Updated: Dec 24, 2018
Did you ever wonder why founders of Uber decided against in-app tipping at the time of launch in 2009?
Why so seriously late?
Let's first understand the economic meaning of 'tip'
Customers pay extra money in return for a service offered to express their gratitude. Tip is paid to those service providers either work on a minimum wage, are seasonal workers or do not make a fat 6 figure salary. A tip motivates a service provider to enhance the consumer's experience. In a tip culture like US, consumers factor in a 10% to 20% tip at a restaurant, salon,cab etc. According to me the economic meaning of a 'tip' is the 'additional purchasing power of a consumer'.
Uber v/s In-App Tipping
Founders of Uber, Travis Kalanick and Garret Camp, launched Uber with a low cost strategy. They did so by marketing 'Cashless & Tipless' or by educating their drivers to say 'Do not tip but instead give us a rating and review'. Uber cared less, even after Lyft launched in 2012 with an in-app tipping feature. What was Uber trying to achieve? Well, Uber was acquiring the additional purchasing power of a user. It was clear on day 1 that Uber was not going to sustain on a 80-20 fare share model. Instead of pleasing their drivers, Travis and Garret first monetized their riders to their maximum capacity and then introduced in-app tipping.
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