bunch. So in the name of efficiency and fairness we don’t know how much customers have pre-tipped. Otherwise unscrupulous drivers would skip deliveries that were next in the queue in order to take later orders with very nice tips.

As far as what customers tip better I don’t think there is a significant difference. Even the unscrupulous drivers don’t prefer any one of the payment types to any of the others. The area I am in has a couple universities and drivers don’t like to go there. These are the customers that are most likely to give a very small tip or none at all.

If our drivers could see the tips (and at most restaurants they can) I assure you that is more likely to help your service. Drivers aren’t stupid and delivery service thrives on repeat customers. Really great tipping customers (25%) are valuable. All things being equal a driver will goto the great tipper first, especially if they’re a repeat customer.

Case in point. We have 2 particular customers who are outstanding tippers. Drivers jump at the chance to take their orders. The first one is located a couple blocks from the restaurant. He routinely tips 20+ dollars on 20 dollar orders. He ALWAYS gets his food within 15 minutes of calling it in. Chinese food can be prepared very quickly and as soon as it’s ready a driver leaves with it. The other customer lives about 3 miles from the restaurant and always tips 10+ dollars on a 20 dollar order. Drivers make it a point to get out there as quick as possible.

These guys don’t want to kill the golden goose. And you don’t have to tip like Daddy Warbucks to get this kind of service. The drivers know what repeat customers are decent tippers and try to provide good service to them.

42 Mark Lyon October 17, 2012 at 5:41 pm

I vary my tip from the Seamless default based on distance. The search screen tells me how far a restaurant is from my location; I use that data when ordering in bad weather and when tipping. For instance, one place that delivers to my office has really good dumplings, but they are far away. If I were just ordering from a menu, I’d not consider that they were far away when ordering, but since this information is easily accessible to me, I use it and decide to order a bit more than I might otherwise (perhaps I’ll ask a colleague if they want something) and I usually crank the tip up a dollar or two more.

I’d love to be able to have better transparency on the Seamless site – perhaps alert me if someone in my building recently placed an order from a certain place or advise me if a restaurant has a low health department rating.

43 Ross Parker October 18, 2012 at 6:40 am

People say we Brits talk a great deal about the weather. I think talking about tipping practice is the American substitute. I once spent a whole day on a skiing holiday with a group of Americans whose sole topic of anxious conversation was how much to tip their chalet host at the end of the week. I bet there are as many tipping apps in the US as their are weather apps over here. I am sure that Americans find the weather chat similarly peculiar.

44 ShaneM October 18, 2012 at 11:33 pm

Ha! Not sure about the weather though. I can’t talk my grandmother without her asking me about the weather.. We usually discuss it about 3 times during the call. LOL

45 Gulltopr October 18, 2012 at 3:09 pm

I use to work at a hedge fund where all our meals were paid for, if we ordered via seamless web…(nice until you realize that the goal is to keep you form ever leaving your desk) – so i have a slightly different perspective since i wasn’t “paying” for the tip but was buying about 7 meals a week on seamless – I usually tipped generously in order to ensure good service (prompt delivery) but actually usually took out bad service on the restaurant (not ordering from them) rather than tipping less in the future. All this despite the fact that its really hard to tell whether speed of delivery (the only real metric to judge a delivery driver on unless they are down right surly or managed to drop kick your food) was their fault or the kitchen’s (especially if you have a meal that is served cold).

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