How can Grubhub balance user convenience with restaurant profitability when setting default tip amounts on the checkout page?

Introduction

Balancing user convenience with restaurant profitability when setting default tip amounts on Grubhub's checkout page is a critical product trade-off. This scenario involves multiple stakeholders, including users, restaurants, and Grubhub itself. My response will analyze this trade-off, propose a solution, and outline an experimental approach to validate our hypothesis.

Step 1

Clarifying Questions (3 minutes)

• Based on recent market trends, I'm thinking Grubhub might be facing increased competition. Could you share how our market position has evolved in the last 6-12 months?

Why it matters: Helps understand the urgency and context of this decision. Expected answer: Losing market share to competitors. Impact on approach: Would prioritize user retention over short-term profitability.

• Considering our revenue model, I assume we take a percentage of the total order value, including tips. Is this correct, and if so, what's our current take rate?

Why it matters: Clarifies how tip amounts directly impact Grubhub's revenue. Expected answer: Yes, with a take rate of 15-30%. Impact on approach: Higher take rates might allow for lower default tip amounts.

• Regarding user behavior, what percentage of users currently modify the default tip amount?

Why it matters: Indicates how sensitive users are to the default tip setting. Expected answer: 30-40% of users modify the tip. Impact on approach: Lower modification rates might suggest less sensitivity to default amounts.

• From a technical standpoint, how flexible is our current system for implementing personalized default tip amounts?

Why it matters: Determines the feasibility of more complex solutions. Expected answer: Moderately flexible, but would require significant development time. Impact on approach: Might limit short-term options but open up long-term strategies.

• In terms of timeline, is this a pressing issue we need to address immediately, or do we have time for a more comprehensive approach?

Why it matters: Helps prioritize short-term fixes vs. long-term solutions. Expected answer: Not urgent, but should be addressed within the next quarter. Impact on approach: Allows for a more thorough analysis and testing period.