Growing in the Food Delivery Sector
Home or office delivery of a meal ordered through an app from our smartphone, tablet, or computer has become a habit for an increasing number of people worldwide. It's no surprise that in recent years, companies involved in food delivery have multiplied. These are typically start-ups that have focused on this new type of digital economy and are currently operating in a highly competitive environment, accompanied by debates over the role of riders and their rights as workers.
An expanding market and strong competition in a sector that is still poorly regulated: this is the ideal situation to test the most talented managers and evaluate the quality of their decisions in a dynamic and highly competitive environment.
In this article, we will analyze the marketing strategies that have led Deliveroo to impressive growth in terms of market capitalization, with revenues rising from £18 million in 2015 to £476 million in 2018, and the development of a commercial network that now serves 12 countries and has around 120,000 restaurants as partners.
How did Deliveroo, founded as a start-up in London in 2013, become one of the leaders in food delivery in countries with high competition in the sector, such as France, the Netherlands, Germany, Australia, Hong Kong, Italy, and, of course, the United Kingdom? In our opinion, the key to its success lies in the choices made by its managers, especially in the marketing sector, with some key moves that allowed the company to overcome fierce competition and remain one of the few food delivery companies operating globally.
Word of mouth and discount codes to attract customers
One of the most effective marketing moves made by the Deliveroo managers was using social media differently compared to the competition. In short, we can say that the British company decided to invest less in social media advertising campaigns than its competitors and relied more on the traditional and free word of mouth.
There’s no doubt that, although the influence of a good promotional campaign is always felt, we tend to value the recommendation of someone we know much more when making decisions. The same holds true for food delivery: if a friend, colleague, or family member recommends an app for ordering, we are more likely to listen to them than to a paid advertisement.
The problem, however, is how to trigger the virtuous process of word of mouth, that is, how to encourage some people to start using our products, satisfy them, and thus make them our ambassadors among friends and colleagues.
Deliveroo decided, for this reason, to invest significant amounts in promotional discount codes to attract new customers. This is undoubtedly a strategy used by many companies in the food delivery sector, but not with the same intensity as Deliveroo: in 2016, for example, the average cost of an order at partner restaurants was $25, including delivery, and the discount offered to first-time users was as high as $20.
The large amount of investment made by Deliveroo’s marketing department in promotional codes made it possible, along with other strategies we will discuss later, for a staggering 611% increase in revenue in 2016, though this was accompanied by an equally high increase in costs. The 2016 financial year resulted in a gross profit margin of only 0.7%, but the new customers gained from this marketing move paid off decisively, and the gross profit margin for 2017 reached a substantial 23%.
Stunt marketing and influencers to target the office sector
The analysts at Deliveroo did their job well and "listened" to the market, discovering that the office sector presented great growth opportunities for food delivery companies around the world. For many employees, professionals, and executives, having a meal delivered directly to the office from a good local restaurant had become an increasingly appealing prospect, both to minimize lunch break time and to offer more variety in meals, all in a situation of utmost convenience.
To establish themselves in this specific market niche, the Deliveroo managers decided to rely mainly on two strategies: stunt marketing and social media influencers. As you probably know, stunt marketing involves launching initiatives that have a strong impact on customers, aiming to surprise them and, therefore, make them remember the brand in a positive and impactful way. For example, in Singapore, motorcyclists dressed as kangaroos sped through workers leaving the business district on Friday afternoons, handing out Deliveroo flyers, or a huge slot machine that dispensed food and company merchandise was set up for several months at Waterloo Station in London.
Another tool to attract new customers in the office sector, which is populated by a highly active social media audience particularly interested in food trends, was to engage some successful local food bloggers who promote the restaurants partnered with Deliveroo, explain how to use the app and its features, and also offer special discount codes on certain occasions.
Customers at the heart of the business
It may seem obvious to say that a good marketing strategy should have the customer at the core of every move, but it is not so easy, in the reality of different business situations, to implement actions that truly put our customers at the center.
The managers of Deliveroo are undoubtedly masters in this difficult art, and the business results speak to their efforts. In addition to the moves already mentioned in this article, in just seven years of operation, the London-based company has, for example, implemented a complete brand renewal in 2016, making its logo more recognizable and effective, and continually works to leverage digital opportunities to stay close to its customers.
In particular, Deliveroo has invested heavily in the user experience of its app, making it simple and immediate to use, developed an innovative algorithm to reduce delivery times by 20%, and created a blog with recipes, insights on partner restaurants, food trends, and much more, hosted on a web domain separate from its main site.
These are moves that may sometimes seem counter-intuitive – why teach recipes when you sell food delivered to your door? – or overly costly in terms of investment, but the results are proving the Deliveroo managers right. They have shown the ability to listen to the market, take risks by going against the grain, and be ready to seize the opportunities offered by technology.
