Why Accepting Contactless Orders, and Mobile Payments Increase Restaurants Revenue & Average Check Size
With mobile & contactless payments growing worldwide, the same trend keeps showing up: People spend more money when they buy stuff from their phone.That’s just a fact. For context, when we refer to mobile or contactless payments, we’re referring to someone paying directly form their phone or mobile device, without the use of a payment terminal. At OrderUp, we’re very confident that our contactless order and pay will net higher ticket sizes, and more revenue.
But why? How can we be so sure? This post isn’t about OrderUp and our solutions, but about trying to explain the “why” behind this phenomenon of mobile payments. And to be honest, it’s not very favourable for the consumer, but extremely beneficial if you’re a business or restaurant owner.
There’s two sides to this:
You’re either the one spending more money, or you’re the one making more money. Good thing for restaurants, you’re in a perfect spot to be on the winning side of this, and reap the rewards of consumer spending behavior in 2021. We take a dive into what we already know about mobile payments, and then consider further research from academic sources to help explain the “why”.
What We Know About Mobile Payments and Larger Bills or Ticket Sizes
Thanks to our data, our friendly competitors, researchers and adjacent industry experts, we’re able to compile a baseline for consumer spending from a mobile device.
- OrderUp’s internal data suggest a minimum of a 16% increase in average check size
- Another order & pay platform found about a 12% increase in average check size
- A similar mobile payment provider saw an increase of 23%
- Pizza chains reported an increase of 18% when orders were placed from mobile/online vs over the phone
- Another study suggests a 20% increase when orders are placed via mobile
The Pain of Paying
The Pain of Paying is a behavioural economic theory developed Ofer Zellermayer in 1996. In Zellermayer’s own words “This work introduces the “pain of paying” — the notion that a consumer who pays for a product or service experiences emotions associated with the act of paying.” The study concludes that in general, paying causes consumers an emotional distress, or “pain”.
Since 1996, this research has been corroborated and built upon this initial theory. In 2001, researchers from MIT and Stanford were able to actually detect pain receptors in in consumers brain when they had to pay for something with cash. The interesting part, is that the pain was much less in subjects who paid by credit card instead of cash.
This brought up the concept dubbed as coupling. That humans are more likely to spend on a card because they don’t realize the immediate impact it has on their personal finance. In this MIT study, they offered participants the opportunity to buy basketball tickets to a desirable game. Those told they could pay by credit card were willing to pay twice as much as those who had to pay in cash.
“Credit cards effectively anesthetize the pain of paying,” said George Loewenstein, Carnegie Mellon professor of social and decision sciences (SDS) and co-author of the paper. “You swipe the card and it doesn’t feel like you’re giving anything up to make the purchase, unlike paying cash where you have to hand over bills.”
Millennials, and Mobile Payments in 2021
Fast forward to 2021, and fuelled by a pandemic, contactless mobile payments are set to surpass traditional credit card payments by 2025. Taking into consideration that Millenials and Gen-Z:
1. Are the largest demographic worldwide. (source)
2. Have the most purchasing power worldwide. (source)
3. And have grown up in a relatively cash-free environment compared to their older generations. (source)
We’re seeing a similar “Pain of Paying” phenomenon, except instead of Cash vs. Credit Card, it’s Credit Card vs. Mobile Wallet, Apple Pay, Contactless payment from phone. This has been validated in three studies by the Association for Consumer Research where they “provide evidence that consumers feel lower levels of pain of paying when using mobile phones and watches as compared to credit cards” (source). In a sense, paying from our phones acts as shield for the pain of payment.
A study by Mastercard showed that the majority of respondents (82%) view contactless as the cleaner way to pay, and contactless payments are up to 10 times faster than other in-person payment methods, enabling customers to get in and out of stores or restaurants faster.
All of this provides evidence to support and explain why restaurants are seeing higher average check size when their customers are paying contactless. But, that’s not it – mobile payments go far beyond hiding the pain of purchasing. They also induce a feeling of impulsiveness, and may be engrained into our human nature.
The Online Disinhibition Effect
Published in 2004 by John Suler, The Online Disinhibition Effect theorizes that online “Some people self-disclose or act out more frequently or intensely than they would in person.”
While this has impacts far beyond restaurants and mobile ordering (think “keyboard warriors” or “online trolls”) – the theory holds up for contactless ordering and dining. When someone is “online”, be that a computer or smartphone, they’re more likely to act “out of character” for lack of better terms. In theory, this means someone is more likely to indulge in extras or add-ons, when they doing so online. The reason for this dates back to Freud’s take on the “Actual Self” versus the “False Self”, and how one believes they are perceived by others and society – causing them to act a certain or expected way.
Online disinhibition in the context of restaurant ordering can be observed in a study that took place over 4 years analyzing 160,000 online pizza orders. The outcome? The online orders resulted in 18% more revenue, and more add-ons. An example of how giving someone full autonomy over their order and payment, without judgement or fear from external parties or society can result in someone acting “more intensely than they would in person.”
While this is true for online ordering, what about on premise contactless dining? The same conclusion could be reached as to why someone would add something on themselves, or indulge a little bit more, instead of sharing that with another human being or instead of saying it out loud or “in-person”.
Just as our phones act as a shield for fear of pain by payment, it can also act as a shield for perceived judgement of choice. Resulting in more impulsive, and desired purchasing behaviour when it comes to add-ons, drinks and up-sizing.
Impulsive Mobile Purchasing Behaviour
Impulsive behaviour in consumers varies widely, and like the evolution from cash-to-card-to-phone, and it’s changing with the times. For instance, a study published in the journal of Personal and Ubiquitous Computing in September of 2020 titled “Research on mobile impulse purchase intention in the perspective of system users during COVID-19” dives into consumers’ mobile impulse purchase behaviour through a lens of the pandemic.
The study finds that “Mobile shopping and impulsive purchase are also derived from the stimulation of mobile shopping environmental factors. By awakening the intensely positive emotions of consumers to feel pleasure, then generate tendency of impulsive purchase.”
Fuelled by the global need for contactless payments, the study finds that the positive emotions generated when someone simply uses their mobile device is enough to encourage impulsive purchase behaviour. This is in contrast to the “Pain of Paying” mentioned above. Using mobile devices could play a part in limiting or minimizing that “pain” of paying via smartphone.
One of the more exciting parts of this research is the purchase behaviour when combined with personalization – something that has been lacking for traditional brick and mortar restaurants. Third party apps have controlled the data that makes this possible up to this point. At OrderUp, we hope to change this and give restaurants the ability to provide personalized experiences and offers based on true consumer data. In the same publication, the authors note:
“Specifically, when mobile merchants implement personalized marketing based on the research of consumers’ past purchase information, such customized and highly targeted products’ recommendations are likely to cause strong emotional reactions from consumers to make consumers feel positive mental states such as exciting and joyful and awaken consumers’ desire for the products in front of them.”
This represents a massive opportunity for restaurants to adopt technology that not only allows them to offer personalized experiences and offers, but makes it easy and even automated.
Apps, Websites and E-Commerce are Designed to Make Consumers Spend More
Many consumers don’t know this, but there is a tremendous amount of time, research and money that goes into optimizing websites and e-commerce stores, in order to get someone to click and eventually make a purchase. This process has a bunch of different names, but most importantly is revenue optimization. It’s a series of tests, that realistically never ends. The goal is to find the absolute best placement of everything… Name, price, description, imagery and so on of any given product that maximizes revenue.
For example: The button on an e commerce to finish a purchase or pay. The website will continually test everything from the wording of the button, to the colour and font. See below for an example.
Whichever button results in the most clicks/purchases will be the “winner”. That winner will then go on to face another iteration of the same button to see if it can be any better. The same goes for product names, descriptions, images and so on. But it goes much deeper than just buttons and verbiage.
In the publication “Turning Clicks into Purchases: Revenue Optimization for Product Search in E-Commerce” explores an automated function called Learning To Rank with Implicit Feedback (LETORIF). This is where items are categorized based on the number of clicks they get that result in the most revenue. The crazier part is that this is all done automatically by computer programs and algorithms. This is just one of many strategies used by vendors to drive and grow revenue.
So the bottom line? There’s opportunities to tap into similar technology and strategies when guests are viewing your menu and paying from a mobile device.
At the end of the day, your digital menu is an online store. You should (and can) treat it like one.
The Kicker – New Opportunities For Restaurants.
We know that people spend more in a contactless, mobile first payment setting, but now restaurants have the power to truly maximize this process, and thus their profit. Third party apps have teams dedicated to testing everything about their ordering process. Something that hasn’t been available to independent restaurants without a serious amount of capital or time investment.
With new technology, the power of personalization, testing and optimization is placed back in the hands of restaurant owners and operators. You’re able to test pricing, menu design, item placements and images like never before. At the click of a button, operators are able to test and optimize just like the billion dollar apps that have been profiting off them for years. Learn how OrderUp makes that possible by checking out our blog post on Digital Menu Engineering and Optimization.
How Restaurants Can Succeed In A Mobile Payment Economy
At the end of the day, having a mobile ordering and payment solution from a smartphone will not only be imperative, but will help make your restaurant more money. Whether it’s the sleuth of human psychological research that drives this, or creatively optimizing your menu for revenue – mobile order & pay will most definitely benefit restaurants and small business owners.
At OrderUp, we’re the only platform that offers a contactless, mobile order and pay platform at no cost to the restaurant. Our menu builder is extremely easy to use, and allows restaurant owners to test everything from imagery to pricing and placement of items in real time.
Get started by claiming your free digital menu that’s optimized for mobile usage. From there, start accepting commission free orders & payments, and watch your revenue grow.
If you’d like to learn more about our solution and speak to a person, simply click the button below, and we’ll walk you through the entire process.