Despite a gloomy economic outlook, Deliveroo’s chief, Will Chu, has reason to be optimistic. On an investor call, he announced that Deliveroo had swung into profit of c£6mn in the second half of 2022, compared to over £100mn loss for the previous year.
Whilst their pathway to overall profitability is set on track with reducing year-on-year losses, it certainly paints a positive picture for the firm.
So much so that Credit Suisse has called the firm a financial outperformer, upgrading their rating and leading to a steady rise in the stock price.
Chu is a customer champion who understands the importance of getting the right proposition, experience and communications approach, working harmoniously to create value.
The company’s better than forecast growth is built on a fundamental understanding of the customer and their expectations.
As well as the levers of value that the company can pull to drive home the goods.
Importantly, they recognise that different levers are essential at other times.
Focus on Customer Experience
Deliveroo takes Customer Experience very seriously. It understands that customers have yet to be happy with the end-to-end experience of any player in the food delivery space. So getting this right is seen as a big differentiator for the firm.
He said, “The food delivery industry has not yet cracked the problem of how we consistently deliver a great end-to-end delivery experience each time.”
They are making a step change in their service delivery and design to align more with Customer expectations in this regard whilst still being mindful of commerciality.
Of course, their recent move to reduce headcount by 9% to drive profitability is counterintuitive.
However, it shouldn’t come as a surprise since operations and logistic costs have spiralled over the last year.
The move also makes them rethink how they can gain efficiency without losing the CX their customers want.
Redefine the propositio
They focus on leveraging additional revenue opportunities as part of their drive towards profitability. A mega one is a role that advertising can play on their platform.
Last year, they boasted over £40mn of revenue from this avenue, predominately from promoting partners’ food options. However, with their Media and E-commerce platform, they are looking to expand their ad space into FMCG brands.
Related to this is the expansion of their delivery proposition into the grocery market. They have significantly increased their partnerships with major supermarket chains, including Sainsbury’s and Waitrose.
All these moves enable them to take advantage of existing infrastructure and virtual real estate in new incrementally value-adding ways. So it’s a great case in point that often you have the keys to unlock new and more value; it’s just a case of bringing it to life.
Communications
As mentioned, the art is knowing what lever to dial up and down. Initially, they planned on increasing marketing spend in 2022; however, given the economic environment did the opposite.
They reduced the budget by c£50mn to around £88mn, still no small change. But there was a clear call for more “efficiency” in their marketing. A decision that ultimately led to a boost in short-term top-line growth.
Summary
Deliveroo tells a tale of two halves. On the one hand, a relentless focus on customer value, aligning expectations and crafting experiences. On the other, a focus on operational excellence and cost-cutting in a bid to narrow the gap to profitability.
It’s a case in point that the two do not have to be mutually exclusive and that accurate Customer Strategy is about getting the balance of both.
Customer understanding, Business model design, Proposition evolution, Customer experience and finally, Communications to achieve results.
It shows that when combined, each element working in unison can have a transformative impact on the commercial performance of a business.
