Using the transfer data on our dashboard, there’s a limited amount of information that we are offered, and thus, a limited amount of calculation we can do to analyze our revenue stream.
1. Postmates splits the delivery commission with us at a rate of 80/20. So, you can easily determine what the customer’s total delivery fee was.
2. The customer’s tip amount is shown, and with that you can calculate some arbitrary numbers that may or may not paint a picture that will help clarify total value both to the customer and the courier.
The most important piece of data, when it comes to the tipping behavior of customers, is the total order amount. Unless we screen-shot our phone at the right time, we won’t have that information, and that is what you can use to determine the tip RATE. That’s the important number.
In the service industry, it’s common to see 15% – 20% on top of the bill as a gratuity. It’s not required to be paid in most cases, rather it’s earned by the service provider and paid by the customer in the form of a “certificate of appreciation.”
In delivery where the delivery fee is built in to the product, or is complimentary, the customer perception is that they’re paying a fair price for a product and they’re getting something free. When that happens, then the math surrounding a tip changes. Here’s an example.
Joe works for Pizza Land who offers “free” delivery. He delivers a pizza to Fred which costs him $14.99. The customer pays for the pizza and throws $2.00 in as a tip, a total cost of $16.99. The tip is 13.3% of the total bill. Not stellar, but not stiffed.
Joe then becomes a Postmate. He is commissioned to deliver a pizza from Pizza World, an establishment that doesn’t offer delivery. The pizza is priced competitively at $14.99, but because he’s using Postmates, he’s billed a delivery fee. We’ll say for the sake of this example that it was only $5.00. Fred, ordering through Postmates, receives his Pizza World pizza to his doorstep for a total of $19.99 before a tip, which is considerably higher than Pizza Land. The trade-off is that he likes Pizza World better, and that may be worth the extra few dollars.
HOWEVER, now that he’s already spent more in just delivery fees, what effect is that going to have on his willingness to tip? Is there a psychological connection to the amount someone is tipping when delivery is built into the pricing or offered free as opposed to not? Is his perception that he has already spent the money on the courier service, and that is enough? Perhaps. I don’t have any scientific data to back this up.
I also don’t have any way, without recording the total of every order, to test the theory, but I have a hunch. And that hunch tells me that when someone orders something for $8.00 and pays $5.00 minimum for delivery (62.5% more than they need to,) that they’re less likely to tip generously, unless they work in the service industry (generalization.)
Now, if someone orders $100.00 worth of food and the fee is $5.00, then they’re only paying a 5% premium for delivery, and thus, if they are a tipper and they tip 15-20% typically then you may see a 15% tip to round out the total fees to the customer to 20% above the price of the food. The same they would pay, minus their time, if they were to come to the restaurant itself.
So, are we really being stiffed when a consumer pays for delivery through Postmates and doesn’t tip? If only I could analyze this on a curve over time to track consumer behavior in a given area.
There are certain metrics that are not offered to us that would be helpful for record keeping. For instance, there’s no log showing when we went on or off duty. There’s no data showing us response times, delivery times, and wait times once we reach the location. This is all good data that could be used to improve each of our businesses. And remember, we are independents, which means we’re running a business independent of each other, and when you are an independent, if you don’t treat your business like a business, you usually go out of business.
In the world of real estate, I am also an independent promoting my broker. Postmates is our delivery broker. However, at HomeSmart it is completely up to me to generate business and I don’t receive the same type of “leads” from my broker that I do from Postmates, my delivery broker. If I want business, I advertise in specific areas to a specific clientele base, and I can measure the reward.
As an independent, it would be in my best interest to promote Postmates in the area containing the customers that are most likely to order higher dollar orders, but without data to analyze my return on investment, nor zero guarantee that if I work the area I’ve promoted that I will get the leads, there’s little incentive to actually do that type of promotion.
Even if I give out my promotional code, or if I tell 100 people about Postmates, there’s no guarantee that the interest that I’ve generated in Postmates will directly affect my bottom line. In other words, my friend’s orders aren’t going to come to me. They’ll go to the first responder, unless I’m mistaken regarding how the system works.
I’m curious to hear your thoughts on the topic.