A step-by-step guide for a restaurant to:
Reduce UberEats commissions to 8.75%
Paying high commissions are simply not sustainable
While UberEats is a good platform for gaining exposure to new groups of audience, it has got 2 big problems:
- Extremely high commissions
- Poor customer retention
UberEats charges around 35% in commissions for each order. While UberEats could give you the euphoria of handling a good volume of orders, do remember that revenue is what matters at the end of the day. If you are a fine-dine and if you continue to pay commissions at this scale for each order, then it will hurt your bottom line pretty badly.
Poor Customer Retention
You cannot possibly earn back the investment you made in acquiring a customer in just one visit. It will at least take a few orders from a single customer before you recoup the original marketing expense that made him walk-in.
Do not mistake your marketing expense for your advertising expense. Everything from the flashy lights on the front to clean tables would count towards your marketing.
UberEats customers understandably will not actively look forward to ordering with you again as there is endless variety to choose from on UberEats. So UberEats naturally does little in the way of customer retention.
Endless variety is one of the main drivers of customers for UberEats
When is it good to pay 35% commission?
Did I just say paying 35% is good? Nope. I would never pay 35% in commissions. But let’s just imagine for a second when it makes sense to offer such high discounts.
Restaurants have been traditionally giving out huge discounts on occasional promotions or on platforms like Groupon in the hope that it will encourage new groups of people to try out the food and expecting that a good percent of them will come back and convert into regulars.
Occasionally giving huge discounts to create a buzz makes sense
But will any restaurant be willing to have their entire customer base to come out of Groupon? Not in their wildest dreams. This is kind of what is happening to you if you are a busy UberEats kitchen.
Some points to ponder:
- High commissions are bad
- Poor customer retention is bad
- High commissions with good customer retention is okay
- High commissions with no customer retention is a disaster
UberEats cannot be ignored. So the customer retention problem has to be fixed.
How customer retention fixes the problem of high commissions?
Let’s do some math.
Customer orders for $50 via. UberEats with no repeat order
Commission paid = $17.50 (35%) == 🤕
Customer orders for $50 via. UberEats and does a repeat order directly (not via. UberEats) with you for the same amount
Commission Paid = $17.50 (first order)
Total Order Value = $50 + $50 = $100
Total Commissions paid = $17.50 = 17.5%
Suddenly just by one direct-repeat order, the commissions dropped by 50%.
Lets work out a few scenarios:
0 repeat order = 35%
1 repeat order = 17.5%
2 repeat order = 11.6%
3 repeat order = 8.75%
4 repeat order = 7%
5 repeat order = 5.8%
6 repeat order = 5%
While 6 orders is not unreasonable in the life time of a customer, let’s not get too ambitious here. Let’s just aim for three and on average
if you could get 3 repeat orders from customers acquired via. UberEats, then you are just paying 8.75% in commissions, which is acceptable to me
Strategies to retain customers acquired via. UberEats:
For the following steps to work you need to have an extremely good mobile ordering system otherwise UberEats customers are not going to buy into it.
- Get a mobile app for your store. If you don’t have one checkout Zagl.
- Come up with app only specials exclusive for your app customers. Be creative. Talk to your chef.
- Give a First Order Discount of 10–15% to motivate your customers to try your app. (Optional)
- You pay 35% for UberEats on a regular basis. You can save this if your customer orders directly with you. So I recommend you slightly lower the price (5–10% less that UberEats price) for all items on your menu on your app.
- Print a pamphlet with step-by-step instructions about how to download the app. Mention the first order discount and the app only specials.
- Actively recommend your regulars and new customers from UberEats to order directly with you, by dropping the pamphlet along with the food delivered.
- Capitalise your investment on your app by retain your customers and doing repeat business with them.
And finally if you are a fine-dine, attach a fabulous invitation along with the delivery package for the customer to walk-in and experience your venue. Remember UberEats shows nearest restaurants based on customer’s location, so he could perhaps be just a walk away.
Of course do not expect business from day one on your app. Building your audience on the app is a slow and a steady process, but it’s worth every minute of your time in the long run. If you could follow these steps and actively build your audience you will be handsomely rewarded overtime and you will be a happy UberEats kitchen that’s paying less than 10% in commissions.
Zagl e-Shopping Mall is a mobile ordering platform for cafes/restaurants with no percentage commissions and extremely high customer retention by acting as as first-party ordering platform which could complement your high turnover on UberEats. For more info checkout other posts in this blog.