Read the following case study carefully and answer all the questions given at the end of the case.

Can Zomato Continue its Deep Discounting Strategy?

Zomato, one of India’s leading Food Service Aggregators (FSAs), was engaged in a conflict with restaurant partners over its practice of offering high discounts to customers. On August 15, 2019, hundreds of restaurants under the National Restaurant Association of India (NRAI) launched a logout campaign and delisted themselves from platforms of FSAs such as Zomato, EazyDiner, Nearbuy, Magicpin, and Dineout, alleging that the aggregators had distorted the food service sector through aggressive discounting and predatory pricing, which hurt the core value proposition and bottom line of restaurants. Zomato, in particular, came under severe criticism as its premium subscription-based dining out service Zomato Gold (ZG) had 6,500 restaurant partners and a total of 1.1 million subscribers in India as of August 2019.

As part of the campaign, around 2,500 restaurants logged out from the ZG service. Zomato’s co-founder and CEO Deepinder Goyal (Goyal) urged restaurants to stop the logout campaign in the interest of consumers. He admitted that Zomato had made some mistakes and tweaked the ZG program. However, NRAI refused to accept the modified version of the plan, saying that the corrective measures would not resolve the key issue of deep discounts. Goyal then said he would stand by the changes made. He even expanded the ZG service to food delivery. However, time was fast running out for Goyal as Zomato ran the risk of being overtaken by rivals. He would have to resolve the issue quickly in the best interests of all the stakeholders.

a) Assume that Zomato finally agrees to review is pricing strategy and decides to follow the competition in determining its prices. Discuss any five (5) competition–based methods that Zomato could utilize. [10 Marks]

b) Zomato wants to open a new branch in New York, and its Managing Director intends to use target-profit pricing to determine the suitable price for its products in New York. The following information is available.

• Zomato intends to make a target profit of $7 000-00 before tax from 1000 customers per month
• Variable costs (VC) =$22 per month
• Fixed costs (FC) =$26 000-00 per month

Calculate the suitable price required for each product to obtain a target profit of $ 7000-00 before tax. [15 Marks]

c) Discuss the pricing objectives that retailers like Zomato can follow when setting prices for their products. [15 Marks]