09 Dec 2019 18:07 IST

Build trust by focusing on long-term partnerships

Shared discounts, ratings-based benefits and a tweaked Gold programme could revive profitability

The stakeholders involved in this issue have been defined under three broad categories: Customers, restaurants and the food service aggregator, in this case Zomato. The effort is to see how best all their interests can be served.

The issues that the stakeholders involved in the Zomato case have had to face have been listed out as:

High rate of commission charged per order from the partner restaurant.

Praveen G

 

Kartikeya Jauhari

 

Commission paid by a restaurant per order is 18-25 per cent. Example: If the total invoice value or the total bill amount is ₹1,000, then after bearing the total discount and paying the commission per order to Zomato, the total amount which the restaurant receives for that order lies somewhere around ₹380-420, which is 38-42 per cent.

Worse, the total amount of the deep discount is to be borne by only the partner restaurant and not shared by Zomato.

To cater to the discounting offers, the restaurants had increased their prices to account for a lower per unit discount on the item. This led to a distrust among the end-users.

This situation can be resolved only by keeping in mind the interests of all the stakeholders involved, which can be set out as follows:

Limit the discounting

Focus more on customer retention due to loyalty rather than due to discounts

Create a discount-sharing model, where discounts per order are shared between partner restaurant and Zomato

Reduce the rate of commission charged on partner restaurants, which is very high

How can Zomato build improved partner relationships with restaurants, protecting their brand equity, and minimising the effect of commoditisation? Should Zomato stop deep discounting? Should ZG go back to being an exclusive invite-only service, as originally envisioned?

Our study has analysed the following areas where Zomato can build partner relationships:

a. Work on retaining partner restaurants

b. Generate ideas on new restaurants to partner with

c. Formulate a model for restaurants to pay less commission

d. Put out advertisements that increase restaurant visibility – connect with the emotions of consumers

Using sales gamification for restaurants

Zomato could create a game-like model for restaurants to play, as part of the partnership, ultimately giving them less commission per order. They would be using the concept of sales gamification to ensure better Gold sales for restaurants and encourage new lead generation.

To ensure a game-like environment for the restaurants, below is a sales funnel which has been created for the partners to play along.

 

 

The levels given to the restaurants would be based on the restaurant’s ratings and the number of orders brought through Zomato Gold.

The commission which the restaurants would have to pay will go on decreasing as their levels increase.

 

 

Zomato and deep discounting

Today’s generation Z is getting used to the deep discounting models that FSAs such as Zomato, and Dineout are offering them. Rejecting these models would result in a loss, both in terms of revenue and customers. A model of deep discounting should be created and designed in a way that achieves a balance between all the stakeholders: customers, company and the partner restaurants.

Since in the current model, the cost of discounts has to be entirely borne by the restaurants, we propose a model that allows the discounts to be shared between Zomato and the restaurants.

Should Zomato Gold go back to its roots?

In 2019, Zomato Gold should not be thinking of going back to how it was originally envisioned. Customers today are willing to pay to subscribe to the service. They have more faith in it than before, and the consumer spending power is better nowadays.

The discounts can be shared

This framework will define the discounts shared by both the company and the restaurants as the partnerships build up. The Table gives an idea of the discounting model.

 

 

In addition, Zomato must make an effort to increase competitiveness among partner restaurants; aim for a longer partner relationship; and take the trouble to speedily resolve disputes related to restaurant margins per order.

Loyalty programmes and customer schemes

While shifting the behaviour of customers from discounts to loyalty, there is need for a scheme that defines the customer’s perspective towards food, in a greater sense. And for that we conceptualised a scheme to boost customer loyalty.

To woo customers, Zomato can put up a loyalty programme named Zomato Plus, that is based on the number of orders.

It starts by giving three orders free on sign up. with this expense borne by the company and not the restaurants.

Then,a discount of 10 per cent on subsequent orders up to INR 200.

On completion of 10 orders, they are eligible to get another two free items, but up to a certain bill amount.

Apart from these incentives, the company can give customers some creative room to let them feel that they are deeply connected with the company.

To validate our loyalty scheme programme and understand the customer behaviour, data was collected from 63 respondents among the students of Symbiosis Institute of Business Management, Bengaluru. The findings from the survey are as follows (refer the two graphics below):

Age group of the respondents: 20-30 years.

The respondents preferred Zomato Gold (70 per cent) over Dineout (30 per cent) for a subscription-based service.

The Graph indicates the fact that even though the company is implementing a deep discounting strategy, customers want a great experience when they go out or make an online order. This shows the customer loyalty toward the brands (see Scheme Graph)

On our giving a rough idea about our model, more than 80 per cent of the respondents gave a positive nod that the scheme would be effective in terms of benefits to both customers and company.

 

 

 

(The First Runners-Up are 1st Year MBA students at SIBM Bengaluru.)

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