Covid-19 has rapidly accelerated the consumer shift towards delivery apps, with the global online food delivery market worth over $35 billion annually, and expected to reach over $360 billion by 2030, according to the ASEAN Post. “For the first time”, CBS News wrote in February 2020, “U.S. restaurants are projected to make more money from food consumed outside their doors than inside”.
Also driving the shift towards delivery away from dine-in in the U.S. are UberEats, Grubhub, and DoorDash. As these companies seek to reduce competition and increase scale, the landscape today is one of consolidation. Several acquisitions have taken place in 2020: Uber, which owns UberEats, purchased Postmates for $2.65 billion, and the European giant Just Eat Takeaway snapped up the U.S.'s third-largest delivery app, Grubhub in June 2020 for $7.3 billion. Last year, DoorDash bought Caviar to help cement its position as the market leader in the U.S.
However, these apps offer virtually the same service and access to the same restaurants - barring a few exclusives. Each app has an opportunity to take their growth to the next step, by focusing on improving their marketing strategies and products. Below, we offer several ways they can do that.
Get to users first, and retain them for longer
With millions of users turning to food delivery apps as we continue living in this Covid-19 era, marketers must ensure they have the right UA strategy to maximize the potential of this opportunity. Central to a savvy marketing strategy is acquiring users who align with the business needs of this vertical: long-term, loyal users who spend in apps. To that end, OEM and carrier channels (like Samsung and T-Mobile respectively) represent a valuable opportunity - with these channels, advertisers can reach high LTV users at high-intent moments throughout the device lifecycle, at scale. Here’s how:
Deep targeting: One way this is achieved is by deep targeting. OEM and carrier channels leverage opt-in user data, like age and gender, to serve relevant ads at the right time directly on their devices. Advertisers can also target users based on their device model: people with high or mid-end devices, for instance, are typically those with the disposable income to spend on food deliveries and most likely to convert into long-term, paying users.
Valuable placements: In addition to deep targeting, OEM and carrier channels enable advertisers to get to users first. Given the lack of meaningful differentiation between food delivery apps - all the apps offer virtually the same service and, apart from a few exclusives, most have the same restaurants - advertisers can be confident that users will stay loyal to the first delivery app they install. That’s why getting to users early is so important, and why it’s worth incorporating these channels into a UA strategy. The OOBE (out of box experience) placement, is a great example - advertisers can reach relevant users while they’re setting up new devices, in a native experience that feels like a natural part of the device onboarding process. Despite the merits of traditional channels, they don’t offer the ability to reach users earlier than competitors like the OOBE does.
Total reach: The reach of campaigns on OEM and carrier channels is not limited to social media users and gamers like the majority of UA channels - they also reach non-savvy users, such as seniors, directly on their devices. This, combined with age targeting, makes for a powerful UA channel. Given that seniors are the most vulnerable group in terms of coronavirus, many are avoiding public spaces - making their need for grocery and food delivery far more pronounced than younger cohorts. Delivery companies should strive to onboard as many seniors as possible, not only to untap their business potential but also to provide a genuinely valuable service. Recognizing this, in April 2020 UberEats rolled out a new delivery service for senior citizens that allows customers to place their order over the phone, without needing to use the app.
Differentiate the product
Aside from marketing, food delivery apps can forge loyal, long-term paying customer bases by focusing on their product and carving out unique advantages over their rivals. Doing so will allow them to convert and retain more customers.
To that end, the lowest hanging fruit, and something most are already doing, is signing exclusivity with popular restaurants. Although the cost of procuring exclusivity deals with major chains is high, it helps attract customers and lets the apps tap into these restaurants’ consumer loyalty to generate long-term revenue.
Improving the user experience is another way to create a competitive advantage, and one way to do that is faster delivery times. UberEats, for example, offers users the option to add 99 cents to $2 to reduce waiting time by 5 to 10 minutes. Combine that with more sophisticated customer support and apps will gain an advantage over their rivals.
Having said this, for a greater impact food delivery apps should focus on tech improvements, like AI-powered recommendations. For instance, if a delivery app sees a user’s preference is healthy, vegetarian food, they should offer notifications about new restaurants in this category, or provide intelligent recommendations based on this. Expanding on that idea, delivery apps could add value to their service by developing the infrastructure to allow the integration of fitness tracking apps, which help users stay on their dietary plan by recommending certain meals or eateries, and providing a breakdown of nutritional values, like calories and protein. Of course, tech improvements are time-consuming and not something that can be implemented right now, but they can certainly drive long-term value.
Tapping into food delivery apps’ biggest demographics, Gen Z and millennials, is key for increasing sales. Millennials are three times more likely to order in than their parents, and we know that for both of these groups, environmentally-friendly brands have a big pull. A 2019 survey of over 1,000 people found that over 20% of Gen-Z consumers cited “ethics, business, and manufacturing” as a top purchasing consideration. Moreover, when it comes to brand loyalty, Gen-Z were more likely to prioritize sustainability, brand name and company mission/purpose compared with other age groups. For advertisers, this is all the more enticing because it’s possible to target users by age on campaigns run through Aura’s OOBE.
In practice, for delivery apps this could mean facilitating the removal of all single-use plastic from restaurants using its service (such as helping them cover any added costs or providing them with wholesale biodegradable packaging); significantly lowering the cuts they take from restaurants; and being totally transparent about extra fees to consumers. To give credit where it's due, DoorDash and its subsidiary Caviar cut their commissions by 50% for six weeks during the first wave of Covid-19, while UberEats lifted commissions on pickup orders and delivery fees for consumers buying from independently owned restaurants. UberEats is also taking small steps in terms of sustainability, requiring users to request straws and utensils - restaurants are not meant to include them by default.
With billions of dollars already invested in the food delivery market, we're set to see tremendous growth over the next few years. The apps that win will be the ones that focus on savvy user acquisition, product innovation, and tapping into the consumer zeitgeist for sustainability and transparency.