Friday, April 1

An ingenious nudge

I discovered a very bright "nudge" while meeting up with some friends at the local Royal Oak last night (for non-Ottawan readers, it's probably the biggest pub chain in the nation's capital).

The Royal Oak does a good job of providing a decent atmosphere, decent food and a decent pint. They are also do a surprisingly good job of using anchors to their advantage. Anchors are quite simple and can be very effective — by triggering a customer's mind to a specific price or rate, you can affect how much they value a product.

The Royal Oak location I visited is one of those technologically up-to-date pubs where they bring the point-of-sale terminal to your table when you pay your bill, as opposed to bringing you a receipt to sign. When you pay with a credit or debit card, the terminal first prompts you to approve the amount of your bill. Then, on the tip screen, it gives you two choices: 20% and "other."

When I saw this, I did a double-take. A 15% tip is the norm in Canadian restaurants. A 20% tip seemed excessive, but I also thought I'd look cheap by disagreeing with the default. I momentarily thought about meeting the machine partway and giving a 17% tip, but it was too late: I already had the 20% anchored in my mind. Was the service bad enough to warrant me docking some of the tip? Nah. I selected the 20% option and passed the terminal back to the waitress.

Curious, I asked the waitress if most people tip 20% when paying with a card. "Yeah," she said. "Most people are too lazy to bother changing it. It's great — I usually take home at least 15% in tips, even after I share them with the kitchen."

Cheers to a pub that understands behavioural economics.