Zomato | E&R

The Background

• In 1991, when India was on the verge of defaulting on its exports, as a prerequisite for IMF assistance, the government was forced to undertake reforms. Since then, India's GDP has grown at a rate of about 7% a year, a remarkable achievement.
• A second trigger in the late 90s, driven by widespread computer use, greater adoption of the internet, an educated English speaking population, there was a boom in the IT and financial sectors. This led a young generation entering the workforce, with greater both disposable incomes than their predecessors, and greater opportunities to spend it
• A third trigger, in the second decade of this millennium was the widespread adoption of smartphones, social media and growing numbers of people accessing mobile internet. People were not only going out, but spending a lot more time finding out where to go, what to do , and telling other people they should go out too.
• The fourth and final trigger, was the growth of aggregators, be it in the cab space, the hotel space, the food space, or others, aggregators were here to stay

Food Delivery Market

A few factors have led to the growth of the Food Delivery Market in India,

• The rise of dual-income households
• Longer working hours, and longer commutes
• An increase in the number of affordable food options
• A greater acceptance of eating out, and eating on the go. What used to reserved for special occasions two decades ago, is now a regular activity

*One might argue, that the growth of OTT platforms like Netflix has played as important a role as any of the above factors, but that is an argument for another day

The Food Delivery Market, currently value at around $7b, is expected to grow at a rate of 33% a year between 2022 and 2028.

The Company

Founded in 2008, as a listing portal, Zomato is an India based multinational restaurant aggregator and food delivery service. In 2011, Zomato started operations across multiple cities in India, and between 2012 and 2014, started operations in multiple countries including the UK, the UAE, Qatar, Sri Lanka, among others. In 2015, Zomato entered the burgeoning Indian Food Delivery Market, and despite not being the first mover, is the biggest player at present.

Zomato also launched Zomato Infrastructure Services, a cloud kitch service, to help partner restaurants expand their operations without a incurring additional fixed costs. This was shut down in 2018.

In 2017, Zomato launched Zomato Gold, with offers for users in select restaurants. Gold now contributes to about 40% of Zomato's Gross Order Value.

The company then went public in 2021.

In 2023, Zomato is active in the following geographies,

As per Zomato's annual reports, it is operational in 24 countries, 3200 cities, has 32 million active monthly users, 1.4 million listed restaurants, and about 8500 employees

The Competition

Over the past decade, there have been a number of Food Delivery Apps that started and shut down. At present, while there are other companies at play, the food delivery market in India is effectively a duopoly, dominated by Zomato and Swiggy, with Zomato holding a market share of Q2 of Calendar Year 2023.

It is also interesting that the there was a large overlap of users using multiple platforms,

In 2022, of the respondents, 81% reported using Zomato and 74% reported using Swiggy. So clearly there is a case of a customer using multiple apps, and every app's objective is to be that user's primary food delivery app

What is Zomato's Core Value Proposition?

Being a food aggregator, Zomato acts as a bridge between the consumer and the restaurant, and is pretty dependent on the network effect

For the Consumer

Zomato makes it easy to find restaurants, read restaurant reviews, and order food

• • This could be food delivered to your homes from the same city
  • Food delivered from another city - Zomato Intercity Legends
  • Or a restaurant the user visited after reading its reviews
  • • In the user interviews, users in their mid 20s and 30s described their first experience with Zomato as checking out restaurant reviews. That association meant they were preferential towards Zomato, and deepened their association with Gold
  • Booking a restaurant/event and paying for it through Zomato Gold for great discounts and offers
  • There were also a few surveyed consumers(3 to be precise, Akash J, Tanuja L, and Tapsi G), who said while they used both Zomato and Swiggy, they preferred Zomato because of Blinkit, whether that was the clincher, or it was just another nice to have feature in an already preferred app is difficult to say

For the Restaurant

Zomato makes it easy to cater to customers they may otherwise not be able to reach

• • This could be users in the same city or other cities
  • Restaurants don't have to worry about increased delivery demands as the workforce is Zomato's, helps them focus on restaurant logistics only
  • It also helps cloud kitchens, and take away only places cater to demand as they don't have to worry about hiring staff for deliveries

How do users experience that Core Value Proposition?

For the rest of this assignment, we will only focus on the Consumer and how they use the product.

A user in this case is an active user, who orders from Zomato at least once a month. The user can choose to access the product via the App, or web browser

• Find Restaurants and Read Reviews - Users experience this Core Value Proposition by reading restaurant reviews and visiting these restaurants. This could be via the app or the web browser. Getting a great discount on booking a slot at a nice restaurant was a consistent Aha moment. This helped a few surveyed users(Roshni B, Anish M, Manmohan S), find newer favourites and explore more cuisines they may not have otherwise tried
• Order Food - Users experience this Core Value Proposition by ordering on the app consistently - While there was a loyalty to Zomato or Swiggy, there was also a loyalty to certain restaurants, and certain foods. Among the surveyed users, 2 users, Tapsi G, and Prakhar S, said the fact that Zomato allowed you to have certain favourite restaurants on the landing page of the app meant they preferred using it over Swiggy

What is the Natural Frequency of Zomato's Core Product?

While in theory, Zomato can used for every meal , in practice even the most active users will order in once a day over an extended period of time

Basis frequency of use, the following categories were found

Casual - Ordered once or twice a month

Among the surveyed users, Casual users for Zomato were a mixture of those with no particular affinity towards Swiggy or Zomato, or those who preferred going out to ordering in, and the rare few who preferred Swiggy, but their favourite restaurants was not serviceable at particular times, so they ordered on Zomato infrequently

Core - Ordered once or twice a week

Among the surveyed users, Core users for Zomato ordered in at least two days a week, typically over the weekend. In some cases, during the week as well, to sate their sugar cravings or just when they feel like eating some comfort food. These users also used their Zomato Gold to book restaurants around once a month. However, this was not always the case as ____ of the casual surveyed users booked restaurants once a week, and ____ of the casual surveyed users barely used the feature to book restaurants, and were more than happy with the free delivery

Power - Ordered between 3 and 4 times a week and frequently made restaurant reservations through Zomato

Among the surveyed user, Power users ordered multiple meals a week, with some preference to ordering over the weekends. But clearly ordered from Zomato when food wasn't cooked at home, or they just had a bad day

What is the Best Engagement Framework for Zomato?

The most important Engagement Framework for Zomato is Frequency of Engagement

While speaking about the types of users, the metric was how many times a user ordered from the app on a monthly/weekly basis. The Engagement Framework would also track how may times the user used the product to place an order.

Given that Zomato is primarily a service used by people to find restaurants and find something to eat, there is a natural threshold to the engagement framework as user can only eat 3 meals a day(A round of snacks maybe).

Among the surveyed users, one of the biggest reasons for churn was that they were using the app to eat out and they stopped using or uninstalled the app when they were trying to get healthier.

Hence, there the frequency of use will have a ceiling and engagement can't be pushed indefinitely or you risk alienating the user.

The user experience does not really improve substantially with repeated use. There are features in the app which allow you to choose your favourite restaurants so you can order quicker, but beyond this, nothing in the app changes or improves your user experience with greater money spent.

For Breadth of engagement, surveyed users did use Delivery and Dining, with few users using Zomato events. In this as well, having gold membership allowed the user to use multiple features and made the experience better

Meet the Users

The users from the surveyed populace hailed from both Tier I and Tier II cities. They were a mix of single and married users, self employed, salaried and students. Their pay ranges, and relevant food related preference are given below,

Casual, Core and Power User

How do they use the platform?

A snapshot of the surveyed audience is attached with the assignment

The Casual, Core and Power Users are segmented as follows

ICP Segmentation

Advanced Segmentation(RFM Base)

Engagement

Natural Frequency Based

ICP/Persona Based

Retention

A Birdseye view

Please note below statistics are dated, but they are the best available in the open domain and are to be taken with a grain of salt

As per research published by CleverTap in 2019, of 100 people who install a food delivery app, only 25% complete the registration process, and only 22% are active by the end of the first week.

About 85% stop using the app two weeks after installation,

As per Pankaj Chaddah, in 2016, Zomato had a user retention rate of 65%, with the user cohort reaching its nadir in M3, after which largely stabilizes and marginally improves

Given that this is a Zomato report, it is also to be taken with a grain of salt.

Even if the retention rate is half of what is claimed, it is still considerably better than the industry standards.

A Microscopic View

To see what actually drives Zomato's great retention numbers, we will take a look at both Primary and Secondary Research

Primary

Of the 30 users surveyed , it was obvious that the core and power users were the ones driving retention. If we are looking at ICPs, it would be ICP 1 and a segment of ICP 2 which was driving retention

The major reasons that were driving retention on Zomato was

• Zomato Gold - The core and power users unfailingly had Zomato Gold, and the delivery fee being waived off was such a kick for every order. The users know prices on the app are higher than prices at the restaurant but are willing to pay for that convenience, and the small win of no delivery fees helps offset that additional price that they're going to pay for the food
• Great User Generated Content - This primarily flows from Zomato's beginnings as a restaurant review page. Users said they Googled a restaurant, saw User generated reviews/pictures on Zomato and decided to visit/skip it. After doing this a few times, they eventually downloaded the app and looked at restaurants via the app itself, and then started ordering through the app
• Offers and Discounts - The users are primarily cost conscious, and will look at discounts on offer. This sort of behaviour was consistent across online spending, where people looked for deals wherever they could. Four male users even, also said they hadn't bought anything other than formal shoes online
• Greater Choice and Delivery Drivers - Zomato in general was said to offer a greater choice of restaurants by surveyed users. This is purely anecdotal and may or not be true in that city/that area, but it did matter when the user wanted to experiment. Surveyed users are also used to eating the same dishes, so in case it wasn't available on Zomato, they would order it from Swiggy. A greater field force helps ensure delivery agents are always around and this drives retention rates
• Great Campaigns - Users also remembered Zomato having great campaigns, both OOH and online. Surveyed users often said they saw the ad when they were thinking of ordering in and it affected their decision making. A clarifying question that would they always order from Zomato if they saw the ad and saw better prices elsewhere, was almost met with no, they would usually order from where got the better deals, but hey better than nothing right

Channels Driving Retention

From secondary research, the following Channels were driving Zomato's retention

SEO

Apart from the usual restaurant pages, Zomato also targets very specific "near-me" type keywords. Given that you can check the review and then visit the restaurant or download the app. As stated in primary research as well, many users came about from restaurant reviews initially

Then when you visit a site you're nudged to download app or view on the app, and once this happens a few times, you start using the app for your searches

Push Notifications

The push notifications are witty

They are relevant

and they aren't excessive meaning the user still finds it funny, and Zomato is at the top of the User's mind while ordering in

Social Media Content

Zomato has had some great content over the past few years, again witty and relevant

Hitting the nail on the head with everyone's struggle

Post for the Zomato Premier League

Offline Channel

Almost ironically, some of Zomato's most memorable moments have been billboard ads which help the user with Top of the Mind Recall

Sub Features Driving Retention

This is split into Delight and Hygiene Factors

Delight

• Zomato Gold(Again) - Free Delivery, Great offers at partner restaurants, nuff said
• Favourites - The app allows you to select a few favourite restaurants, choose what you want from them over and over again without having to go through your past orders, or search for the restaurant, small feature with an outsized influence

Hygiene

• Zomato's delivery is more or less reliable with deliveries happening in time, where you can track the delivery executive's progress, and coupons often being sent in case of delays to make up for it. Food reaches you safe, and you are certain it hasn't been tampered with. In short, Zomato does what you are hiring it to do

Churn

We will break this down into Voluntary and Involuntary Churn

Involuntary Churn

• Aging and Lifestyle Changes- For the lack of a better word, as users grew older, they reduced eating out or ordering in naturally, events like having a child, meant that for a while users were not going to eat our or order in a much. Users were also likely to get more health conscious and opt for more home cooked meals as they got older
• Movement - During the pandemic, people moved out of Tier I cities to their hometowns which may be Tier-II or Tier - III towns, where Zomato's offerings may not be as great. To a smaller extent, even within cities, when people moved areas, if their favourite restaurants don't deliver anymore, they are bound to reduce usage
• Happenstance - In some cases, it was pure luck that someone switched. Some surveyed users got a free Swiggy One membership, or bought it before Zomato Gold, which meant usage which was split between the two apps now moved to Swiggy
• Among the surveyed populace, churn was mostly involuntary, and the biggest factor was a change which caused the to lack time or become more health conscious

Voluntary Churn

• Non-Competitive Prices - While there was a loyalty to Zomato over Swiggy or vice versa, users did not really think twice about switching platforms in both cases if there were no discounts
• Bad Experience - Food being tampered with, app or payment issues left a bad taste in the user's mouth. Sub-optimal quality food was not a reason for churn if the company did their bit to make up for it. In fact, there is some research to show that quick resolutions make customers happier than when they got their product in the first place

Negative Actions and Signs of Churn

Some of the Early Signs are

Negative Actions

• Unresolved Support Tickets - Support Tickets are bound to arise for delayed orders, or app issues, payment issues, but unresolved tickets are what Zomato needs to look out for
• Bad Reviews - This could be on the app for an order received, on social media for an issue or order received or the Play/App store for app issues.

In these cases, resolving the problem quickly will mean the user comes back, possibly happier

Anti Engagement

• Frequency of Orders has Dropped - Customer has dropped from 2 orders a week to an order a week for an while now, this also means the time between orders is increasing
• Time Spent on the App has Dropped - Customer no longer looks for offers and restaurants on the app and spends less time on it
• Customer adds items in their cart, but does not complete the order, happens on multiple occasions
• Customer has let their Gold Membership Expire - This should ring alarm bells given how pivotal Gold is to the app

This category of users may be harder to retain as there could be more going on behind the scenes that Zomato does not know about.

Resurrection Campaign

For a resurrection campaign we will target the below use case

• Bad Review leading to a stop in the orders
• Sudden App uninstall following support ticket
• Reduced frequency of usage
• Multiple instances of items being added to cart and orders not being placed
• Gold Membership About to Expire

Before running any campaign, it is important to see if the issue was resolved first - Support Tickets closed so the user doesn't get angrier with the app. The idea for both these cases is to simply get the user to interact with the platform in a positive manner

Churned

At Risk

For at risk users, it is important to also track if the user has removed saved cards, or recently disabled push notifications so you know how serious the issue is. Recently disabling push notifications is a sign that the user is considering walking away