turnaround strategy of zomato

An Insight Into The Turnaround Strategy of Zomato’s Business Plan

In Business Report by Tarun GuptaLeave a Comment

ZOMATO, a start-up founded in July 2008 in a country known for the most discerning customer behaviors in the World, reached the status of being one of the 25 most promising websites in the country by 2010. The turnaround strategy behind its working, owes a share of its success to the advent of smart mobile telephony and the internet in India. The upper and middle class people who were increasingly gravitating towards comfort and convenience increasingly adopted technology. With right time to market, one such idea of getting convenient access to details of all nearby places to eat without having to collect huge stacks of menu cards, gave birth to this business model. The lateral thinking put in the model was innovative and way different from way of operating of traditional companies.

Business Turnaround Strategy

Customers Point of View
Zomato’s offering to the customers is: solutions in the form of database of all restaurants, the type of food (menu), the economical constraints, contacts, working hours and location of eatery and most importantly, the reviews from other users! Convenience and accessibility in the form of ‘on the go mobile apps’, easy interface, availability on various platforms.. and the presence over social media like the Google+, Twitter and Facebook (Maximum penetration in India) contributes to its increasing rate of application.

Restaurant Owner’s Point of View
Restaurant now compete among a large pool of users registered on the app, and even this pool is increasing at an exponential rate. Zomato provide restaurant business owners a platform for online visibility through marketing. Many small restaurants that couldn’t afford maintaining a website or were not running good business due to locational disadvantage now could have a free online presence (without having to pay any cash) and now could be accessible by customers. zomato processThus, ZOMATO acts as a specialist in providing online platform for such restaurant. The contacts on websites encouraged the home delivery orders to nearby locations. The customer interaction is in the form of feedback. Customized marketing campaigns and marketing strategies for the restaurants are ideated by Zomato. In turn, it assists critical client in increasing sales through Zomato and otherwise.

Zomato’s Point of View
Zomato sell advertising spaces on websites to restaurant business owners, advice restaurants on the basis of changing trends and perform sales analysis. They initiate marketing campaigns for client restaurants and innovative usage of creativity and graphics for introducing gears and merchandizes.

Sustainable product pricing, offering products that imply longevity, expanding operations in a calibrated but determined manner are the ways in which Zomato continue conveying their commitment to building a long-term presence.

Marketing Turnaround Strategy


Use of Social Media
ZOMATO has a deep presence in the social media especially on Facebook and Twitter which has been the crucial element for their success. They have been consistent about the underlying principles with their approach to social media. Some of them are listed below:

Stick To Your Domain:
The focus has always been around food & nightlife and they extended that to social media as well. The posts are related to food & nightlife, product launches, and updates on ZOMATO. They do not advertise the clients through Twitter or Facebook. They are much relevant to recent happenings (quite similar to the butterly girl of Amul).

Content Is King:
ZOMATO do not believe in spamming the timeline, which is why you will see that they limit their updates to when necessary. Posts are limited to 5-7 per week.

Always Be There For Your Customer: They react to the needs of the customer as soon as possible. The increasing number of users are no less than an asset to Zomato. Users encourage, criticize, suggest ways to improve products, ask for help to find the best places to eat around them and ZOMATO always made it a point to listen and respond to what they have to say as quickly as possible. This struck a chord with them.

Be Yourself, Be Original: ZOMATO enjoys having fun conversations with their users on social media network and it always interacted like friends and this worked best for them.

More than 50 percentage of access to ZOMATO has been through mobile platform and seems to be a perfect strategy in a country with increasing GPS enabled-smartphones like India.

Zomato on Facebook

zomato fb cover

Few Keys Points on The Official FB Page

ZOMATO never advertises or mentions any of its restaurant on the FB page.

1. The photos section on the ZOMATO page consists of number of innovative ads. Here, the turnaround strategy opted for advertising was implementation of real-time marketing relevant to the current happenings, a strategy opted by a very few other companies.

2. The cover page have innovative phrases with links to ZOMATO mobile app for different operating systems (as shown in fig).

3. The events tabs has frequents updates of events held by ZOMATO (mostly in malls and pubs) which includes stand-up comedy contests, food-eating contests (ZOMATHON) held mostly for the promotion of the sites and app. (Though the last event was held on 6th October, 2012)

4. The Pinterest section has a flow of articles, news, mentions, blogs, interviews, etc. related to the mention of ZOMATO pinned on it. Few examples includes the history of ZOMATO, info graphics, updates of apps briefly explained, fun stories of a foodie and so on.

Brand Name Turnaround Strategy

ZOMATO, initially started as Foodiebay in July 2008 with a list of more than 1000 restaurants in the NCR region. The name continued on till November 2010 and was then changed to ZOMATO after they broke even (in terms of their initial investment) in June 2010. Few reasons why the name was changed:

1. Expanding The Offerings
ZOMATO received financing from Infoedge in August 2010. This gave some stability to the firm and that triggered the thought of being a company in the longer term. They had plans to expand in the verticals adjacent to food (e.g. marketing consultant to provide solution to the restaurants/pubs). And sticking to the name Foodiebay was definitely not the best option to support this move.

2. “eBay” in “Foodiebay”
When the name foodiebay was coined they neglected the inclusion of term “eBay” in it. And citing to follow the golden rules of naming a start-up as per onstartups.com they found it necessary to change the name.

3. 1st FUNDING In August 2010
ZOMATO received first funding by InfoEdge in August 2010 and they thought it to be a perfect time to rename the brand as the major part of the funding was about to be spent on marketing. If ZOMATO had delayed the renaming part, additional amount would have to be spent on marketing of the renamed brand.

4. Correct The Mistakes
ZOMATO found the rebranding stint as a solution to set right all the mistakes that took place during the initial stages of the business.

Pros of Re-branding

A New Identity
Earlier, ZOMATO was mostly experimenting with different business models and it is only in the end 2010, they saw the bigger picture (we think!). ZOMATO understood that they could potentially move into different industry verticals which didn’t ideally fit in well with their old brand identity (foodiebay was, traditionally, seen as related only to food, as the name suggests). Rebranding turnaround strategy gave them a perfect excuse to redefine their business objectives for the longer term.

A New Startup
There are only a couple of founders for any startup (haven’t seen startups with more than 3-4 founders work). All the other people in the company are, for lack of a better word, employees. That’s because they didn’t build the firm from scratch – they weren’t there during the most difficult times. Here, rebranding turnaround strategy changed all that. ZOMATO’s team was a network of 22 members and this asset deserved every recognition of being associated with the founding team of ZOMATO. Rebranding provided an opportunity to include them in the founders list of a start-up.

Excuse To Redefine The Culture
Foodiebay lacked discipline among employees. Employees turned up for work at any time as there was no formal code of conduct for the employees. Such actions made team work and collaboration difficult for ZOMATO. Also, with fresh financing and plans of expansion, ZOMATO grew in size which aggravated the need for a formal rule book for the actions of the employees.

New Hires And Layoffs!
Rebranding was seen as a solution to hire new talents and layoff old ones found redundant by the founding members.

Excitement And Publicity
There was nothing in store for ZOMATO to come public and rebranding was an opportunity to face journalist and be a news on all the newspapers. It also helped to get lot of new customers and make up for the lost old and loyal customers. This also enabled ZOMATO to build new network by expanding the number and type of restaurant under its wing.

Cons of Re-branding

Hate Mails And Losing Loyal Customers
Already existing customers lost the sense of connection with ZOMATO as the name was changed. Many sent hate mails and they were reverted back immediately by ZOMATO to prevent them from losing, a proactive turnaround strategy indeed! However, ZOMATO is still believed to have lost many other customers.

Confused Employees
Employees were confused as why the name was changed (especially the sales team) as they faced challenges to answer for the question of the name change frequently asked by the customers and clients. Also, fears that the company was being sold and other rumors started flying loosely in air which threatened the very existence of ZOMATO.

Complicated Process
Most important challenges were linked to the fact that the re-branding has to be done in a single shot. This requires intense preparation and considerations of the consequences needs prior. Most importantly, all the changes has to be done overnight without disrupting the usual services and offerings.

HR Turnaround Strategy

The hierarchical structure for ZOMATO was among the simplest and clearest amongst all the startups in India. The following pyramid shows the employee support for ZOMATO.

zomato sales
Responsibilities of the employees at different level listed below:

Sales Team

  • Its responsibilities include pitching to the clients, building networks, contracting and payment collection.
  • Working in teams and meeting the targets allocated.
  • Reporting to Area Sales Manager

Area Sales Manager

  • Maintains the overall financial health of the area.
  • Allocates targets and incentives for the sales team
  • Manages teams to handle client relationships.
  • Pitching, negotiating and billing critical clients. Troubleshoots problems related to complex clients.
  • Formulates Area Reports (Revenue, Acc. Payable, team performance,etc.) and reports to Sales Head of the city.

City Sales Head

  • Holds the revenue responsibility of a city; Creates and monitors operating plans for the city in coordination with the Business Head / Country Head.
  • Ensures complete Product and Sales training of new sales joinees.
  • Responsible for Networking in the merchant’s community and represents the company at various B2B events.

Sales Manager (Brand Ambassador)

  • Sells advertising space on Zomato to restaurants. Searches for prospective clients and generate sales lead. (Small joints or a 5 star hotel).
  • Distributes Zomato merchandizes for display at restaurants. Advises clients, design marketing campaigns to amplify impact. Formulates result reports for advertising campaigns and interpret them for clients. Works alongside Graphics team to contribute to campaigns and maintain client relationship.

Country Sales Head

  • Develop strategies to enter new cities and looks over the city Sales Heads as well as the Sales Managers.
  • Maintain financial levels of performance and records.

Financial Turnaround Strategy

Earnings @ ZOMATO
There are 4 major sources of Revenue for firms like ZOMATO:-

1. Advertising
Placing ads for restaurants on ZOMATO website and app constitutes a major part of strategies and the key motto of the business model. These advertisements can be seen under the title “Trending restaurants this week”. In addition, complementary advertisements regarding events in restaurants in the locality accounts for another 5% of the total revenue of ZOMATO.

earnings at zomato

2. Event Ticket Sales
The tickets for various events are made available through the site, thus working as an interface cum e-ticketing partner (somewhat similar to bookmyshow.com). The revenue generated is certain percentage of the ticket amount or according to the advertising contract with the restaurant.

3. Consulting (Solutions Supplier) And Advisory Roles
Data analysis and business intelligence tools are widely used by ZOMATO content expert to advice clients on number of issues. ZOMATO maintains a huge database (terabytes) and analyzes them to understand demand and crowd patterns, customer tastes and preferences, competitions, etc. Thus, indirectly, ZOMATO acts as a consultant (information supplier) to the restaurants, providing them specialist solutions to improve the visibility of the restaurant on the online space.

Analysis of The Income Statement (Post Rebranding)

The increasing losses of ZOMATO has primarily being attributed to its turnaround strategy of aggressive international expansion as shown below. It has launched operations in Sri Lanka, UK, Qatar, South Africa and Philippines. It also launched its operation in Singapore but were forced to roll-back due to conservative nature of the restaurants refusing to share the menus and price online. This made the intake of cash flow imminent for ZOMATO to sustain amongst companies providing similar support services like Yelp, Foursquare, Burrp, etc.

Income Statement of Zomato

Fundings

The flow of working capital (in form of cash flow) has been regular in almost every year since 2010. The recent business financing was primarily meant to go global. Interesting to note that, Info Edge had credited all the five funding to ZOMATO.

zomato fundings

Should Zomato Go Public In India?

With funding required at regular intervals and plans to expand to 22 countries in next 2 years, ZOMATO would need a lot of working capital or cash for financing its expenses. With all 5 fundings, Info Edge now has around 51% share in ZOMATO. Further, funding would make Info Edge the clear majority in holdings. Going public will pave the way in raising working capital and diluting the majority status by Info Edge. It will also help in creating the base of being an Indian public organization rather than a VC funded one (Emulating Yelp).

Also, this will help banks and other financial institution to provide asset based lending facilities to ZOMATO to improve the Debt-by-equity ratio. Info Edge has also been the financing advisor of ZOMATO. Hence, if Info Edge plans a turnaround strategy to acquire ZOMATO, the asset based lending facilities provided by banks would correspond to the risk associated with InfoEdge and not on the risk of ZOMATO. The funding approved by the financing advisor of InfoEdge is seen as a potential investment expecting hefty returns on them.

Team Members:
Akshay Borhade
Ankur Bajaj

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