As a business owner, when you advertise your business, your ad spending benefits your employees by increasing the flow of customers. All good!
So, what about the new world of Daily Deals? The reduced margin of your discount offer is partly justified by allowing you to reduce your traditional advertising expenditure. So, as a business owner, you can spend less on advertising and use Daily Deals to drive new customers. However, this time it gets personal to your staff!
Daily deals are a unique new beast, where the discount pricing approach directly affects your service team. According to the August 2010 Rice University Survey on GroupOn effectiveness, the single biggest predictor of deal profitability is in the hands of your service team!
Gypped on Tips?
We all know that a Daily Deal can drive legions of new customers to try your products or services with a guarantee of a low price tab. But the lower tab results in less tip income to the service staff. A 20% tip on a $70 bill versus 20% on a bill that deducts a $40 prepaid coupon represents a tip income “loss” of 43% from the normal price.
Service staff are increasingly aware of this issue, and how you handle a tipping policy will be watched closely.
Here are three paths you could take, along with a little pro-con discussion on each:
1. Policy Protect Your Service Team.
Some businesses have elected to require the consumer to pay a fixed tip on the full price value of the coupon, in order to “protect” their service personnel from the loss in tip income, and to give them incentive to view Daily Deal customers as valued new prospects. In practice, this is most often calculated on check-out – if the customer is paying with a discount coupon with this in the fine print, the final bill would deduct the coupon amount and add back a tip percentage of the discounted value.
This can be viewed as the “safe way” to protect your service quality and prevent a backlash by your front line team who build up an attitude towards discount customers.
The downside of this practice is the sometimes visceral reaction of consumers to being forced to tip. Some percentage of your new customers will be put off by this practice, and this can negatively impact their experience. In today’s world of consumer reviews, there is an increasing risk of these comments making their way to review sites like Yelp.
2. Do Nothing.
Most Daily Deal coupons simply are quiet on tipping, and adopt a “that’s business” attitude. After all, the math should be net positive for most businesses – if you double your base of customers in the short term, the net impact on service personnel income should come out positive. Not to mention the impact of a growing base of returning customers.
Will this come back to haunt you? Service teams are increasingly aware of the issue from past experiences and industry chatter as more and more of your peer businesses use Daily Deals. Under any scenario, a considered decision to let the customer decide how to tip really deserves to be communicated.
3. Offer Suggested Tipping.
An increasingly common practice is a polite notice on the printed coupon to “please tip on the original value”, reminding the customer that their great deal shouldn’t come at the expense of the service personnel who often rely on tips as primary income.
So, this feels like the “safe middle ground” doesn’t it? Striking a balance between not irritating a portion of your new customers with forced policies and encouraging consumer behavior that is positive to service personnel seems logical. The obvious question is whether it really has any impact on consumer tipping practices?
Any Creative Ideas?
When you do a Daily Deal that has a big impact on your staff, it’s worth getting creative. What did you do to prepare your staff – for the increase in business, longer hours, and tipping policy choices you have made?
We’d love to hear your ideas on how you’ve dealt with this delicate and critical balancing act.