How to Cut Food Delivery Fees with Discounts and Promotions?
This article explains the pros and cons of using third-party food delivery apps for order fulfilment and delivery. You will also discover the best strategies for promoting your mobile app or site and keeping all the profits in your pocket, thanks to personalized discounts and promotions that can direct customers straight to your app, skipping any expensive intermediaries.
The rise of food delivery apps
Since the pandemic started, the food business has been struggling. When plenty of countries introduced lockdowns, the only way for restaurants to reach hungry customers was through increasingly powerful food delivery apps like Uber Eats, Postmates, or DoorDash. At first glance, it might seem like a fair deal – without home deliveries restaurants would tank and vice versa. However, using these apps means a large selection of restaurants, speed, and convenience in ordering and paying for customers.
However, there is a darker side to this business model. Customer convenience comes at a hefty price that restaurants must pay, as delivery apps can charge up to 30% of the order price and additional shipping fees. Bombarded with expenses that exceed the profit margins, some restaurants cease to make a profit.
At the height of the pandemic, the situation got so bad that some cities introduced rigid caps on delivery and shipping fees. For example, New York City placed a 15% cap on handling fees, and all other costs were capped at 5%.
Of course, there is also another side to this story. Delivery apps usually explain that high commissions stem from the value that restaurants can gain from their mutual partnership. Starting from access to a growing customer base to covering the costs of customer service, marketing and promotion, secure online payment providers, or even consulting.
As the lockdowns worldwide are becoming a thing of the past, restaurants are looking for new ways to deliver food and great dining experiences straight to customers, without expensive intermediaries eating a big chunk from each order.
If you are in a food business and looking for a way to reduce high food delivery fees, lower costs for customers and take back control over your restaurant positioning and offer, this article is for you.
What are the pros and cons of working with food delivery apps from a business perspective?
As reported by Deloitte, 68% of consumers order delivery, and 46% expect their eating habits to stay the same once the pandemic ends. However, with the demand for food convenience growing, restaurants need to choose between working with expensive third-party food delivery companies or building their service. Here is a short breakdown of the pros and cons of both approaches:
Benefits of using a third-party food delivery service:
- Access to enormous customer base – big technology players such as Uber or Delivery Hero make things easier for starting restaurants thanks to their constantly expanding user base and better discoverability.
- Simplified logistics – using third-party delivery providers means that restaurants don’t have to worry about managing a separate delivery service and the logistics that follow (vehicle maintenance or hiring delivery drivers).
- Better exposure – getting started can be challenging in the restaurant industry. Working with third-party services means that they cover the marketing and promotion costs, which can bring new customers to your business, especially if you form a closer partnership with a selected provider.
Cons of using an external food delivery service:
- Less control – using third-party services to help in order management, fulfilment and delivery means that at each step, you are losing crucial customer data that could be potentially used to optimize your offer and innovate. Typically, a restaurant is also not directly responsible for customer support. So if your food turns up cold or damaged due to the provider’s error, your brand will take the reputation hit.
- Smaller profits – even the fairest delivery apps will still eat your profit margins. To make a real profit, you need to process a high volume of orders.
If you decide to build an ordering and delivery service in-house, you may expect higher costs upfront but potentially better results in the long run. Here are more points to consider.
Benefits of building an ordering & delivery service in-house:
- Keep more profits – if you build the solution yourself, you will pay $0 in commission fees, which means more money in your pocket.
- Encourage customer loyalty – by keeping ownership over all touchpoints, you can quickly enhance your offer with targeted discounts and promotions relevant to your brand and customers’ expectations.
- Eliminate order errors – ensure the highest level of service by retaining control over the whole ordering and delivery experience.
Cons of building an ordering & delivery service in-house:
- Overwhelming logistics – depending on your scale, the management of a delivery fleet can quickly get overwhelming.
- Worse discoverability – by doing everything in-house, you are also fully responsible for marketing and promotion. On the other hand, most delivery apps offer featured offerings and local SEO consulting. But, of course, for a price.
- Expensive start – despite plenty of freemium software tools and open-source technologies to build even advanced ordering apps or websites, the development cost can still be higher than settling for a food delivery service.
Considering all of the points above, it becomes clear that delivery apps and restaurants are entangled in a peculiar love-hate relationship. Most restaurants are aware that, despite feel-good marketing, the primary goal of food delivery apps is not to support or strengthen a given restaurant but to marginalize and unify brands across the board. Eventually, the ultimate goal is for the customer to remember the delivery brand and not the restaurant itself.
As restaurants reopen their doors to increased foot traffic and expect higher profits as things return to business-as-usual, plenty of restaurants changed their approach. They stopped relying on third-party apps for order fulfilment and delivery or at the very least attempted to minimize their activity by directing customers to their fully-owned ordering channels.
How to cut food delivery fees with discounts and promotions?
If you already have ready solutions for taking, managing and delivering orders, you are prepared to start promoting your brand. Here are some best practices and promo campaign ideas that you can implement to see an increased volume of orders streaming from your app or website, skipping anyone in-between.
1. Be transparent with customers
After setting up your app or website, the best first step is to inform customers about why you made the switch. Due to the rising popularity of localism, which sees more and more people getting involved in their local communities, customers are more receptive than ever to honest and informative marketing communication. For example, let them know why ordering from third-party apps is not helpful and that by choosing your app or site to place orders, they help their favorite restaurant stay afloat.
2. Promote your app or site
It goes without saying that before investing in any promotional activities, you need to spread the word about your new app or website. To do so, you should use all communication channels available. For example, you can promote your app offline (via leaflets distributed in the neighborhood) and online (via social media and local SEO) to leave a mark. You can also use the help of local influencers and offer an additional incentive to customers to download and, even more importantly, keep your mobile app on their phones.
3. Offer app- and site-exclusive discounts
Besides constant offer optimization and promotion, the final step is to provide a tangible incentive for customers to order from your branded app and not competition or a food delivery app. For some customers, the idea of helping out is enough, but others may need a discount or a special offer to resist the power of convenience and habit.
Here are some ideas for incentives you can offer for orders placed via your app/site:
- Amount or percentage discounts.
- Free side dish, drink, or another menu item.
- BOGO offers – buy one menu item, receive another for free.
- Free delivery in selected locations.
- Digital stamps collection with free menu items and discounts as rewards.
- A referral program with discounts as rewards.
- Cashback for every order placed with your app.
How to build an app-only promotion in Voucherify?
All of the ideas above can be implemented with Voucherify. Voucherify is an all-in-one Promotion Engine powered by API, which can be plugged into any infrastructure and customer touchpoint. Voucherify can be used for any promotional purpose with a rich selection of eight campaign types. All without breaking the bank – we offer a free and prolongable 30-day trial, a free plan, and affordable self-service plans.
To implement an app-only discount, Voucherify needs to be able to differentiate between orders placed via your app and other sources. You can use metadata (custom attributes) to attach the property, such as “source: mobile_app,” to all orders.
Once the metadata is added to all orders, it is time to build a cart promotion. In Voucherify, cart promotions act as automatic discounts applied to the cart once the promotion conditions are met. You can create additional restrictions, such as minimum order amount or segment-based limits. However, you need to ensure that proper order metadata is active for this use case to work.
When the promotion is active, all you need to do is send the redemption request to Voucherify. Our Promotion Engine will check whether the order meets any set restrictions and will pass or fail the redemption accordingly.
Whether you decide to keep using third-party services, minimize their presence, or become fully independent, sales promotions can help achieve granular sales objectives and drive customer traffic wherever you want it to go.
Build your first promo campaign with Voucherify