Is it better for Delivery Hero to focus on increasing order frequency or maximizing average order value?

Introduction

The trade-off between increasing order frequency and maximizing average order value is a critical decision for Delivery Hero's growth strategy. This scenario involves balancing short-term revenue gains with long-term customer retention and platform sustainability. I'll analyze this trade-off by examining key metrics, stakeholder impacts, and potential experiments 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 influencing this trade-off consideration?

Why it matters: Helps contextualize the urgency and strategic importance of this decision. Expected answer: Moderate market pressure, need to differentiate. Impact on approach: Would emphasize innovation in customer experience alongside revenue growth.

• Considering our business model, I assume we operate on a commission basis from restaurants. Is this correct, and are there any other significant revenue streams we should factor into this analysis?

Why it matters: Clarifies how different strategies might impact our overall revenue structure. Expected answer: Commission-based model with additional revenue from advertising and premium partnerships. Impact on approach: Would consider how each option affects multiple revenue streams, not just direct sales.

• Regarding user segments, are we primarily focused on a specific demographic or geographic area for this initiative, or is this a platform-wide consideration?

Why it matters: Helps tailor the strategy to specific user needs and behaviors. Expected answer: Platform-wide initiative with potential for segment-specific approaches. Impact on approach: Would incorporate segment analysis into the experiment design and data analysis plan.

• From a technical standpoint, do we have the capability to implement personalized recommendations or dynamic pricing, which could be relevant for either strategy?

Why it matters: Assesses the feasibility of sophisticated solutions that could support either frequency or order value increases. Expected answer: Basic recommendation system in place, dynamic pricing under consideration. Impact on approach: Would explore how to leverage existing tech capabilities while proposing realistic enhancements.

• In terms of timeline, is there a specific quarter or milestone we're aiming for in implementing this strategy?

Why it matters: Helps prioritize short-term tactics vs. long-term strategic shifts. Expected answer: Aiming for initial implementation next quarter with ongoing optimization. Impact on approach: Would balance quick wins with sustainable, scalable solutions in the recommendation.