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Discounts as Marketing Strategies for O2O Platforms (Management Project)

ABSTRACT

With the development of the Internet and online payment, Online to Offline (O2O) platforms come into people’s lives. O2O platforms provide offline goods and services for their online users and these platforms are various, for example, they can help the users to call taxis, order food, call babysitters, make orders for cleaning the car and so on, which help people a lot for its convenience.

At the same time, attracting customers for these platforms becomes a problem and many of these choose to make discount strategies to reach their goals. Companies invest a lot of money on discounts for competition while investment sometimes is risky, because the company maybe cannot earn the money back, so it is very important to learn how to make discount strategies for O2O platform wisely.

Eleme will be studied as the case of this study, because it is a successful example of developing its food delivery O2O platform through investing a lot of money on giving discounts to attract lots of users. Eleme is one of the best food delivery O2O platforms in China, and its users are quite many, so it is a suitable choice to investigate. A mixed method is used in this study.

Interviews have been done on commercial tenants of Eleme and questionnaires have been sent to ordinary end-users of Eleme, and the combination of these two parts can lead to good discount strategies. To answer the questions of the thesis, relevant knowledge about O2O platform, market strategies, discount strategies, consumer behavior and measures taken by Eleme will be used.

The result of this study shows that discounts of the O2O platform do attract lots of customers and giving discounts is a good way to be competitive. At the same time, the platform needs to balance the profits of itself and its commercial tenants, and pays attention to needs of the ordinary end-users behind discounts in case of losing them. Eleme used a lot of wise discount strategies to develop itself, but the competition in this area is continuing and many measures can be taken for further development.

LITERATURE REVIEW

In this chapter, researches and investigations related to discount strategies and O2O plat-forms are presented to provide a theoretical background for this research. Some measures taken by the case of Eleme and the questions of this thesis to be answered are also based on found sources.

Graph 4 Online-to-Offline ecommerce sales in China from 2011 to 2018

Graph 4 Online-to-Offline ecommerce sales in China from 2011 to 2018.

As can be seen from graph 4, O2O ecommerce sales are increasing and ecommerce needs online payment, which grows quickly and it reached 335 billion RMB in 2015, which indicates that there are many online payment users in China. The red line shows the percentage change, which indicates that the growth of online to offline ecommerce sales in China becomes slower but the sales keep on growing.

METHODOLOGY

This chapter describes the research method of this study in detail. Relevant measures will be pictured for getting information and knowledge of discount strategies of O2O plat-forms, and Eleme will be studied as the case.

Research Method

The purpose of this study is to find out discount strategies that can help O2O platforms attract more users under the competition and understand the users’ opinions towards dis-counts. The research is based on Eleme as a case. A qualitative method is used to look deeper into the company, and at the same time, a quantitative method is used to reach knowledge of views from its users. According to Watkins & Gioia (2015), qualitative methods can help researchers understand certain social experiences and understand complicated phenomena.

Social experience of commercial tenants and the complicated phenomena of cooperation between the platform and its commercial tenants are studied in this research, so it is suitable to use a qualitative method. Commercial tenants cooperate directly with O2O platforms and interviews among this group help to understand the relationship between tenants and the platform. A quantitative method can provide the views toward one phenomenon from hundreds of people and this method sometimes can save time because of the convenience of the Internet (ibid.). In order to understand the opinions of many ordinary end-users, a quantitative method is a good choice.

RESULT AND ANALYSIS

This chapter will analyse the collected data based on the research review presented. The result of interviews and questionnaires will be analysed separately first and then combined together, and the combination will be investigated in detail to answer the questions of this study.

Interviewing Results and Analysis

Representatives of eight businesses were interviewed from January 20, 2017 to February 20, 2017, through a semi-structured interview and the sample includes 4 commercial tenants in Shanghai and 4 commercial tenants in Weihai. In the interview, the respondents are asked to talk freely about the questions in the list (see appendix 1) through online video chat. From the interviewees’ answers after the first interview, some conclusions were made and some follow up questions were asked in a further interview.

CONCLUSION AND DISCUSSION

Relevant theories are used to understand needs of both commercial tenants of Eleme and ordinary end-users of food delivery O2O platforms for discount strategies. Eleme takes measures to face these challenges of discount strategies analysed in chapter 4, and they are concluded as follows:

  1. End-users are easily attracted by discounts and promotion can impress end-users a lot. Eleme invested a lot to give big discounts during a short time to occupy the market at the beginning of its development.
  2. End-users can get used to discounts and price war can influence the platform in the long term. Eleme decreased the investment on giving discounts when it succeeded in at-tracting a lot of users, and Eleme began to share the cost for giving discounts with its commercial tenants.
  3. Different segmentations show different preferences to different discount strategies. Eleme advertised itself respectively to different segmentations with discount strategies.
  4. End-users like discounts and they may give up platforms without discounts and they also need high service quality. During the competition, Eleme kept on giving discounts and improved its service quality at the same time.
  5. End-users feel uncomfortable with problems caused by discounts and service quality is very important in competition. Eleme took measures to solve problems caused by dis-count strategies. For example, it set up its own delivery system to improve its service quality.

After analysing the results of the research, Eleme is proved to be a successful food delivery O2O platform and it makes many good discount strategies. From this study, some interesting points shows up and they will be discussed as follows:

  1. According to the interviews, some interviewees pointed out that in rainy days, orders would be more numerous than in sunny days, so seasonal discount strategy can be considered and discounts in rainy days can be decreased to earn more profit and reduce the burden caused by too many orders.
  2. Eleme paid attention to the market segmentation and attracted them through different advertisements, but discount strategies can also be segmented further to meet the different needs of different segmentations. Besides, Eleme notices that occupation is an essential variable, but variables like geographical area can also be given more attention, which is because differences between areas are obvious according to this research.
  3. According to the interviews, commercial tenants are not so satisfied with the current discount strategies. Opinions of commercial tenants should be taken seriously, and only paying attention to attract ordinary end-users may harm commercial tenants.

Source: University of Boras
Authors: Liru Jiang

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