Lessons from the Tip Jar

The following post was originally published in October 2011

I recently attended a formal function that offered a cash bar service.  The bartender (we’ll call her Jennifer) was engaging and efficient at her role.  She may have also been a prudent business person, for while she was serving beer and wine, she was also selling tips. 

To drive tip revenue, Jennifer employed one of the most common sales techniques used in coffee houses and event food and beverage:  the tip jar.   Powerfully simple in its approach, the tip jar can be highly effective in driving ancillary tip revenue for the barista or bartender.  Here is how it works:

First, the bartender creates the opportunity for the sale:  simply putting out the jar is the equivalent of stocking the shelf at retail.  If you don’t stock it, chances are good you won’t sell it!  Usually, the jar is large – defining an upper limit of the tip revenue potential.  Seeing a relatively empty jar (in theory) motivates or guilts the next customer into a higher form of generosity.  

Second, the jar is often ‘seeded’ with a starting amount of money, usually a $5.00 bill and/or a $2.00 Canadian coin.  This is the implied testimonial:  someone else thought so highly of the service that they elected to tip $5.00 for it.  Noticeably absent in the seed money are quarters, dimes, or nickels.  This seeding sets expectations upon the customer of the size of tip that ought to be considered.  Any tip smaller than the ‘norm’ would portray the customer as “cheap” compared to those who have tipped before them.  

Finally, bartenders might add a suggestive selling message, often in the form of a personalized note to express their appreciation for the tip that is yet-to-come.  For a look at some off-colour and humorous creative tip jars, do a google image search on “tip jars”.

The tip jar offers valuable lessons in how organizations might pursue ancillary revenue.  It requires us to think about availability (can the customer access it?), awareness (do they know about it?), persuasion (have we given the customer a compelling reason to buy?), and social proof (have others taken the chance to buy and been satisfied?).  If generating ancillary revenue can work for Jennifer, surely it is worth thinking about in businesses that serve thousands, if not millions of regular customers every month. 

The Bottom Line

Deceptively simple, the tip jar is a successful revenue-add technique that has been honed to perfection over time.  At Stratum Five, we make it our business to observe, analyze, translate, and apply these and many other methods to revenue growth across multiple industries.  To find the simple solutions to revenue growth in your business, please consider giving us a call today.