This Is Marketing by Seth Godin

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?