Do American consumers want to be deceived?
Do they like being lied to?
Those are the provocative questions raised by a recent debate about eliminating restaurant tips. It’s a discussion that rages on, particularly in the travel industry, where consumers are lied to without shame or legal repercussions every day.
The tipping issue, you’ll probably remember, was triggered by a large restaurant group’s decision to phase out gratuities at its establishments.
One of the most interesting comments I heard was, “This will make eating out less affordable for many Americans.”
Technically, the price isn’t changing. It’s the initial price — the up-front rate quoted for an entree — that will rise, because it will now include the tip. But the cost to the consumer is more or less the same.
So how will this make eating in a restaurant less affordable?
Easy. Say you’re walking past a nice sit-down restaurant, and you review the menu. The burgers are a fairly reasonable $6.50 each. You run the math in your head and say, “I can afford to eat here with my family.”
But you don’t factor in the tip. But when the bill comes, you can feel the weight of the server’s stare on you as you’re handed the receipt. You see the large line item on the bill for “TIP” and you realize you’re going to have to add 20 percent to the bill. To not do so would deprive your server of a salary.
The restaurant has played a price game with you. It quoted a rate that only the most cold-hearted patron would pay: the one minus a tip.
Hotels don’t even give you the choice when they add a mandatory “resort” fee, which supposedly covers resort-like amenities, to your bill after you’ve made a booking decision. In some cases, long after you’ve made a reservation.
We’ve been over this material countless times. No need to repeat ourselves.
But let’s take the discussion a step further. What if that kind of pricing was actually preferred by American consumers?
Airlines seem to think it is, with their transparent airfares bill, which passed in the House of Representatives but has stalled in the Senate.
Many restaurant patrons say they like the tipping system, which rewards attentive service. (After all doesn’t TIPS stand for “To Insure Prompt Service”? It doesn’t, but who cares?)
Truth is, we appear to be hardwired to be fooled when it comes to pricing. One penny of price difference can make a measurable difference in our buying decision, say studies. We don’t just respond to the tricks, we appear to welcome them.
Are consumers like the insects who willingly buzz into the Venus fly trap? Or, maybe a more precise nature analogy would be the male praying mantis who is about to have sex for the first, and last, time?
Do we want what we know is bad for us?
I’ve mediated tens of thousands of cases where consumer should have known — had to have known — that they were about to be conned. The price was too low. The deal was too good to be true. And yet they reflexively whipped out their credit card and bought it.
(Incidentally, businesses use these destructive instincts as an excuse for giving us bad service. They say they’re just giving us what we want: low prices. The customer is always right!)
But if you try to explain this behavior in an evolutionary context, in the sense that perhaps our brains are wired to respond to the ridiculously low price even when we know it can’t possibly be true, then you realize that intelligence has nothing to do with it.
Point is, we can’t help ourselves. We do what we do.
And so today, in the latest installment of my That’s Ridiculous! feature, I ask: Are we ridiculous?
Despite all of our complaining, are we begging corporate America to lie to us?