How much is a $250 bonus worth?
The value of a 250 dollar bonus may be $250 when measured mathematically, but its real value has very little to do with the math. This week, one of the food delivery services doing business in New York City has offered couriers a bonus that will cost them $250 to pay out—or $273 if you get all exact.
The value to them could be way larger.
Over the last few months, I’ve been working on a study of the food delivery business. This is going on for several reasons, but the thing that got it rolling was one of them hiring me to figure out what’s working—and what isn’t—in their business model.
To pull it all together, I’ve spent some time pounding the pavement, delivering food and other things for my client and a few of their competitors. And the numbers you see above are real; I’ve completed 160 deliveries for one of these companies and earned $1,117.27 doing that.
That’s just under $7 per delivery. Assuming that rate is approximately accurate across the board for that company’s couriers, then 75 deliveries pays $523.72. If you’re all-in with that company as a courier, then, this offer is a serious bonus:
UPDATE: IT GETS BETTER (or WORSE)
… and the experiment continued several weeks later:
Complete 50 deliveries in New York City between Fri, 3/9 12:00 AM and Tue, 3/13 11:59 PM.
Pocket a minimum of $400. If your earnings on those 50 deliveries are lower, we’ll pay the difference.
The analysis I’ve been doing on how these services work covers customer treatment, restaurant treatment, and courier treatment … and it’s dense. I’m not going to get into much else in this post; today we’re talking only about the value of a 250 dollar bonus. And I’m not sure what that value is—at least, not yet. But the service that’s offering it is on the right track. Why? Because the courier relationship is the hardest part of their business.
Now, think about something. At one level or another, companies in the delivery business serve three customers on every transaction. Yikes!
And the more I look at the issues the more convinced I am that the couriers are the problem standing in the way of real success for these services. Not because they’re bad, necessarily, but because they aren’t adequately motivated. I said “motivated”, not “compensated”.
The Value of a 250 Dollar Bonus
The food business is complicated. Managing a restaurant is hard—and a special management case. The five-dollar footlong doesn’t make enough money. Something as simple as bread can make a difference, and at the end of the day everything comes down to customer service. And food delivery is more complicated still.
Because, as this story points out, Postmates (and the others) aren’t actually in the food delivery business at all. They’re in logistics. In fact, the legal position they try to take with labor regulators depends on that being plausible.
Since I wrote that piece about logistics almost two years ago the landscape has shifted. “Food Delivery Near Me” has only become more complicated—and the field more crowded. The various companies use vastly different compensation models and are competing for a somehow-not-large-enough pool of responsible couriers.
The question is, does offering couriers what amounts to a 50% bonus—if they work enough, that is—provide enough motivation to engender any kind of loyalty? Or will it backfire when the couriers who make the grade expect the bonus again? And again?
Or will it push the price paid for delivery up, forcing a changed business model that wasn’t intended?
And you thought the bonuses that some large companies are paying with the windfall from a changed US Tax Code were complicated.
I’ll have more to say about this delivery business thing over the next few weeks. Keep your eyes peeled.