In the United States, certain classes of business receive a substantial amount of their total revenue in the form of tips. Restaurants are probably the most common example.
However, now that a huge fraction of transactions are done by credit card or phone, it has become feasible for additional businesses to get in on the tip-collecting process (tip-collecting tablet example in Figure 1).
For example, previously, a lunch truck might have had an anemic tip jar—obviously a repurposed peanut butter jar—with 87 cents in it. But now, that same truck can just put a button labeled “TIP: 15%” on their electronic checkout screen, and a substantial fraction of patrons will select that option.
As a thought experiment, consider how many people would tip two dollars on a $10 burrito cash transaction (very few), then compare that to the number of people who would click the “20%” button on an electronic checkout (many more).
(Please appreciate the high-quality market research that went into the preceding sentence.)
While the best part of this system is that it allows a normally non-tip-based or non-service business to get tips, there are still stubborn holdout customers who will not include (for example) a 25% gratuity for an oil change, or when buying tomatoes at a grocery store, or when paying a traffic ticket.
But there is still a way to persuade these individuals!
In order to incentivize people to click the tip button (instead of just the “checkout: NO TIP” button), we can simply have a secondary screen that shows the tip amount.
People might object to this brazen attempt to shame them for not including a tip, so we will disguise it a bit by calling it an “Order Confirmation” screen, and using it to provide a customer transaction number (i.e., it is a supplement to the normal “your order is number 326, your burrito will be ready when that number is called” process).
People might object to having the full dollar value of their transaction visible on the “confirmation screen,” so we could potentially show only the tip percentage rather than the full value.
PROS: Increases previously-untapped revenue streams for low-margin businesses.