Blog For Restaurant Owners

Recently an online portal pitched something similar to the following offer:

“Give 20% discount to online orders coming from our portal and we’ll promote your restaurant to 70,000+ of our customers”.

As a restaurant owner, you:

a) Sign-up (what’s there to lose?)
b) Ignore the promotion because you already get PLENTY of orders from the portal
c) Ignore the promotion because you get VERY FEW orders from the portal
d) Wonder what the right thing is?

My Thoughts:

The hidden message is obviously attractive. The 70,000 customers is a big and attractive number that screams for attention - and gets it! If I can manage to add 2% of the 70,000 customers, (assuming that none of them are my existing customers) it adds to 1,400 NEW customers. At $15 an average ticket (after discount, say) that is $21,000 in revenue that I did not have!!! So option (a) above is not unreasonable!

But wait, my first suggestion is to ask some basic questions:

Q1: WHERE are these 70,000 customers? A portal typically provides its services across the country since geography is hardly a limiting factor on the internet. So no matter how good my pizza is at my restaurant in Chicago, someone from San Francisco is not likely to catch a plane to satisfy his craving for a Chicago pizza! In short, although the 70,000 number is impressive it is really not relevant to my business. I want to know how many of these 70,000 are within a 10 mile radius from my restaurant. I’d prefer to give my 20% discount coupon to customers who are likely to come to my restaurants … not someone who lives a plane ride away from my restaurant.

Q2: WHO are these 70,000 customers? How did the portal “acquire them”? We did some research and here is the basic answer. Very few portals actually invest in acquiring their “own” customers via advertising and promotions. They are often the customers of restaurants that subscribe to the portal services. So, when Joe Foodie orders an online order from the portal for Restaurant-1 he is highly likely to have originally come to portal from Restaurant-2’s website because Restaurant-2 uses the portal for its online ordering. So the “loyal” Restaurant-2 is not only paying for the portal services but also delivering its customers to the portal … to be poached and handed over to the competition. Would you like to put yourself in the position of being the restaurant-2?

Q3: HOW many of these 70,000 are ALREADY my customers? If I am getting the promotion from the portal, most likely I am already accepting orders from the portal … so my customers are already in the mix!! Giving 20% discount for a customer I already have seems to be silly because the benefit of the 20% discount seems to go to the portal … not to my business!! For an order that my EXISTING CUSTOMERS place, MY business is not only providing a 20% subsidy in terms of the portal’s promotion but also PAYING THE PORTAL’S FEE!!!

So the offer might look attractive on the surface … I think, it really sucks! Anyway, lets dig deeper, before we come to a final thought!

On to the next option …

“Ignore the promotion because you already get PLENTY of orders from the portal”.
If you already get plenty of orders from the portal then the 20% discount you offer will more likely go to your EXISTING customers. No real benefit here! So, may be signing up is not a good idea! However if you don’t sign up for the portal’s offer, all YOUR portal customers will get the promotion from your competition. Armed with a discount coupon from your competitor, YOUR customers will have the incentive to order from your competition! You are likely to LOSE your existing business. So signing up seems to be a necessity. But wait, isn’t this a heads-the-portal-wins-and-tails-the-restaurant-loses proposition? From what we see, that is exactly what it is! The more customers you serve from the portal, the deeper you get entrenched … and the fewer are your choices. So this is hardly a one time choice … it actually raises a bigger question. “If portals don’t help in the long run, why do business with them?” I’ll address this issue later. For now lets look at the next option!

“Ignore the promotion because you get VERY FEW orders from the portal”.
If you do not get many orders from the portal AND you want to increase traffic from the portal, this option actually makes sense. However, the obvious question is “who are you really helping?” … yourself or the portal? You are not only paying the portal for the extra orders (assuming that you get them!) but also handing over your customers to the portal for future marketing from your competitors. The new orders you get come at a price - LOW margins! After paying the discount AND the portal’s fee you have really lost on the margin. So, if margins is not really an issue, this option makes some sense.

So this is all a bit confusing! What is the final judgement? Should I sign up or not? Is this a good deal?

Here is my long-and-short of it:

1. Getting business from a portal is a mixed blessing. In the short term my restaurant benefits, however in the long run, the more business i get from the portal the more i become entrenched. The deeper I get, the fewer options I have. So, my answer is: Sign up if you are desperately in need of orders and survival is a bigger issue than healthy margins.
2. The real question is: “If portals is a mixed blessing, why do business with them”? This is an important question that needs a more than a simple “yes/no” answer!

My Opinion: Portals fulfill a niche - bringing in new customers. It is perfectly reasonable to pay the premium that a portal demands (the 20% discount + the portal fee), but it only makes sense if:

• the restuarant can serve the customer at a significantly cheaper “repeat-rate” than offered by the portal… i.e. after the first order, the restaurant should be able to define the customer as the “restaurant’s customer” not call it the “portals customer”!
• the restaurant can market to its OWN customers if the restaurant chooses to.
• the restaurant can market EXCLUSIVELY to customers that are not EXISTING customers of the restaurant
• the restaurant does NOT give-up its own customers for promotions from its competitors via the portal’s definition of a “portal customer”
• the restaurant is serious about expanding the online ordering channel and willing to develop an alternative to getting online orders outside the portal’s platform.

Final Thought:
Every restaurant that accepts online orders from a portal should have its own online ordering channel. Every order that comes from the portal platform must be considered an order from a new customer. The restaurant owner should make every effort to drive the new customer that comes to his restaurant from the portal, to move to the restaurant’s website. It is a war … and at this time, very few restaurant owners have paid attention to this detail. Portals are demanding - and getting - a large piece of the margins that the restaurant should keep. Good online platforms are the tools that restaurant owners need to defend themselves and succeed in the new world where take out and delivery orders are increasingly coming on the web, instead of on the telephone!

Filed under: Atul Shevade, Authors, Online Ordering, Portals, Web Strategy