Food Delivery Product Managers Need Steady Customers

The chase is on for customers who will order repeatedly
The chase is on for customers who will order repeatedly
Image Credit: Eric Vondy

I can only speak for myself, but it seems as though anytime I walk into a store that sells food, there is some sort of sticker on the door that proclaims that if I’d prefer to have my food brought to me, there is a service that will do it. What a fantastic age we now live in! The product managers at these food delivery services are working hard to try to establish their new market while fending off all of the other companies that are doing the same thing that they are. However, there is a fundamental problem that they are all dealing with: their customers are not turning into repeat customers.

The Problem With Food Delivery Customers

If every store that serves food now offers a form of delivery, what’s the problem that product managers have to solve? The problem is that food delivery services have not yet figured out how they can change their product development definition in order to create repeat customers. What these services are discovering is that a customer’s decision to order food often depends considerably on which delivery services are currently offering a discount. The problem is that discounts are doing a good job of attracting customers and encouraging them to order food more frequently. However, the discounts are causing customers to hop from one food delivery service to another as customers look for the most generous coupons.

Product managers are discovering that their younger customers, the ones who use their food delivery service the most, are the ones who lack loyalty. The food delivery product managers know what they need. They need high-frequency customers who order from them repeatedly. They need these customers to be driven by their force of habit more so than by the availability of coupons. In the food delivery market the various food delivery services are all currently trying to build up the largest user base before they take the time to find ways to make each individual order profitable.

Right now the food delivery market is a tough market for product managers to be competing in. In a recent survey, only 6% of the respondents said that they ordered restaurant delivery daily. 36% of the people said that they order once a month or less. This is in contrast to how people order from grocery stores to have their food delivered. It turns out that only 4% of people order their groceries online. All of this is not going to look good on anyone’s product manager resume.

How Food Delivery Product Managers Are Going To Make Their Customers More Reliable

The food delivery product managers have an example that they are hoping to not follow. The meal-kit business, where subscription boxes of pre-apportioned ingredients along with recipes were delivered to customers, went through a boom bust cycle. They had used free trials and promotions to initially get customers, but once those stopped their customers dropped by half and a number of start-ups went out of business.

The good news is that people think that the food delivery firms have a better chance of staying in business because takeout food does not require the same level of work on the customer’s end as a meal kit does. The challenge that is facing product managers is to keep the customers that they already have because if they wander away, they can be very expensive to win back. This is why food delivery product managers are starting to experiment with a new idea: subscriptions.

The idea behind food delivery service subscriptions is that satisfied customers will sign up for regular services at a flat rate. The thinking is that this would allow them to avoid delivery charges. Over at Amazon, they have already started doing this by allowing their Prime members to get free grocery deliveries from Whole Foods. The DoorDash product managers have decided to wave the cost of a delivery on orders that are greater than US$15 if the customer has signed up for the service each week. The challenge for product managers is that there are limits to subscription programs. The biggest issue is that delivery fees are negotiated individually with each restaurant.

What All Of This Means For You

As product managers we always want to be involved in exciting markets that are growing rapidly. It turns out that the food delivery market is one such market. There are a lot of different issues identified in the product manager job description that these product managers are currently dealing with including a lot of competition. However, there is one significant issue that may cause significant problems as this market matures. This issue is that the customers that they have today are buying food because they have discount coupons and they may not turn into repeat customers.

Customers are currently being presented with multiple discount offers from different food delivery companies. This is doing a good job of attracting new customers and getting them to use the service. However, the customers are switching food delivery companies based on what discounts they can get. The customers who use food delivery services the most, the younger customers, are the ones who most lack loyalty. Studies have shown that not many people are currently using the food delivery services. What the food delivery product managers don’t want to do is to emulate what happened to the meal-kit product managers who saw their market go away once they stopped offering discounts. A new idea that food delivery product managers are looking into is subscriptions: food is delivered for free if you are a subscriber. There are challenges to this type of program that product managers will have to work out.

Based on the number of food delivery service stickers that we are starting to see on doors when we go out to eat, this is a booming market. Food delivery product managers are dealing with all of the issues that any startup business have to deal with, but they also have to deal with the fundamental problem of not having enough repeat customers. What has to happen is that ordering takeout food from restaurants is going to have to become second nature to customers who like the food but who don’t want to visit the restaurant. Changing the way that customers view the world can be difficult to do, but if food delivery product managers can pull it off then they just might have a winner on their hands!

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: If food delivery product managers stop offering discounts, what else can they offer to get people to use their service?

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What We’ll Be Talking About Next Time

Every product manager wants their customers to be able to buy their product when they decide to make a purchase. The worst thing in the world that could happen is that your customer is ready to buy and you have nothing to offer to them. Grocery store product managers are facing a situation like this. Product shortfalls are forcing them to have to get creative. Their goal is to be able to present their customers with full shelves. What kind of magic is this going to require?