Archive | May, 2011

Opt in vs. opt out in tipping

31 May
To tip or not to tip

To tip or not to tip?, that is the question

The tip line. A somewhat passive-aggressive solicitation for money. It’s long been the norm at full-service restaurants, but it also appears at many places where I wouldn’t ordinarily tip. If I order and pick up my food at the counter, a tip seems unnecessary. If I pay cash, there is no default expectation of a tip. (Though there might be an easily ignored tip jar somewhere.) But paying by credit card, the tip is closer to an opt out. I have to explicitly draw a line through the tip line and write in a total. I’ll admit to tipping at places I wouldn’t ordinarily tip because of the subtle pressure. Sometimes I’ll pay with cash to avoid the situation.

Changes in payment systems are changing this dynamic. Increasingly, credit card companies aren’t requiring signatures for low-value transactions. With MasterCard’s Quick Payment Service, transactions under $50 can be processed without a signature. It’s faster for the consumer, moves the line quicker, but removes the opportunity to tip on plastic.

Square’s payment service offers a tip option:

Square's tip button is off to the side

This implementation is the equivalent of the physical tip jar: if you go through the normal transaction flow and just sign, there is no tip. You have to explicitly click the box in the upper right corner to add a tip. (I haven’t seen what the tip experience is like with Square’s new Card Case.)

Is that the right experience? It depends on whom you ask.

One merchant I talked to would prefer that the tip was part of the default transaction flow, as it is with a credit card slip. On a $5 food cart transaction, even a $1 tip is huge. As a consumer, I prefer the opt in experience. As a product designer, this is a great example of how even small changes can have big impacts.

Either way, the customer doesn’t have to do math. That’s already a huge improvement over the paper experience.

What Square’s new Register and Card Case means for small businesses

23 May

Square today announced its Register and Card Case products to complement the existing Square reader and smartphone applications. While Square has been focused on the merchant experience, this move expands its role on the consumer side. (Consumers have been able to receive receipts by email or text message when making purchases at Square merchants.)

With the new application, customers will be able to search for nearby Square merchants, see what’s on their menu and view receipts for previous transactions. Customers can also pay right from their mobile phone and the payment is confirmed on the merchant’s iPad.

Merchants will have the ability to accept a payment without swiping a card. They can also keep better track of what they’re selling. A loyalty program allows businesses to reward loyal customers. Unlike check in based systems which involve users to self-report, this system would be harder to cheat.

One open question is whether these transactions will be treated as card present transactions for Square. I expect that Square will charge merchants the swipe rate for these transactions. If they’re paying out the card-not-present rates, this will eat into their margins.

What we’re seeing here is only the beginning. There are a lot of important problems that can be solved with the data that Square will be collecting:

Consumer problems

  • It’s 2 a.m. and I’m hungry. What’s open? This is a problem that search generally handles poorly. Yelp has done the best job of collecting this among anyone I’ve seen. (Google tries, but its data is less comprehensive.) Even when the data are collected, they are often inaccurate. (Holidays, business was slow so we closed early, etc.) The Square Register could contain a virtual Open and Closed indicator that is visible to consumers.
  • I have a craving for a dosa. Where can I get one? With menu item data, Square could answer that question — at least for its merchants.
  • I have a receipt, but I can’t remember who I was with. The Square app could allow users to flag tax-related transactions and record notes like who you ate with.
  • I want to tell someone about a place I ate at, but can’t remember the name. (And want credit.) People are generally bad at remembering place names. Merchants could also offer rewards for new customer referrals, much like online merchants do.
  • I’m in a hurry and I need an order to go. Consumers could order right from their mobile phones, the order would pop up on the merchant’s screen and the merchant could select an estimated pickup time. For the merchant, this also reduces the risk of nonpayment for phone orders that aren’t picked up.

Merchant problems

  • Updating Web sites is hard. Most local business Web sites I go to are horribly out-of-date. Menu items and pricing can be more than a year old. Hours are often wrong. Maps are hard to find. Square could take the data from the Register system and generate Web pages with dynamic information, including today’s specials and hours. Some card issuers and payment processors have offered Web site creation, but these have mostly been low quality efforts.
  • I don’t have a mobile presence. Very few local businesses have dedicated mobile sites. At best, you get a hard-to-read version of the main site. At worst, you see sites created by incompetent flash designers who knew nothing about user experience. These render blank on an iPhone. Square-generated mobile Web pages would provide easy access to key info such as location, hours and menus. Google says about 40% of searches on mobile devices are local in nature — as a result, this is becoming increasingly critical.
  • I don’t have time to enter data multiple times. Square could also generate a PDF that could be printed for in-store menus. Data entered once gets used for POS, paper menus, Web site, mobile site and promotions. This not only saves on work, it eliminates inconsistencies which can cause customer service problems. Getting a bit crazier and thinking further out into the future, a Square app on an Apple TV could show promotions in store.
  • I want to get people to try new items. Square could use transaction history to entice regular customers to try things on the menu that they haven’t tried before. With promotions, you want to spend your promotion dollars on transactions that wouldn’t happen otherwise. Paper coupons are dumb in this regard. Say you’ve got a raspberry tart that you think is amazing. You could find all of the customers who haven’t ordered it and send them a promotion.
  • I want to know what my customers think of me. An email after the fact could prompt users for feedback and generating a net promoter score. It can also be a way of drumming up more business. For example: “Would you recommend us to a friend?” If the customer says, no, you can ask why. If yes, you can ask for friends right then and there. “Whom would like to recommend us to?” The referral can be coded so that the business can thank the original customer for the referral. A Square app could also provide more actionable data than the typical Yelp review — a restaurant would know when they ate, what they ordered, etc. This would make it easier to identify problem employees or dishes.
  • I want to know how I’m doing compared with other businesses in my area. I charge $3.50 for a slice of pizza. How does that compare with others? How does my revenue compare? Of course, this all needs to be done in a way that protects business anonymity. Data would only be available when there is enough participation so that a single businesses’ information can’t be identified. Participation should be opt in, with the carrot being access to data. The key here is that data needs to be in a meaningful context. I’ve seen many startups that just want to throw data at businesses. That’s not good enough. Square will also need to answer the “So what?” What decisions should I make based on that data?

See also:

Shop talk: Square and Groupon

10 May

Today I had the opportunity to talk with Dave from Chili Inside / Chili Outside a food cart operating in Portland. Chili Inside recently ran a Groupon and also uses Square to take credit card payments.

The key takeaway here is that simplicity sells. The credit card acceptance market has been complicated to understand, with setup fees, monthly fees, minimums, upcharges for certain types of cards, etc.

Not only does simplicity make the initial sale, it makes it easier for those customers to evangelize your product because they’re comfortable explaining it to others.

Square

  • Dave found out about Square when his son, Alex, spotted it at another food cart in Portland.
  • Other providers “seemed more daunting to even look into.”
  • “When Square came along and it looked easy and simple. It was.”
  • Before Square, he would try to get customers to pay with cash on hand or direct them to a mini-mart to get cash. One of Chili Inside’s older Yelp reviews says, “Only cons were they are not set up to take cards which cost me $2.50 around the corner to use the ATM.”
  • Customers have reacted very positively to seeing the iPhone with the Square reader. “Most everybody is pretty dazzled by it. It’s really fun to show it off.” Dave also showed me his technique to get it to swipe the first time every time.
  • He uses the Square reader daily. About 1/3 of his transactions are by credit card. During the time I was at the cart, at least three people paid with Square.
  • Square’s pricing was lower and less complicated than other vendors.
  • He is pleased with the real-time reporting capability. “We’ve got real time feedback virtually on every credit card swipe we take.” He showed me the screen with transactions that had just happened.
  • He was pleasantly surprised that a Square representative gave him a phone number to call with questions.
  • He would like to see the tipping option more prominent in the interface.
  • He has evangelized Square to other businesses locally. Square sent him a bunch of readers and he has been handing them out.

Groupon

  • Chili Inside ran a Groupon promotion on the same day as several as other Portland food cards.
  • 533 Chili Inside Groupons were sold. A normal day is 20-30 customers. Groupons were about a month worth of business.
  • In the week since the Groupon ran, about 35 have been redeemed. Dave estimated that 20 of them were from people who hadn’t heard about Chili Inside before.
  • Dave’s primary goal in running the Groupon was to introduce customers to his food and inspire repeat business. As a new business in the area, it was important to reach an audience. (See 5 cases when it makes sense to run a Groupon.) “Most of the people that purchased the Groupon didn’t know we were here and they live within blocks. We believe when people have our food, they’ll come back.”
  • Chili Inside uses an iPhone to scan the bar code on Groupons to redeem them.
  • He had approached Groupon months ago and never heard back. Then a rep called him about the food cart day.
  • Groupon has approximately 500,000 people on its mailing list in Portland. Chili Inside sales were 0.1% of that.
  • He has been approached by other deals sites, including LivingSocial.
  • Dave wouldn’t disclose the terms of the Groupon deal.

Google

Other

  • His wife monitors Yelp reviews and updates Facebook and Twitter pages.
  • Dave wasn’t aware of foursquare.

Note: As with most such research, when I mention that someone isn’t aware of something, it isn’t a criticism. It’s meant to highlight that even though people in the industry talk regularly about services like they’re ubiquitous, they aren’t.

See also:

Amazon offers up a new Kindle

2 May
A Kindle ad for Oil of Olay

A Kindle ad for Oil of Olay. The creative looks splotchy on the Kindle's e-ink display. Why this ad shows for a 30-something male is another matter.

I received my Kindle with Offers on Friday. It’s Amazon’s latest attempt to take on a somewhat new market. The name “Kindle with Offers” is a bit misleading, but it sounds better than “Kindle with Ads”.

Many of the ads aren’t offers at all. Here is the initial set I’ve seen:

  • An ad for Buick.
  • An ad for Oil of Olay.
  • An ad for the Amazon VISA card touting 3x rewards points on Amazon purchased. (This is their standard rate.)
  • An offer for a $10 credit if you register your VISA card as the default card for Kindle purchases and buy a Kindle book from a select list.
  • An offer for a $20 Amazon gift certificate for $10.

For people used to Web ads that flash, blink and otherwise overwhelm content, the Kindle ads are barely present. One appears on a small portion of the home screen, similar to a banner ad. The other format (shown in the picture) takes over the entire lock screen of the device if you haven’t been reading for a while.

The ads are disappointing. Amazon hasn’t done anything unique or interesting with them. Some of the ads on the Kindle were clearly repurposed.  Ads for Oil of Olay makes extensive use of gradients, which look terrible on the Kindle’s e-ink display. I thought my screen had become defective until I cleared the ad.

I really shouldn’t even see the Oil of Olay ad (not female) or Buick ad (not old enough). Amazon should know that neither ad provides value to me or the advertiser. The ads I see on Amazon.com are much more relevant than these.

In terms of offers, VISA is trying hard to be at the forefront of mobile payments. A similar promotion ran when Starbucks launched payments on the iPhone; if you registered your VISA card and bought Starbucks credit with it, you received a $5 bonus. VISA also recently invested in Square.

The $20 Amazon certificate is similar to the promotion that LivingSocial ran earlier. Except this time Amazon is footing the bill for the promotion.

Acting on an offer is a bit clumsy. After selecting an offer, you get an email with all of terms and instructions on how to redeem it.

Kindle with Offers is priced at $25 less than the comparable Kindle. The discount on the Amazon gift card is effectively another $10 loss. That brings the Kindle with Offers discount to $35. For comparison, Google makes less than $20 per year per user (on average) for its massive advertising engine.

For a media play, Kindle will need a lot more advertisers. Or it will need an aggressive revenue share on real offers like Groupon has.

Otherwise, it’s just a way to get Kindles in the hands of more price sensitive customers without repricing the base product. That itself is not a bad goal.

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