Is There Really Such a Thing as Free Lunch?
Key Takeaways
Grubhub’s “Free Lunch” promotion led to a surge in orders and new customers in the New York City metro area on May 17th, 2022.
Despite the popularity of the discount on the day, plagued by overwhelmed restaurants and negative customer experiences, the majority of users who ordered free lunch did not order again from Grubhub that week, and Grubhub’s share of sales in the New York area continues to decline compared to competitors.
On Tuesday, May 17th, Grubhub ran a promotion promising customers in the New York City area a “free lunch”. Participants received up to $15 off their orders, excluding the cost of tax, tip, and delivery fees, from the hours of 11 am to 2 pm. The demand and sudden rush of orders led to overwhelmed restaurants and customers rushing to social media to complain of missing deliveries and long delays. While Grubhub managed to win over the lunch crowd for the day, was their promotional strategy really successful at creating a long-lasting impact on consumer behavior?
Short term gains
On the day of the promotion, Grubhub orders in the New York metro area jumped 202% compared to the prior day. Additionally, Grubhub made up 49% of the total third-party delivery orders on May 17th, beating out both Uber Eats (33%) and DoorDash (18%). 73% of orders placed on Grubhub that day were placed with a discount, compared to an average of 15% for the remainder of the month. The promotion also led to an increase in new customers. Of the NYC area customers that ordered on Grubhub “Free Lunch” day, 38% hadn't ordered from Grubhub in at least a year.
As NYC residents would know, $15 is unlikely to fully cover lunch costs. Even so, it didn’t take a truly “free” lunch for users to order with Grubhub. Only 3% of orders placed on May 17th with a discount were truly free. 47% were under five dollars, 24% were under 10 dollars, and 26% were over 10 dollars, even with the discount. The promotional strategy and promise of a free lunch were enough to boost orders and reel in customers.
Share of Orders by Total Amount Spent (Using Discount)
New York City Metro Area, Grubhub, May 17th 2022
Long-term impact murky
While the promotion aided in an influx of orders and users on the day of, the impact did not extend far beyond May 17th, as Grubhub continues to lose market share in the New York City metro area.
In January, Grubhub comprised 27% of the total sales market share, while Uber Eats and Doordash made up the remaining 73%. By May, Grubhub’s share dropped down to just 24%. Even with the single-day spike in orders on May 17th, Grubhub’s order volume returned to 24% on May 18th and remained relatively low compared to competitors for the remainder of the month.
Daily Order Volume Share
New York City Metro Area, Third Party, Jan 2022 - May 2022
Additionally, the promotion had little long-term impact on customer behavior. While the promotion did manage to draw in new consumers, 76% of “free lunch” users did not order from Grubhub again that week. Despite high single-day orders and total users, the negative customer experiences resulted in Grubhub being unable to make any significant long-term gains without the discount.
Source: Proprietary email receipt data
Interested in connecting with our analysts to learn more?
