Zomato: Food-Tech Titan

Insights about Zomato:

• 5.8 Crore Customers
• 64.7 Crore orders delivered in FY22-23
• 2.3 lakh Avg. active monthly restaurant partners
• 3.5 lakh avg. active monthly delivery partners
• Zomato customer app has over 10 crore downloads on Android (4.5 rating from 86L reviews)
• Company Size: 5000+ employees
• Market Cap: $12.19 Billion (as of Nov '23)
• Share Price: ₹117.70

Core Value Prop

Is Zomato ready for Monetization?

Retention Curve

The retention curve here flattens around the M6 mark, given that Zomato is primarily a weekly if not daily product, by the 6 month mark those who want to stay associated with Zomato are the only ones left. A few assumptions here are that the total no. of users that land on the app for the first time is 15 crore (based on the download figures across both Android & iOS) and that eventually, the user base stabilizes at around 5.8 crores (which is the exact number of users Zomato served in FY22-23).

Deeper Engagement

As seen from the above, core & power users makeup about 80% of the total user base. This is a clear indication that the product has managed to deeply engage a large part of its user base and is therefore ready to monetize them. The above findings are a direct result of the user survey conducted with about 25 people. Link

Link to the Google Form circulated: Link

Willingness to Pay

As seen from the user survey conducted the top features for which users use Zomato are:

• Food delivery at home
• Table reservations/looking at menus before going out

Both of these actions require the user to spend money (on or off Zomato), therefore if Zomato were to offer the right kind of offers and discounts serving these core functionalities, then users would be willing to pay for the same. And if we were to conduct a simple spend on Zomato v/s going out it could come to 3:1. Considering the avg. spend on Zomato is 500 and going out is 1000. This brings the total spend to:

(500*3) + 1000 = ₹2,500

Combine that with the users' annual income & spending patterns indicates an affluent middle-class, who definitely have the means to pay.

Substitute Pricing

Core Problem Solved by Zomato

Some of the other substitutes of Zomato are seen below. These options were presented to users and contained their preferences as well. It's very clear to see the duopoly nature of the food-tech industry. Therefore Zomato must always stay competitive in it's pricing, or people will easily switch to it's closest competitor.

Pricing Design

Who To Charge?

If the RFM framework were to be applied, it is clear that the segments that can be monetized are Champions, Loyalists, and potential loyalists.

When To Charge?

When to charge refers to the best time in the user journey that the user will be the most likely to hear out a pricing pitch and check it out if they find it compelling. The best time for Zomato users for a pricing pitch would be right after they have successfully placed an order and are waiting on the tracking screen: "Get all your deliveries for free - Get Zomato Gold". The other ideal place would be when they have just made a table reservation or are looking to make one and the Zomato Gold banner is shown saying "Get priority booking & 20% discount on all partner restaurants". This would seriously compel our top users to enter the pricing page which looks something like the screenshots attached below.

What To Charge?

The zomato product can charge customers on the basis of 3/4 things that a product can usually charge for:

1. Time: Zomato offers the convenience of getting the best food in the city to the doorstep of the user within 30 minutes and just by having the user click on a few buttons (less than 2 mins). This is a service they already charge for via delivery fees (which perfectly sets up the pitch to upgrade to their subscription service: Zomato Gold). Thus zomato's delivery fee is dependent on how far the restaurant is and how much time it will take to deliver the order to the user.
2. Output: Zomato takes great effort to have the food delivered to the user via it's platforms and its delivery fleet, this is a service it charges for via "Platform Fee". Users recognize this as a service to be paid for since the manual labor involved in getting food delivered to the doorstep is quite significant.
3. Access: Zomato through its table booking service allows users to easily book tables in the best restaurants in the city on special occasions. Everyone knows that during major festive seasons or weekends, it is almost impossible to find a table, therefore with its Zomato gold subscription it tells users that they will get "priority booking" if they are a zomato gold user. This gives users exclusive access over others into the most happening restaurants on the best occasions like Valentine's Day.

How Much To Charge?

Here I have segregated the perceived value of Zomato across 3 aspects Time, Effort, and Access.

• We then wrote down the user effort across all three and quantified it in terms of time.
• The per-hour cost of the users came to be about ₹400 on the basis that 75% of users earned above 10LPA which roughly translates to 70k per month.
• We saw that for ordering and getting food the user spends close about 45 mins in the absence of zomato to get the same need satisfied. This means the per-order cost in terms of time was 45 mins and every month this came to be around 3600 considering most users ordered at least thrice a week (so 12 orders a month). This is obviously over and above the actual cost of food (excluded in this calculation)
• Then we saw that in the absence of table booking convenience the user would have to first find the numbers of restaurants individually, call multiple restaurants, and find a suitable time to book a table. I quantified this effort into time as 15 minutes per successful booking which means the cost came upto ₹100. And assuming 2 table bookings a month that equals to ₹200.
• Add both of them and the monthly perceived price comes upto ₹3,800.
• The actual price of Zomato Gold is ₹349 for 3 months, which means ₹116 per month.
• The difference between perceived value and price is about 32x.

How to show Pricing?

Zoamto Gold - Pricing Page Design