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Tipping in the restaurant industry

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Eliane Moerenhout

on 4 September 2012

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Transcript of Tipping in the restaurant industry

The restaurant industry:Hybrid The servuction model The importance of physical evidence The importance of people
-A set of stimuli (sight, sound, touch, taste and smell)
-An organism component (employee/customer)
-A set of responses (approach/ avoidance behaviors) The contact personnel: the public face of a service firm Other customers Consumer decision: A three phases process The prepurchase phase The consumption phase Agrarian -> Industrial -> Service -> Experience * Cognitive dissonance: Customer doubts about his decision
* Customer satisfied -> Loyalty, retention, positive WOM What is customer satisfaction? What is service quality? Consequences of CS and SQ The postpurchase phase Consumer fulfillment response Customer satisfaction in the restaurant industry
Customers will return a restaurant first for the quality of food, second for the quality of service *PZB -> difference between expectation and performance

*Service quality -> entire family picture album customer satisfaction -> one snapshot Is tipping a mean to achieving SQ and thus CS? What is tipping? How to justify tipping behavior? The different systems across countries A relatively small amount of money given for services rendered as by a waiter -> 15 to 20% of the bill $42 billion in the US food industry

Zagat survey: 80% of the pop -> voluntary tipping system -Social norm
-Selfish agents -> tipping illogical?
-Future service quality
-Motivate employees
-Avoid embarrassment and guilt/ feel fair and generous Study by Lynn on 21 countries
->Number of tipped professions increases with levels of extraversion and neuroticism and decreases with levels of psychoticism The effect of tipping on customers: Buyer monitoring Tipping and the employees: The ASA model for a better workforce Tipping and the institution: A profitable system Jacob and Page: hard for the restaurant owners to control the employees -> easier delegate judgment to customers

Lower wages, get employees motivated (Vroom's expectancy theory of motivation) Tipping increases demand and improves competitiveness Lynn, Kwortnik, Sturman: Attraction-Selection-Attrition

-> better service workers thanks to tipping

-> Agency theory There is no link between tipping and service quality However, the link seems to exist: Perception Approach Lynn, McCall -> very weak correlation of 0.11
-> Tipping and weather condition

Azar: tipping-service puzzle -> if not related why make an extra effort? Correlation from OLS regressions (correct if service quality exogenous but it is endogenous)

The fact that servers believe that the amount of tips is related to the quality of service

To keep quality, customer should reward according to quality The insights of customers: A quantitative survey Online survey 205 respondents The insights of servers:
A qualitative research Interviews: 57 respondents Restaurants adopting a different system than their country's custom A UK restaurant adopting the tipping custom Per Se: A NY restaurant adopting the service charge included system September 2005 -> from tipping to 20% European style service charge

Interview
-More balance between front stage and back stage
(higher hourly rate)/ Stop worrying customers with computation

-99% of customers leave on top of service charge -> goes to the waiter
-System works -> Per Se is high-end
-Good SQ because Per Se selects carefully its employees How to satisfy customers in the restaurant industry? INSIGHT Services are
-Intangible
-Heterogeneous
-Inseparable
-Perishable What is conveying CS and SQ? A brief introduction on tipping Everybody's choice goes to tipping Is tipping correlated with SQ? Price presented in distinct parts perceived less expensive -> computer-simulated dining experience (Lynn and Wang 2007) -> Tipping/ service-inclusive pricing Conclusion E restaurant system: future of the restaurant industry? -Reduce training
-Decrease human errors


Preference between human errors or robot?

Would customers perceive it as high quality of service? Customers seem satisfied by the current system even if it involves a monetary cost
A norm erodes over time if it is costly to follow and people do not derive anything from following it Goods are tangible can be touched, felt, seen and purchased complaints primordial
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