In 2017, the app-based online food aggregator Zomato, launched ‘Zomato Gold’ – a premium,…

In 2017, the app-based online food aggregator Zomato, launched ‘Zomato Gold’ – a premium, subscription-based dining out program. The program offered customers complimentary food and drinks for every order they placed at selected restaurants, exclusive invitations to food and drinks events like wine testing sessions, new menu previews, pub crawls, chef cookout sessions, new restaurants openings etc. Customers availing this offer, enjoyed not only huge discounts but also got more choices, convenience and more transparency. To sign up as a Zomato Gold partner, restaurants first had to pay Zomato a Rs 40,000 fee, in exchange they were allowed to upsell additional food items to cover the cost of complimentary items. Also, Zomato charged restaurants 18-22% of the bill as a commission and any discount given to customers by Zomato was borne by restaurants. Later, the Zomato Gold scheme was introduced the for online ordering also. Such deep discounting for online orders robbed the restaurants the opportunity to upsell. This led to a lot of dissatisfaction of restaurant partners. In 2019, ‘National Restaurant Association of India’ launched the ‘Logout’ campaign against Zomato Gold and told restaurant to opt out from the program. Restaurant owners believed the deep discounting was not only reducing their profit but also it was diluting the brand value of the restaurants. They complained that the program was originally meant to be for a niche group of diners but was made available to everyone by Zomato without consulting with them and the company was transferring the customer acquisition cost to them. Zomato argued that restaurants opting to be a part of Zomato Gold was optional, not mandatory and as a result they should not complain.

What Zomato should do resolve the conflict with restaurant owners? If you were asked to redesign the Zomato Gold program, what changes would you suggest? (15 Marks)

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