As restaurants compete for attention on mobile apps, deals run aplenty. | Photo: Shutterstock.
We’ve been thinking lately of two different numbers from two different studies.
In one, from the data firm Circana, 29% of restaurant traffic is on some kind of perceived deal.
In the other, according to our study on third-party delivery with Intouch Insight, about half of orders placed on third-party delivery apps were on some form of offer.
Which raises the question: Why are there so many deals available on third-party delivery apps that customers can get half of their orders at some form of discount?
The reason is both understandable, in the context of the market, and disturbing, in the context of operator finances, along with the growing power and influence of the aggregators themselves.
Aggregator apps have evolved into powerful sources of digitally savvy customers. These apps have enjoyed growing demand even through an allegedly difficult era for restaurant sales.
These apps are marketplaces. In any marketplace, companies are vying for customers’ attention. It’s also an especially competitive marketplace. And so everybody on the apps is effectively competing for attention from scrolling customers. If I want pizza, I can get several different options, and most of them have a deal.
For instance, in my search for pizza, the top sponsored restaurant is offering 30% off. The second has a buy-one, get-one-free deal. The next few have free delivery. Pizza Hut has a buy-one, get-one offer. The local Topper’s Pizza has a sponsored presence offering 30% off.
A screenshot of a group of offers for a pizza concept on DoorDash.
As one restaurant operator told us for a different story we’re working on, offering discounts is important to get customers to notice your ad. That gets them at the top of the listing, which drives sales. “I’d play with that a little bit, but when we offered discounts, we saw an increase in sales, and when we decreased promotions, sales dropped,” the operator said.
And that makes sense. Visibility in any marketplace is vital, and on a search screen or on a mobile app that visibility is always at the top.
To be sure, delivery remains a more expensive overall service. Customers typically pay some fees to get their food delivered. But restaurants also raise their menu prices to offset the higher costs, notably in the fees charged by the aggregators themselves.
But these services have become vital for some restaurants, especially as they grow in popularity.
Third-party aggregators already hold enormous sway in the restaurant industry, one that will only grow as more customers continue to use them. And it is important for restaurants to court these customers.
At the same time, it often yields a difficult choice. In some franchises, especially struggling brands, operators will continue to make these offers on the apps, worried about a potential loss in sales if they do not. But it also wreaks havoc on their profitability, because of the fees associated with delivery, not to mention other headaches such as lost or stolen orders. Third-party delivery has made what was already a difficult industry that much worse for a lot of operators.
And these days, when restaurants struggle to get customers in the door despite a heavy dose of discounts and a machine gun approach to limited-time offer marketing, the need for the one area with growing traffic is more crucial than ever. It’s just an unfortunate irony this area is the most expensive form of traffic, and the one that needs the most frequent discounts.
