This Is Marketing: You Cant Be Seen Until You Learn to See

Case Study: No tipping at USHG
For more than a decade, the best reviewed restaurant in the New York
Zagat’s guide was the Union Square Cafe.
Over the years, the company that operated the café added nearly a dozen
other highly regarded restaurants around New York (and spun off Shake
Shack, a billion-dollar company, in the process) as part of the Union Square
Hospitality Group (USHG).
In 2016, they stunned a lot of observers by eliminating tipping.
Instead of accepting tips, USHG raised their prices 20 percent. They
devoted the increased revenue to offering parental leave, fair wages, and the
chance to treat their team as professionals. The shift meant that the folks in
the back of the house (who actually cook your food) get paid better, and it
means that the waitstaff have an incentive to work together, to trade shifts,
to work the way a doctor, a pilot, or a teacher might—for the work, not for a
tip.
This is great leadership, but it presents a host of marketing problems.
How do you communicate the price increase and elimination of tipping
to a regular customer, someone who values the perception of a special
relationship because he sees himself as an above-average tipper?
How to communicate this to a tourist, who is comparing menu prices
online before making a reservation, and doesn’t know that having tips
included makes the restaurant much cheaper than it appears?
How to communicate this to the staff, particularly the highest-earning
servers, who stand to see their wages go down?
What’s the change being made, and who’s it for?

---

One of the big insights to take away is that a change like this can’t be for
everyone. For example, some diners find joy in the status they get by
leaving a big tip. They do it with a flourish, and, in the scheme of things for
someone who’s well off, it’s a cheap thrill. USHG can’t offer that thrill any
longer. “It’s not for you, sorry.”
On the other hand, a diner seeking affiliation as a form of status can find
that the right sort of sincere thank-you feels far better than the fear
associated with tipping too little or too much.
Better still, the diner who has a worldview that revolves around fairness
and dignity now has a harder time patronizing other restaurants. Given the
choice between a restaurant where the workers are engaged, fairly treated,
and working with dignity—or one where the hierarchy undermines all those
things—it’s easier to become a regular at a restaurant that is proudly aligned
with your view of the world.
Dining in a restaurant is rarely a solo endeavor. USHG gives hosts a
chance to gain status through virtue signaling. They give diners a story they
can tell themselves (and others)—a story about how the small act of
choosing a restaurant turns the ratchet on a much larger issue around race,
gender, and income disparity.
That story isn’t for everyone, but for the right people, it transforms the
experience.
Who’s it for, what’s it for, and how is status changed? What will I tell the
others?

---