Americans have tipping fatigue. Domino’s thinks it has the answer

New York (CNN) — Americans are being asked to tip on digital screens for everything from a cup of coffee to self-checkout at grocery stores, and many are frustrated with the new tipping culture.

Pizza chain Domino’s aims to tap into that exasperation. Not by eliminating tips, however. Instead, Domino’s is encouraging tipping even more.

Domino’s launched a promotion that rewards customers with $3 off a future online delivery order for every $3 or more they tip a Domino’s delivery driver. Domino’s “You Tip, We Tip” deal runs through mid-September.

“At Domino’s, we know there’s a lot of pressure to tip these days,” a narrator says in a cheeky new commercial showing people being asked to tip at the grocery store, gym and even a wedding. “Domino’s wants to say ‘thanks for the tip’ by tipping you back.”

The promotional strategy serves several purposes for Domino’s.

First, the ad campaign is a “crafty” way for the brand to engage with consumers, Kimberly Whitler, a marketing professor at University of Virginia’s Darden School of Business, said in an email.

“When ads connect with consumers on a meaningful societal issue in a humorous way (the minister asking for a tip at the end of a wedding is clever), they can have a better chance of breaking through,” she said.

Second, the $3 promotion may help Domino’s grow sales. Customers are hunting for deals so they can save money after three years of rising prices driven in large part by the Covid-19 pandemic.

Third, the advertisement is a labor recruitment strategy, said RJ Hottovy, the head of analytical research at data analytics company Placer.ai.

“It’s gotten more competitive to attract drivers,” he said. “Domino’s can point to this as a way to recruit new drivers while keeping existing drivers satisfied.”

Domino’s did not respond to CNN’s requests for comment on the advertisement or its pay.

Some surveys show that Americans are tipping less, while being asked to do so in more places. Tip fatigue is a problem for both Domino’s delivery drivers, who make a meaningful portion of their income from tips, and Domino’s business model.

“Tips make up most of our pay and are incredibly important for those who work deliveries,” said one Domino’s delivery driver in Florida who spoke under the condition of anonymity because the worker was not authorized to speak to the media. “We lose employees and encounter frequent turnover because of low or no tips.”

But Saru Jayaraman, the president of advocacy group One Fair Wage, sees Domino’s campaign as a way for Domino’s to avoid paying its workers a traditional wage and shift the bulk of their pay to customers in the form of tips.

Domino’s delivery drivers’ pay is linked to tips. Domino’s, like most companies in the restaurant and hospitality industry, pays its delivery drivers what’s known as the “subminimum wage” for tipped workers in 43 states, said Jayaraman, whose organization advocates to end the practice.

The federal subminimum wage for tipped employees is $2.13 per hour — lower than the $7.25 federal minimum for non-tipped workers — though many states require higher base wages for tipped employees. If a server’s tips don’t add up to the federal minimum, the law says that the employer must make up the difference. But this doesn’t always happen. Wage theft and other wage violations are common in the service industry.

Domino’s ad campaign is a way for the company to “encourage people to tip more rather than pay their workers an actual minimum wage with tips on top,” she said.

But the Domino’s driver said they were “grateful” Domino’s promotional campaign exists, and were fearful hours would be cut or earnings would go down if Domino’s raised wages.

The-CNN-Wire
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