The potential risks and rewards of a runaway promotion - lessons from GrubHub

May 30, 2022
Henry Bewicke
Content Writer
Min to read

GrubHub’s recent ‘free lunch’ promotion joins a small but exclusive list of promotional campaigns that made the headlines for all the wrong reasons. The campaign was conceived to spread some good will to New Yorkers, while earning some valuable positive press for GrubHub.

Unfortunately, it achieved the complete opposite, resulting in a day of chaos for restaurants, delivery workers, diners and GrubHub’s team.

The same can happen to any promotional campaign unless proper precautions are taken.

Any business that runs their own promotions should be aware of the potential negative consequences of a badly implemented promotional campaign.

In this blog post we’ll take a look at the promotion, and draw a few lessons that can help your business avoid a similar outcome in the future.

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Good intentions gone wrong

The problem with GrubHub’s promotion wasn’t the idea itself. Many brands have launched similar campaigns and reaped the rewards. 

Giveaways and coupons are great for brand exposure and winning over potential new customers en masse. In many student cities, Dominos offers students $1 pizzas during freshers week. The up front cost of these campaigns is a small price to pay for thousands of potential new customers.

A food delivery bag left on the street

But there were a few different oversights that played their part in the failure of GrubHub’s campaign.

Lesson 1: Communicate the details of your promotions clearly

While GrubHub says that all affected restaurants were told about the promotion before it went live, many claim that they weren’t aware until the orders started flooding in.

Either way, it highlights the importance of communicating the details of your promotions beforehand, especially if they involve affiliate or partner businesses. 

Lesson 2: Predict promotion demand

It seems like GrubHub also significantly underestimated demand. The free lunch coupon was available across the whole of New York City, which is home to more than 9 million people.

While it was live for just three hours at lunchtime, GrubHub recorded a peak of up to 6,500 orders per minute. This completely overwhelmed the restaurants preparing the food, delivery workers delivering the food, and GrubHub’s app itself.

Accurately predicting demand before you launch a promotion is essential to avoid disappointing customers and damaging your business’s reputation. This includes ordering sufficient stock, preparing your staff, and potentially changing the timeframe of your promotion to spread demand.

If possible you should set up your coupon campaigns with automatic budgets. Once your budget has been reached, additional coupons won't work. This can potentially save huge amounts of money if you’re faced with a runaway campaign like GrubHub.

Lesson 3: Pick a realistic incentive

Another potential issue with GrubHub’s campaign was the value of the incentive on offer — $15 off any order at GrubHub affiliated restaurants in the city. This is an unusually high amount for a widely accessible promotion of this type.

A safer alternative would be to reduce the value of the coupon, or to add some additional criteria to the promotion. This would still bring in plenty of new customers, and have the same effect on positive brand sentiment. But, crucially, it could help reduce pressure on your systems, and reduce expenses.

There are many ways to build eligibility criteria and other security measures into a coupon campaign if you have the right tools at your disposal. This brings us neatly on to the fourth, and perhaps most important takeaway.

Lesson 4: The importance of capable software

The key problem GrubHub faced was high demand overloading their software systems and causing their app to crash.

Not only did this cause issues for customers and workers in New York City, it even caused issues for GrubHub workers on the other side of the country who weren’t able to access the app and take deliveries.

Besides the additional load on restaurant workers, the promotion could theoretically have been a success if GrubHub’s software system was able to cope with the additional load.

With high budget, high exposure promotional campaigns, no expense should be spared to ensure the systems you use to run them are capable of handling any likely outcome.

How a promotion engine like Talon.One can help

Creating a budget in Talon.One is easy — we’ve added simple options in our campaign settings that allow you to define the feature that needs to be budgeted (total discounts, discounts per session, etc.), what the limit is, and how often that budget refreshes.

Campaign creation in Talon.One's Promotion Engine

Once you’ve created your budget, you can see how it’s being spent in the dashboard. This way you can tell exactly how much you’ve spent on your promotion, and gain insights if your budget is being spent too quickly.

Setting a campaign budget in Talon.One's Promotion Engine

It’s very easy to build a basic money-off campaign in Talon.One with just two simple rules. 

Setting conditions and rule in Talon.One's Promotion Engine

But it’s important to add other attribute values to make highly popular campaigns less prone to coupon leakage. In the example below we made the campaign only available in Hell’s Kitchen using the geofence feature.

Setting up a geofence around Hell's Kitchen, New York City
Setting up geofence campaign conditions

With just a few extra clicks we’ve massively restricted the number of eligible users. Any number of different conditions could be used in conjunction with the ones we’ve already added:

First time users

Using the ‘session closed’ attribute (there are also other ways to do this) we can limit the campaign to people who have never completed a previous session.

Setting up campaign conditions for first-time users

RFM audience

Using an audience we’ve created in a BI tool, we can segment users based on RFM (recency, frequency, monetary) statistics and targeting only users that are close to churning.

Setting up campaign conditions for churning users in Talon.One's Promotion Engine

Minimum order size

In this example we only apply the discount if the user spends at least $30. You can change the amount to whatever you like, or even include specific products.

Setting campaign conditions for a minimum order size in Talon.One's Promotion Engine

To find out more about building promotions with Talon.One, download our free ebook — Future-proofing retail and ecommerce promotion strategy.

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Future-proofing retail and ecommerce promotion strategy
How to build a winning promotions strategy
Why software is essential for effective promotions
How Talon.One helps businesses build better promotions
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