New And ‘More Differentiated’ Loyalty Program In Making: Zomato

Indian foodtech giant Zomato will soon come up with a new loyalty program on its platform, the startup said during its post-earnings call on Friday (November 11).

“We are, as we speak, working on creating something which is more differentiated, we believe, at least, and to perhaps make sure that we get the benefit of customer loyalty without really losing a lot of money. So I would request you to please wait and watch for that and we will come back with some loyalty program construct soon in the market,” the startup said while answering a question if Zomato was looking to introduce a new loyalty program for its food delivery.

Zomato founder and CEO Deepinder Goyal, CFO Akshant Goyal, head of corporate development Kunal Swarup, and Blinkit founder Albinder Dhindsa addressed the call. 

It is pertinent to note that Zomato discontinued its loyalty programs Zomato Pro and Zomato Pro Plus earlier this year, which seems to have become a cause of concern for many investors as loyalty programs offer a stable customer base. Zomato’s biggest competitor Swiggy is already leveraging the benefits of its loyalty program ‘Swiggy One’.

Responding to a question about the hit on gross order value (GOV) growth due to Zomato’s decision to discontinue renewal of loyalty programs, the startup said that no significant frequency drop was identified from its most frequent customers whose memberships expired.

“…that may have contributed in some form in terms of lower growth, but these are for multiple variables which are all impacting the overall order volume in the quarter, so it’s very hard to isolate the impact of each one of these,” it said.

Despite the rise in contribution margin as a percentage of GOV over the last few quarters, the food delivery vertical posted a much slower growth in Q2 FY23. The vertical’s revenue rose 3% sequentially to INR 6,631 Cr.

In its shareholders’ letter as well, CEO Goyal noted that Zomato’s revenue from its dining-out fell substantially over the past few quarters, especially in the last quarter, due to the discontinuation of its efforts to monetise dining-out (ad sales and sale of Zomato Pro memberships).

As per Goyal’s statement, Zomato decided to discontinue the loyalty programs to undertake a full product revamp and make them more relevant and attractive for customers and restaurant partners.

“As we do that, we expect the losses to further expand in this segment in the near term,” he added.

Meanwhile, Zomato has already introduced a new loyalty program called Zomato Pay for dining-out. Zomato started promoting its Zomato Pay program in July while it was pulling the plug on Zomato Pro and Pro Plus memberships. The feature has recently been made available in cities including Delhi, Mumbai, Bengaluru, Ahmedabad, and Kolkata. It is currently live in 12 cities in India and UAE, as per the company.

Zomato Pay would allow its customers to pay at Zomato’s partner restaurants using the feature on the app and avail discounts and cashback offers. 

Speaking on Zomato’s plans to monetise the new offering, the startup said that the main monetisation method would continue to remain ad sales. However, it also noted that the offering is currently at a nascent stage and more data would be available only in the next quarter.

The foodtech startup reported a consolidated net loss of INR 250.8 Cr in Q2, which widened nearly 35% sequentially but narrowed on a year-on-year (YoY) basis from INR 434.9 Cr in the same quarter last year. Meanwhile, Blinkit posted an adjusted EBITDA loss of INR 259 Cr during the quarter, which narrowed sequentially, but still weighed heavy on Zomato.

Shares of Zomato ended 13.8% higher at INR 72.80 on Friday as investor sentiments were bullish after Q2 results.