It's a stormy time for two of India's biggest startup brands

  • Zomato and Oyo have both been in the eye of many public controversies, stirred by industry bodies.
  • While Zomato has been in the middle of a logout movement from restaurants, Oyo has been dealing with legal complaints against its founder for breach of trust.
  • This has affected the public branding and image of the companies.
Deepinder Goyal and Ritesh Agarwal maybe poster boys of the Indian startup industry. But,the founders of Zomato and Oyo are dealing with complaints from industry bodies, associations and even backlash from their own employees.

Startups which have started to solve existing problems, are now facing their own.

The problems surrounding Zomato and Oyo

Zomato was caught in the throes of a very public controversy thanks to its deep discounting programmes like Zomato Gold (where consumers can avail 1+1 on food and 2+2 on drinks) and infinity dining.

The National Restaurant Association of India (NRAI) launched a ‘logout’ movement last month claiming that the business practices of aggregators are unethical. The movement saw hundreds of restaurants delisting from the app.

But that’s not the end of it. Zomato’s delivery executives across Mumbai and Bengaluru are protesting for pay cuts. The company is also in the news for reportedly laying off employees at its Gurgaon headquarters.

Oyo is in no better position. On one hand, it is battling legal complaints from a Bengaluru-based hotelier accusing Agarwal of cheating and breach of trust. A month ago, hoteliers too had begun boycotting Oyo, but the Delhi High Court had ruled the case in the company’s favour.

To tackle these issues, Zomato reportedly held several meetings with the NRAI. It also backtracked by cutting off discounts from its Zomato Gold programme. It has also put its recently launched Infinity Dining programme on a ‘pause’ mode.

Oyo, on the other hand, has refuted all claims against its founder and has been unfazed through its expansion journey globally.

The branding has taken a hit

Startups and their success is important not just because of their disruptive nature, but their popularity has made them almost invincible with a ‘can-do’ attitude. These issues have come to prove that it is not the case. And, it has started to show.

This is evident in its survey rankings. YouGov measures a brand by the buzz it generates in two weeks. Zomato’s Buzz fell by 6.8 points, from 42.7 in the beginning of July, to 35.9 in August end.

“Zomato’s Brand Index score which is an average of quality, value, impression, reputation, satisfaction and recommend scores, has also fallen from 38.5 on 31st July to 34.9 on 31st August 2019, the time period marked by the two controversies,” said YouGov.

This is a big blow for Zomato which is known for its witty, quirky marketing campaigns on and off-line that has caught the fancy of millennials.

The company however said that its own internal tracking system shows no significant dip in perception in the last 3 months.

"On the contrary, metrics such as trust, brand love, innovation, etc. have shown consistent upswing. These metrics are tracked diligently on a daily/weekly/monthly basis and none of the external noise has impacted our core consumer perception in a negative manner. In fact, we have noted a spike in the user engagement with an increase in average time spent on the app, session counts, weekly downloads, etc. These results from continuous monitoring have reaffirmed our current approach towards consumer engagement and product innovation,” said a Zomato spokesperson.

Brand expert Harish Bijoor believes that Zomato and Oyo both need to be worried.

“We live in the era of nano-second social media hurt. Every social media comment that is hurtful to the brand is a scar. Too many scars, and the brand can get into a negative tizzy. Brands need to be careful, and more importantly quick in their reactions to issues. Both Zomato and Oyo have been through this. As of now, the brand image has not been hurt. it has been jolted, but not damaged,” said Bijoor.
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