Good or Bad? A Practical Guide to Comparing Marketing Performance on Delivery Apps

One of the most common questions I get from restaurants growing their businesses on food delivery apps is:

Is that good or bad?

They want to know if their ROAS is good or bad, whether they are spending too much or not, and if their budget is similar to competitors with the same cuisine or location.

It's a fair question, but also not easy to answer.

With that in mind I'll attempt to tackle the issue in this post.

Whilst acknowledging there is no perfect solution, I'll show you how to think about it and then also a couple of tools you can use to get a sense of how you are doing.

Why Delivery App Performance Is Hard to Gauge

The reality for restaurants is that accessing the data they need to understand their position in the market is extremely difficult.

This is due to the complexity of food delivery platforms but also because there's very few tools available that surface this type of data.

Of course you can understand your own ROAS, contribution margin, revenue etc but how do you know if this is above or below average for your category?

In short: Metrics exist, but benchmarks don't.

What a Healthy Food Delivery App Account Actually Looks Like

First we need to define terms and a methodology for what good food delivery app marketing looks like.

There two dimensions we need to look at:

1. Key metrics

2. Brand equity of lifecycle

Metrics are the only way to understand if a food delivery business is "healthy" or not. There are many metrics to choose from, all of which are important, but to simplify I suggest focusing on the most important, high level, and easily measurable:

That is ROAS, contribution margin (profitability) and total revenue.

But it's not good enough to look only at performance metrics. If you're a 1 location burger restaurant and compare your metrics to McDonalds… well there is just no point.

Brand equity and lifecycle dictates so much of marketing and budget strategy, so you need to benchmark against brands that are in a similar stage and size.

Did you know for example that on average smaller brands spend a lot more on visibility ads as a percent of revenue than larger ones - sometimes 2 or 3 times the amount.

That's the reality of doing business on delivery apps today. So if you're a small, growing brand and you think your marketing cost might be too high, it's quite likely that they could be within the average range.

The same applies to how much discounting a brand has done historically. Brands that have high discounting rates have lower brand equity and therefore will need to spend more to achieve the same results as a brand with less history of heavy discounting.

I discussed this in the article on setting budgets here.

So in the end there are no absolute right or wrong answers for what is a good ROAS or contribution margin, but restaurants should be on the lookout for what ranges make sense given their particular brand equity and lifecycle.

Introducing the Delivery App Health Calculator

In an effort to help restaurants understand their performance relative to the market I've created a useful online tool to help.

Of course it was not possible to get detail about every metric because all the data lives inside the delivery apps themselves, but I have used industry benchmarks and Revly's competition analysis tool to build a resource that can provide some of the answers.

The tool asks for:

Monthly revenue

Cuisine type

Number of brands and locations

Monthly spend on ads

Monthly spend on discounts

Average food cost %

With this supplied information, the tool tells you:

How big and what lifecycle your brand is in based on revenue

How competitive your cuisine is based on number of restaurants discounting in that category.

Your profitability and how that compares to industry benchmarks. (It's important to note here this is not net profit but based on contribution margin or how much revenue you made after variable costs. Here I am assuming a delivery app commission fee of 30%.)

Percent of revenue spent on discounts and how that compares to other restaurants of a similar size.

Percent of revenue spent on CPC ads and how that compares to other restaurants of a similar size

Whether food cost is within range for a typical restaurant to be profitable on food delivery apps.

The goal here is to give you a sense of where you stand based on your current revenue, cuisine and spend level.

The calculator is 100% free to use and you can use it as many times as you want. Access here.

Example of using the food delivery app tool

Let's take a look at a random example to get a sense of what the calculator can tell you.

Consider the following example. You run a brand with 5 locations and 100K AED in monthly revenue in the burger cuisine, you ran one small discount campaign that cost 5K AED and typically spend 10K on CPC visibility ads. Your food cost percent is 27%.

Enter this information into the tool and you get the following results.

The results show at 100K in revenue the restaurant is in its growth stage, i.e. an established brand but considerably smaller than the biggest in the market.

The tool tells you that burgers are one of the most popular cuisine types but that overall competitiveness is about average with 54% of brands discounting the menu.

Contribution margin is 28K after costs which at above 25% is considered good.

You spent only 5% of revenue on discounting which is much lower than average for a brand of this size, but you spend 10% of revenue on CPC ads which is much higher than the average brand. Does this mean you have room for optimization of your advertising? Could be.

Your food cost at 27% is solid.

This should give you some insight into how you are performing on delivery apps, as well as give you some insight into your cuisine and business size.

My goal with this is to help you benchmark your performance against the market.

Other ways to understand your performance

I believe that the tool mentioned here is unique in its ability to get a quick overview, but it's not the only way to understand your performance in relation to competitors.

For deep analysis of your performance and menu in relation to competitors you can check out Revly's competition analysis tool which allows you deep dive into specific menu items, cuisines and locations so you can build a completely custom strategy for your brands.

This tool is part of the Revly marketing software platform, which unlike the above calculator is not free. However the level of detail and customization is much greater and comes highly recommended if that's what you need.

Wrapping it up: was it helpful to you?

Comparisons and benchmarking are not easy when it comes to food delivery apps, but new tools and resources mentioned here start to help with answering these common questions.

In highly competitive markets, benchmarking and market analysis is just one tool in a restaurant's marketing and business optimization toolbox.

Internal data will always be the first point of call for optimization, but data now exists to look at benchmarking as well.

Do you find this approach useful?

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