Is it better for Delivery Hero to offer steep discounts to acquire new users or focus on retention strategies for existing customers?

Introduction

The trade-off between offering steep discounts to acquire new users versus focusing on retention strategies for existing customers is a critical decision for Delivery Hero. This scenario touches on the core of growth strategy and customer lifecycle management. I'll analyze this trade-off by examining the business context, potential impacts, and key metrics, then design an experiment to inform our decision-making process.

Step 1

Clarifying Questions (3 minutes)

• Based on recent market trends, I'm thinking Delivery Hero might be facing increased competition. Could you share insights on our current market position and how it's evolving?

Why it matters: Helps determine if aggressive user acquisition or customer retention is more critical. Expected answer: Increasing competition in key markets. Impact on approach: Would lean towards user acquisition if market share is at risk.

• Considering our business model, I assume we operate on thin margins. What's our current profitability situation, and how does it affect our ability to offer discounts?

Why it matters: Influences the viability and sustainability of discount strategies. Expected answer: Margins are tight, profitability is a concern. Impact on approach: Would need to carefully balance discount depth with long-term value.

• Looking at our user base, I'm curious about our current customer retention rates. Can you provide some context on our churn and repeat order frequency?

Why it matters: Helps assess the urgency of retention efforts versus new user acquisition. Expected answer: Retention rates are below industry average. Impact on approach: Would prioritize retention strategies if churn is high.

• Regarding our technical capabilities, how robust is our personalization engine for targeted retention campaigns?

Why it matters: Affects our ability to execute sophisticated retention strategies. Expected answer: Basic personalization in place, room for improvement. Impact on approach: Would influence the complexity of retention strategies we can implement.

• Considering resource allocation, what's our current split between acquisition and retention budgets?

Why it matters: Helps understand if we're already heavily invested in one area. Expected answer: 70% acquisition, 30% retention. Impact on approach: Would inform how radical a shift in strategy would be required.