As a server, the Cornell School of Hotel Administration always has interesting studies ...
Quote:
Cornell Study Says Tipping Makes Restaurants Seem Less Expensive
red bar Ithaca, NY, February 12, 2007 – Why do restaurants rely on tips instead of a flat wage to compensate waiters and waitresses? Why not build the cost of service into menu prices? One explanation involves the way consumers determine how expensive a restaurant is. According to this idea, consumers will perceive restaurants with higher menu prices but no tipping to be more expensive than restaurants with lower menu prices and tipping. A new study from the Cornell Center for Hospitality Research finds that this is exactly what happens.
The study, “The Effects on Perceived Restaurant Expensiveness of Tipping and Its Alternatives,” compared the expensiveness ratings of restaurants with tipping, added service charges, and service-inclusive pricing. Of those three practices, the one that seems the most expensive to customers is service-inclusive pricing. Tipping and service charges, on the other hand, seem to take advantage of lower menu prices despite higher add-on service costs. Thus, restaurant customers don’t appear to take tips into account when they judge how expensive a restaurant is. The study is available at no charge from http://www.hotelschool.cornell.edu/c...erreports.html.
Authors Shuo Wang and Michael Lynn, both of the Cornell School of Hotel Administration, used a computer simulation that allowed participants to make food selections from several restaurants, each of which used tipping, service charges, or service-inclusive pricing. Even after the participants saw their final bill, which included a tip or service charge, they viewed the restaurant with service-inclusive prices as more expensive.
“We concluded that our participants were generally using menu prices—and not the total bill—as their guide for how expensive they viewed our simulated restaurants,” said Lynn, an associate professor of marketing. “Thus, it seems to us that only restaurants with price-insensitive customers can adopt service-inclusive pricing without risking the loss of customers.”
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The methods that companies use to give their product a higher perceived value or a cheaper price are fascinating. From the all-you-can-rent Netflix subscription (
they start dragging their heels, and delaying your shipments if your appetite for DVD's is as unlimited as your subscription) to the $2.369 per gallon (yeah, that 1/1000 of a cent bargain) I paid for fuel today, companies maneuver to make people think that they are getting a deal. Ever notice the shrinking size of cereal boxes, yet steady prices? Are such practices good, bad, or just circumstance?
Has anyone read Robert Cialdini's
Influence: The Psychology of Persuasion ? It's a great read to see how people are manipulated by - among other organizations - businesses.