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battle of the food waste: ‘Too good to go’

March 11, 2019 ambervmook Leave a comment

An exploration of the different stakeholders and business model of famous food waste reduction app ‘Too Good To Go’

Ever walked into your local student dominated Albert Heijn and seen multiple fruits, vegetables and even full-made meals having a reduction sticker on them? Ever wondered what happened to these products if they don’t get sold by the end of the day? Well, I can burst your bubble, over 2.5 million tons of such products are thrown away annually in the Netherlands only (Toogoodtogo.nl/aboutus, 2019). As can be seen in the picture below (figure 1), households are the biggest spillers, followed by manufacturers, hospitality and retailers. This is very unfortunate because these products are foods that are on, or past, their expiration date, but are absolutely still fit for consumption. It would therefore be a pity for them to end up in the bin.

Figure 1: Distribution of spillage across the value chain (mst.dk/toogoodtogo, p.5)

Too good to go: the business model and market

In regards to the large food spillage annually, that adds up to one third of all food being produced going to waste, the app Too Good To Go was brought into life (toogoodtogo.nl/aboutus, 2019). Established in 2015 in Denmark, Chris Wilson and Jamie Crummie created the app in order to reduce food spillage and CO2 production in Denmark. By having a 20% subscription rate of Danish citizens, Too Good to Go felt secure enough to spread their innovative idea to non-European countries and other European countries like the Netherlands (Toogoodtogo.nl, 2019). This proved to be increasingly successful as the app is based on a very simple, though effectively smart business model.

Since its launch in the Netherlands in January 2018, over 200.000 meals were saved through Too Good To Go (Boskma, 2019; Figure 2). When comparing the Dutch market to the Danish one, several differences can be found. Due to the large amount of plastic packed vegetables for example, in all shapes, mixes and sizes, in the Netherlands, products are barely preservable (Keyzer, 2019). In the Danish market, they are presented in crates. Therefore, ease of use stands central to the Dutch consumer market. Moreover, in the Danish market many initiatives already existed that battled food waste, many of them being subsidized by the government. In the Netherlands, on the contrary, little initiatives are up and running, besides Kromkommer and Instock, who never made the so called ‘frontpage’ due to little consumer interest (Keyzer, 2019).

So, back to the app, how does it function and what principles is it based on (Figure 3)? Too good to go makes sure that local horeca and retail owners are connected to local citizens, who are up for purchasing past-date food (Posthumus, 2019). Local shops can every day indicate whether they have left-over food and place it on the Too Good To Go platform. Consumers in return, can purchase these products in a ‘Magic Box’. On beforehand, they do not know what will be in the actual box (Boskma, 2019). By following this business model, consumers are helped by getting high quality food for a reduced price, whereas local shops receive more revenue (Loritz, 2019).

Figure 2: Screenshot of the Dutch Too Good To Go Instagram account disclosing that 200.000 meals were saved

Figure 3: Outlook of the app design

Value creation and the three perspectives

When elaborating on the business model we see that the value proposition for the consumer, or end user, is based on the previously spoken about reduced price. Here, the final selling price, which is between €3 and €5, is based on one third of the original price. Another value proposition, which will mainly speak to environmentally conscious consumers, is that by purchasing a Magic Box a certain amount of CO2 is reduced (Boska, 2019). Therefore, environmental conscious, and even non-environmental conscious consumers are targeted and persuaded into buying high quality food against a reduced price. Overall, we see that the largest consumer base is presented by millenials, who are overall more aware and involved with the environment (Smith & Brower, 2012). As Too Good to Go connects with their consumers via the app and social media to stay in contact and provide a communication stream, they do well as again, millenials are the most frequent users of social media (Statista.com, 2019; Figure 4).

However, not only the value propositions for the end consumer are very clear, also the suppliers (the restaurants, local bakeries and so on) profit from their Too Good To Go presence. Products that would be disregarded to the bin, now are given a new life. Therefore, money that is invested in stock purchase or the production process is now being turned in revenue by reselling via Too Good To Go. Moreover, reducing food spillage is often on the bottom of the priority list (Keyzer, 2019). However, in many cases the wish to reduce waste is there but setting up a seperate incentive to resell stock is very money and time intensive. Too Good To Go gives a helping hand here. The app and its functions are very much adaptable in the business operations and easy in use (Keyzer, 2019). Besides gaining more revenue, compared to not using Too Good To Go, Too Good To Go can be a platform for end users to find and meet suppliers. Therefore, Too Good To Go functions as a marketing platform for suppliers that by being part of the app, can attract new consumers (Wang, Kim & Malthouse, 2016).

Lastly, we may view the platform perspective of Too Good To Go. The value creation process of Too Good To Go as a platform is mainly based on the making profits and reducing food waste. By its large customer base, the latter is no concern anymore. There is however room for growth and To Good To Go suspects to be self-sustainable in a few years. The first value proposition however, is not being met yet. Too Good To Go is still in its developmental phase in the Netherlands gaining more users by the day (Posthumus, 2019). At this very moment the cost structure is based on a percentage of the revenue each supplier makes, and differ across companies (Keyzer, 2019). By gaining more customers, and at the same time enlisting more suppliers to the app, Too Good To Go will become profitable on the longer term.

Figure 4: Distribution of Instagram users categorized by age groups (Statista.com, 2019)

Efficiency of the model

As can be stated, the model proves to be very efficient so far. The success of Too Good To Go lies mainly in the price reduction of the food that is being offered. The prices range from €3 to €5 respectively, leaving customers to buy quicker. From day one, Too Good To Go had little to no marketing budget but mainly grew by their online presence and positive WOM (Keyzer, 2019). Moreover, the app offers easy use, indicates distance from your current location to the supplier, and leaves you saving favourite restaurants to keep up to date to the latest offers. Also, the app offers not only restaurant food, you are also able to purchase your groceries from the supermarket or local bakery (Posthumus, 2019). Overall this seems very favourable. However, the efficiency of Too Good To Go’s model suffered some damage in the past. Before, no payment with IDeal was offered. Only payment with PayPal or creditcard was possible. As a relatively low percentage of Dutch consumers do have PayPal accounts or creditcards, some potential customers were not able to purchase from the platform. Too Good To Go fortunately made payment via iDeal possible in December 2018 (Keyzer, 2019). Another flaw in the efficiency of the model is the coverage / spread as well as the restaurant offerings on the platform. At this moment, Too Good To Go is very much present in cities, but lack presence in more rural areas. Also, it is very hard to keep up with the demand of the customers (Keyzer, 2019). Too Good To Go is rapidly growing and needs to close new deals with suppliers every day to stay up with the demand. This will prove to be tough, but by the success that Too Good To Go had so far, I expect that it will become as successful as in the Danish market.

References

Boskma, I. (2019). Too Good To Go gaat samenwerken met Albert Heijn en Jumbo. Retrieved from https://www.dutchcowboys.nl/nieuws/too-good-to-go-gaat-samenwerken-met-albert-heijn-en-jumbo

Keyzer, T. (2019). Deze app tegen voedselverspilling trok binnen 1 jaar 300 duizend gebruikers. Retrieved from https://www.businessinsider.nl/too-good-to-go-joost-rietveld/

Loritz, M. (2019). Copenhagen-based app Too Good To Go raises a further €6 million to eliminate food waste | EU-Startups. Retrieved from https://www.eu-startups.com/2019/02/copenhagen-based-app-too-good-to-go-raises-a-further-e6-million-to-eliminate-food-waste/

mst.dk (2019). Retrieved from https://mst.dk/media/91627/stian-olesen-too_good_to_go.pdf

Posthuma, W. (2019). Too Good To Go: ‘200.000 maaltijden gered van de vuilnisbak’. Retrieved from https://www.missethoreca.nl/restaurant/nieuws/2019/01/too-good-to-go-200-000-maaltijden-gered-van-de-vuilnisbak-101315444?vakmedianet-approve-cookies=1&_ga=2.235803906.261607741.1552232949-1156442447.1552232949

Smith, K., & Brower, T. (2012). Longitudinal study of green marketing strategies that influence Millennials. Journal Of Strategic Marketing, 20(6), 535-551. doi: 10.1080/0965254x.2012.711345

Statista.com (2019). Global Instagram user age & gender distribution 2019 | Statistic. Retrieved from https://www.statista.com/statistics/248769/age-distribution-of-worldwide-instagram-users/

Too Good To Go (2019). Retrieved from https://toogoodtogo.nl/nl

Wang, B., Kim, S., & Malthouse, E. (2016). Branded apps and mobile platforms as new tools for advertising, 2, 1-39.

Articles

Contest holders, stop staring yourself blind!

February 21, 2019 ambervmook Leave a comment

Submission behavior and its implications for success in unblind innovation contests

Today more than ever, innovation and a constant search for novel solutions with economic value, is vital to strengthen competitiveness of firms (Bockstedt, Druehl, & Mishra, 2015). In the recent years, there has been an emergence of cost-effective “innovation contests”. Innovation contests are a way to invite individuals to submit their ideas or solutions to a specified problem. These contests are used to leverage the creativity, skills and intelligence of thousands of individuals on the internet (Füller, Hutter, Hautz, & Matzler, 2014). Innovation contests can either be ‘blind’ or ‘unblind’. In blind contests, the visibility of the submission posted is limited only to the individual who submitted it and the contest holder (Wooten & Ulrich, 2015). Wooten and Ulrich (2015) define unblind contests as contests where others’ submissions are fully visible to participants while the contest is still live. Seeing others’ submissions including the feedback from the contest holder, could have an influence on the submission behavior of a participant. Figure 1 shows the difference between blind and unblind contests on Logomyway.com, a popular innovation contest website which matches graphic designers with organizations in need of a new logo. As unblind contests are quite new and not that well-explored in the literature, Bockstedt, Druehl and Mishra (2016) analyze the effect of unblind contests by examining the implications of participants’ submission behavior for contest outcomes.

Figure 1a. Unblind contest on Logomyway.com

Figure 1b. Adapted version of blind contest on Logomyway.com

Theoretical background
Logomyway.com is a consumer co-production network (Dellaert, 2018) in which the consumer co-production is high and the unit of co-production is the network, as the contest holders have the main benefit of this platform (Dellaert, 2018). In that way, value creation takes place in the interaction between customers and the platform (Gronroos & Voima, 2013). A logo is a useful product to crowdsource as it contains a clear question, is easy to implement, there are no obvious skills needed to create a logo and there is no established best-practice (Tsekouras, 2019).
Logomyway.com creates benefits on social needs of the contestants, as their ideas are seen, they can be part of a community. Through receiving positive feedback, or even winning a contest, their social needs are met, leading to higher self-esteem. Moreover, contestants can have a monetary motivation and it is also fun and instructive to create logos. The four main reasons for organizations to use crowdsourcing are to solve problems, generate ideas, outsource tasks or pooling information (Tsekouras, 2019). Logomyway.com especially focuses on idea generation and outsourcing the task of designing a logo. In this way, the contest holders gain benefits by lowering branding-costs (Tsekouras, 2019), gathering insights in the product perception of the consumer and having the choice in picking from a broad range of possible logos / solutions.

Methodology & Findings

In order to take a closer look at how contestants solve problems in unblind innovation contests, a case study was conducted. By using a HTML scraping tool, researchers collected data from 1024 logo-design contests hosted on Logomyway.com. In addition to contest data, profile information and historical performance of contestants was gathered. As contestants were not aware of this data collection, their submission behavior was not biased. Results of this study show how submission behaviour could impact contestant’s success in unblind innovation contests. First of all, a lower position of first submission is associated with a greater likelihood of success due to greater potential for obtaining intermediate evaluations from contest holders, shaping the contest holder’s taste and participating actively in the contest.

Secondly, the number of submissions have a positive impact on the likelihood of success up to a certain point. Beyond this point, marginal knowledge gained about the problem specification and the contest holder’s taste diminishes as more submissions are handed in (Figure 2). Therefore, contestants should focus their efforts on high quality submissions as a quantity-quality trade-off was indicated.

Figure 2. Graph on the likelihood of success x number of submissions

Furthermore, contestants who participated in a contest for a longer period were more likely to succeed as it allows them, via emerging information structure, to observe and assess their submissions with respect to the competition and update their understanding of contest holder’s requirements (Figure 3).

Figure 3. Submission participation time frame

Strengths

A main strength of this study is that it examines unblind submissions in an innovation contest, whereas previous studies mainly focused on examining blind contests (Bockstedt et al., 2016). As unblind contests are on the rise due to their feedback and co-learning system, knowledge about their way of working is invaluable for academic literature. Besides filling a gap in academic literature, outcomes may provide substantial benefits for the contest holders in obtaining the design results they seek. Another strength is the methodological approach. Namely, the contestants subjected to the study are unaware of their participation and therefore participant bias will decrease and internal validation will increase (Smith & Noble, 2014). Lastly, Logomyway.com handles a “winner takes it all” policy in which they define first place as ‘success’. The study however, deploys a top-3 listing based on the judging process as a definer of success, which accounts for a broader scope of definition.

Managerial implications

By optimizing the value system design, the joint payoff of the partners involved will be maximized (Carson et al., 1999). Therefore, Logomyway.com should invest in motivating contestants on different levels. First of all, logomyway.com, and other platforms alike, should motivate contestants to submit their creations early. This could be achieved by installing a rewarding incentive for early submission and by dividing the contest in separate phases. There will be both social (e.g. social capital or self image) and monetary rewards after each phase, until the final product is build. Secondly, they should promote participation for a longer period of time, by keeping contestants up to date about the contest. By doing so, contestants will likely feel more motivated to participate, possibly resulting in more submissions per contest. Lastly, Logomyway.com should motivate contestants to only submit after receiving additional valuable knowledge about the contest and previous designs, by setting a boundary amount of submissions of one per two days. This will improve quality of the designs, which in turn is favourable for the contest holder and co-contestants who can learn from the quality designs and implement it into their own designs.

References

Bockstedt, J., Druehl, C., & Mishra, A. (2015). Problem-solving effort and success in innovation contests: The role of national wealth and national culture. Journal of Operations Management, 36, 187-200.

Bockstedt, J., Druehl, C., & Mishra, A. (2016). Heterogeneous Submission Behavior and its Implications for Success in Innovation Contests with Public Submissions. Production and Operations Management, 25(7), 1157-1176.

Carson, S., Devinney, T., Dowling, G., & John, G. (1999). Understanding Institutional

Designs within Marketing Value Systems. Journal Of Marketing, 63, 115. doi: 10.2307/1252106

Dellaert, B.G.C. 2018. The consumer production journey: marketing to consumers as co-producers in the sharing economy. Journal of the Academy of Marketing Science, forthcoming, 1-17.

Füller, J., Hutter, K., Hautz, J., & Matzler, K. (2014). User Roles and Contributions in Innovation-Contest Communities. Journal of Management Information Systems, 31(1), 272-307.

Gronroos, Chr. & Voima, P. (2013), Critical service logic: making sense of value creation and co-creation. Journal of the Academy of Marketing Science, 41 (2), 133-150.

Smith, J., & Noble, H. (2014). Bias in research. Evidence Based Nursing, 17(4), 100-101. doi: 10.1136/eb-2014-101946

Tsekouras, D. (2019) Customer Centric Digital Commerce Lecture 1 & Lecture 3 [Lecture 1 &3]

Wooten, J. O., & Ulrich, K. T. (2015). The Impact of Visibility in Innovation Tournaments: Evidence From Field Experiments. Wharton Faculty Research, 1-36.