ZOMATO DISCOUNTING

ZOMATO GOLD:
Zomato was co-founded by Deepinder Goyal and Pankaj Chaddah in 2008, as a
restaurant search and discovery service, but later extended to include table
reservations, online ordering, point of sale (POS) systems and cashless payments. In
2011, the company introduced its digital app. Zomato was successful in obtaining
funding from a number of sources and expanded in India and overseas
However, to recap a bit, in Financial year 2016, Zomato had been incurring
losses, that had increased over three times that year. In order to curb losses and capture
the dine-in market in India, Zomato launched a premium, subscription-based program
called ‘Zomato Gold’ in November 2017.
This exclusive membership program offered customers complimentary
food (ie.1+1) and drinks (ie.2+2) for every order they placed at select participating
restaurants. Customers also get exclusive invitations to food and drink events, such as
wine tasting sessions, new menu previews, pub crawls, chef cookout sessions and
restaurant openings.

1. PROS AND CONS OF SALES PROMOTION LIKE LOYALTY PROGRAM AND

DISCOUNTING:
PROS:
1. Customer Retention Loyalty programs make customers feel that they are
appreciated, thus making an ordinary customer into a regular one.
2. Word of lower prices or time-sensitive offers can be enough to bring in new
customers as well.
3. It creates exclusivity as these discount codes will appear custom-made for the
customer with them in mind, offering them a more positive customer experience.
4. Of course, one of the simplest reasons for lowering the price is to Get rid of
unsold inventory which is actually very beneficiary in the hands of the
restaurants.
 5. On the other hand, increase in customer retention and loyalty creates a sense of
urgency to buy, thus increasing the sales and revenue.

CONS:
1. Sales promotions such as loyalty program and discounting can affect the profit
margins of the restaurants to a very great extent.
2. Since the customer data that is provided at the time of signing up cannot be
holistic there are chances of the customer not being truly loyal.
3. These on the other hand causes damage to the ‘Product Brand image’ If the
promotions are overrated or not aligned properly with the Brand values.
4. Moreover, difficulty in managing premium pricing strategy sets a negative
expectation among the customers thus resulting in unstable and inconsistent
profitability in the hands of the restaurants.

2. ZOMATO GOLD LOYALTY PROGRAM AND THE REASON FOR THE CONFLICT
BETWEEN ZOMATO & ITS PARTNERS:
Online food delivery platform Zomato launched its Zomato Gold loyalty
program were in the customers may use this service to get savings on food delivery and
in-restaurant dining. Buy-one-get-one-free, first order coupon upto 50%, cashback &
75% offer on HDFC credit cards are some of Zomato’s popular discounts of its gold
loyalty program for its customers. The most noteworthy benefit of being a Zomato Gold
member is that you can get free delivery on all orders above Rs. 199.
The business model of Zomato Gold involved restaurants upselling a few
additional items to customers and covering the cost of the complimentary item offered.
The expenses toward the additional free drink or meal were entirely borne by the
partner restaurant and Zomato did not pay any percentage to the restaurant from the
subscription fee it collected, neither did it reduce its commission which is one of the
main reason behind the conflict.
However, the other reasons behind the conflict between zomato and its
partners is:
 Inundating users with deep discounts for chump change making the business
unsustainable without sharing the loss burden.
  Moreover, for outlets that traditionally worked more on conventional lines of
strong cash flows, it was a race to the bottom for them.
 And also on the other hand, deep discounting wasn't generating enough
customer loyalty as they were spoilt to choices.
 The discounts were a burden for many restaurants as they had to also contend
with rising rents amounting to nearly 20% of costs, food at 30%and other
expenses like labour and marketing at 20%.

NRAI FOOD SERVICE REPORT – 2019

(Major FSAs offered deep discounts to attract customers and increase orders placed on their
platforms)

3. FINDIND A SOLUTION:
As the campaign intensified, Goyal announced Zomato’s willingness to make
modifications to Zomato Gold and appealed to restaurant owners to stop the logout
campaign in the interest of consumers.
The changes included:
- Limiting Gold usage to one restaurant per day and restricting Gold unlocks to
a maximum of two per table
- Discontinuing trial periods for Gold.
- Strengthening its two-way feedback system.
- Shooting free promotional videos and personalizing push notifications for
non-peak days.
However, The National Restaurant Association of India (NRAI) remained belligerent and
said its members would remain logged out of Zomato Gold.

STRATEGIES TO BE ADOPTED BY ZOMATO TO SHIFT ITS FOCUS FROM

DISCOUNTS TO LOYALTY:

 Offering personalized offers, like Zomato credits, to loyal customers

when they spend a certain amount on a weekly or monthly basis.
 Allowing Customers to avail discounts only on weekdays as restaurants
face weak sales during that time.
 Relaunching its Piggy bank system via which customers earn zomato
coins based upon their order worthiness which can later be used as
real money for further ordering within a stipulated period.
 Limiting the Zomato Gold membership plan to six months instead of a
year for upcoming new memberships.
 With the unpredictable environment, it is better for Zomato to
concentrate on short-term strategies instead of rushing into long-term
plans
  In an attempt to gain the trust of stakeholders, Zomato can extend its
membership for existing customers and partners for a period of two
months.

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