Deliveroo's Revolutionary Value Strategy Fuels Unprecedented Growth
Deliveroo strategically enhances promotions and intensifies marketing efforts to enhance brand value perception, aiming to drive growth and captivate consumers effectively
{{img_placeholder_1}}Deliveroo is intensifying its efforts to offer better value for money to its customers, in a bid to stimulate growth and progress towards generating a positive cash flow.
This emphasis entails a more specific approach to promotional activities, as well as an increased visibility of deals and discounts within the app. Moreover, CEO Will Shu notes that the food delivery company is actively prioritizing value in its advertising campaigns across various mediums including television, online, and print media.
These initiatives were implemented by Deliveroo after establishing a dedicated team to explore ways to provide greater value for money in the current economic climate.
Shu emphasized the significance of these initiatives during a recent call with investors on 10 August, stating, "This is of utmost importance, given that inflation has adversely impacted both consumer demand and industry-wide NPS scores. The cost of goods and services has significantly risen over the past two years."
Deliveroo's perceived value has experienced a significant decline compared to two years ago, as reported by YouGov's BrandIndex platform.
For the most recent month (ending on August 8), Deliveroo's value score averaged -8.4. In the corresponding period in 2021, it was notably higher, though still in negative territory, at -3.4. In the previous year, it stood at -4.6.
There’s no question that inflation has hurt the demand side and also NPS scores across the industry.
Will Shu, Deliveroo
Shu emphasized the importance of both value for money and enhancing the customer experience, particularly after a successful order placement. He explained that the timely delivery and accuracy of orders play a crucial role in influencing whether customers choose to reorder from Deliveroo. Shu stated that he believes this aspect is one of the main factors limiting the growth potential of the industry.
"The thought of an Amazon package going wrong never crosses your mind... but when it comes to food delivery, the emotions are even more intense. Whether it's been a tiring day at work, a special indulgence, or just your regular Friday takeaway tradition, you expect nothing less than a flawless experience."
Getting this aspect right is crucial for enhancing frequency and customer loyalty, as it plays a pivotal role in industry expansion and business growth," he commented.
Deliveroo's losses for the first half of its fiscal year have significantly decreased. In the first half of 2023, losses amounted to £82.9m, a notable improvement from the £153.8m recorded in the same period last year, representing a 46% reduction in year-over-year losses.
Despite a slight decline of 6% in the number of orders compared to 2022, the company managed to counterbalance this with a substantial 10% boost in the average transaction value per order.
Deliveroo experienced a 23% increase in gross profit, reaching £365.1m, compared to the previous year.
In its efforts to achieve positive cash flow and enhance profitability, the delivery company has prioritized enhancing the effectiveness of its marketing expenses. During the first half of 2023, it managed to reduce marketing spend by 27%. This reduction was attributed to a more strategic approach to targeted marketing investments, keeping in mind the challenging consumer landscape. However, Deliveroo plans to increase marketing expenditure in the latter half of the fiscal year.
Shu emphasized the significant strides made by Deliveroo in its advertising business, noting that it has made "really good progress." This allows brands to advertise directly within the Deliveroo app. Restaurants or grocery stores have the option to pay for higher visibility spots on the platform, and other brands can have their ads featured within the app, such as on the rider tracking page.
According to Deliveroo's report, the advertising business generated a revenue run-rate of £55m during this period. The company stated that it is pleased with the increasing number of restaurants participating in the business, but acknowledged that the FMCG aspect of the advertising business is still in its early stages.
Shu emphasized that although the company finds the progress in the advertising business exciting, the primary focus continues to be the customer experience on the app. The company is keen on achieving a balance between advertisements on the platform and maintaining a positive user experience.
