What should my delivery pricing strategy be?

Delivery is never free. Whether the customer is paying or your business is paying (or somewhere in between) then always remember delivery is never free. Delivery is a sales channel and you should build a sales channel strategy that has a relationship with your other sales channels. You should seek to pass on these delivery costs to your customer – customers should and do (in most cases) expect to pay for delivery. How much of that cost you pass on is down to your business strategy but do not fall into the trap of just giving your margin away without very careful thought. This is true of the third party platforms as well as if you run your own delivery fleet.

If delivery wasn’t baked into your business model then you should be adding delivery costs to your menu if you’re on a third party delivery platform. Third party delivery platforms have commission structures that cover the cost of delivery, contribute to marketing spend and to enable them turn them a profit. Do not give all of this margin away from your standard menu – what business can afford to regularly offer discounts of circa 30% off their commercial model and survive? Your delivery menu needs to bake these costs in and you need to create a delivery menu that works profitably for you. You should be delighted with a sale not swear because you’re making another order at thin margins that benefit everyone else but you.

Create a delivery menu on the third party platforms that adds all or some of the delivery commission into your menu

Again unless your delivery costs are baked into your business model then the same principal applies. You add all or some of the costs to either your delivery menu or your simply have a cost + delivery model.

Speaking in general I can’t give a specific answer here to your business. What I underline and reiterate is that you must have a profitable delivery business model. It’s too easy to fall into the trap of low pricing and discounting. These are covering up weaker areas in your performance v your competitors. There are a lot of areas to consider when landing on your final pricing model as I fully understand you also don’t want to price your offer out of consideration so a balanced pricing strategy between passing on cost, whilst keeping potential customers propensity to purchase high. So if you are creating a menu for a third party platform consider their commission a delivery fee and where you’re providing a delivery service you know the cost of delivery. How much you pass onto the customer is your choice but it should never be free unless that’s a baked into your business pricing model.

On-demand delivery can be profitable business but it’s certainly not without its challenges. Yes there’s more customers and they are buying more, more frequently but there’s also 10’s of 1,000’s of new operators on the platform bringing all the challenges of a crowded market place. Creating demand for your product is the real opportunity and if customers demand your product then they will be prepared to pay for the convenience of delivery.