This Startup Used Market Segmentation to Attract Customers
Utilizing strategic marketing tactics to generate business
Business Model
Eat2Eat.com, an Internet-based restaurant portal, promotes fine dining in the Asia Pacific region. Covering more than 800 restaurants in Bangkok, Hong Kong, Kuala Lumpur, Shanghai, Singapore, Taipei, Tokyo, Seoul, and Sydney, Eat2Eat serves as a guide to the region’s best restaurants. Users can find lists of top establishments in various categories, restaurant reviews, recipes, interviews with industry chefs, and even make online reservations.
Vikram Aggarwal formed the company in 2000 when he saw an opportunity in online restaurant bookings. He noticed that bookings for airlines, car rentals, and hotels were highly automated; but there was not a similar automation tool for information and transactions for restaurants online. In addition, corporations could negotiate discounted rates for hotel rooms and car rentals, but not for restaurants. Since business lunches and dinners are very common amongst business travelers, Aggarwal believed there was a largely untapped market.
Reaching the Restaurants
Agrawal met with restaurant managers all over the Asia Pacific region. He negotiated discounts for corporate customers and commissions for Eat2Eat. Diners can easily make a reservation through Eat2Eat.com with the option to choose the date, time, party size, location, ambiance, cuisine, price range, quality rating, smoking preference, and hotel affiliation.
Eat2Eat confirmed with the restaurant the day after the reservation and invoiced the restaurant for the agreed-upon commission which averaged about 10% of the customer's bill. Commissions from dining customers contributed to 40% of Eat2Eat’s total revenue of $478,000 USD.
Market Segmentation
Eat2Eat focused on primarily first-tier restaurants. Aggarwal defines these as “typically those that accepted reservations, were moderately expensive, or were very popular and busy” (Clow and Baack). Aggarwal categorized second-tier restaurants as those who did not take online reservations, therefore he would not market to them.
Aggarwal paid extensive detail to population density, dining habits, the presence of first-tier restaurants, Internet penetration, as well as receptivity to new marketing and distribution tactics in each city. This equipped him with information on which regions and restaurants to pursue as suppliers.
Aggarwal personally met with restaurant owners and managers across twelve handpicked cities. He felt that creating a personal connection was important for his business. Depending on the city, he worked with both chain restaurants and independently owned restaurants. Aggarwal found that it was easier and less time consuming to set up a single independent restaurant versus a large chain.
Eat2Eat primarily focused on corporate customers who already planned business dinners and made reservations often. Aggarwal through personal diners was too numerous, as well as difficult and expensive to reach. He believed that the corporate market made the most sense and created the most value for his company.
Aggarwal approached large corporations and encouraged employees to sign up for the service. Since corporations already reimbursed their employees for business meals, the discounts available for meals reserved through Eat2Eat.com offered corporations a cost reduction. About 80% of the companies Aggarwal approached endorsed the program and approximately 15% of employees would register with Eat2Eat.
Promotional Strategy
Google and Yahoo! search engines consistently ranked Eat2Eat first in search results for Asian restaurant reviews and reservations. In addition, Eat2Eat.com sold banner advertisements on its website which contributed to approximately 20% of the company’s total revenue.
In the early stages of the company, Aggarwal made Eat2Eat.com accessible through WAP-enabled mobile phones as he believed this would increase accessibility and extend the company’s reach and utilization. He believes this would pay off as the world became increasingly mobile and connected to the Internet.
Aggarwal also created partnerships with credit card companies and restaurants for the benefit of credit cardholders. If a consumer utilized a partner credit card, consumers were typically offered special deals and perks, while Eat2Eat would get a commission cut. It was a natural extension for Eat2Eeat to source restaurants for credit card companies as well. Negotiations with credit card companies contributed to the remaining 40% of Eat2Eat’s revenue.
Final Thoughts
Eat2Eat utilized market segmentation to define restaurant partnerships and target customers. It allowed the company to focus on high-value customers versus chasing after more difficult to convert audiences. Eat2Eat focused on first-tier restaurants and corporate businesses to propel the company’s growth.
The company’s unique partnerships with credit card companies, restaurants, corporations, and business professionals made it a win-win situation for all; cost savings and benefits were felt across the board. Eat2Eat’s strategic marketing tactics allow the company to become recognized across the restaurant industry in the Asia Pacific region.
References
Clow, Kenneth E., and Donald Baack. Cases in Marketing Management. SAGE, 2012.
