Blue Apron Inc. was known as the leading provider of meal kit delivery service in the United States of America in 2016. In 2017, the company recorded a $ 5 billion growth which was increasing at a 20% yearly. This made the company to command 53% of the market share even though the company had competitors. However, poor customer relations made Blue Apron Inc. experience some drawbacks that affected the organization performance negatively. Blue Apron Inc. troubles escalated from the acquisition of customers at high costs who generated less revenue compared to the revenues acquired before.
On June 29, 2017, blue apron changed from a private entity to a public entity. Furthermore, this brought up mixed reactions as the initial public offering received a mixed market reaction. The price per share was $ 10 which had reduced and was below the company’s initial public offering target which was $17. Additionally, this made the stock price to drop by 70 % which traded at $2.99 on 30th November 2017(McCarthy & Schwartz, 2018). Therefore, the changing from a private entity to a public entity made the organization to incur losses.
The meal kit delivery service industry was amongst the leading industries in the United States between 2014 and 2017. This industry entails companies selling, marketing and delivering fresh ingredients to the citizens of the United States. This industry market value in 2017 totalled up to $4.65 billion (McCarthy & Schwartz, 2018). The blue apron company was the leading in this industry because it provided customers with plans that satisfied their needs. Additionally, the company provided its consumers with the following plans, $9.99 per serving for one for two people and six servings in a week, and $8.74 for 16 services for a week family package. Therefore, these packages made blue apron to be the best company in the industry offering the best meal kit to its consumers.
Blue Apron Inc. Problems
Blue Apron Inc. is experiencing its current problems because customer profitability, loss of customers and competition. According to (McCarthy & Schwartz, 2018), Blue Apron spent a lot of money in acquiring new customers in 2016. However, the newly acquired customers were less valuable and the revenue per customer declined by 14% which was $387 from $451 which was recorded in 2015 (McCarthy & Schwartz, 2018). It is believed that the more the company spends in acquiring customers the more value the customers should generate to improve the status of the company. Furthermore, the company is experiencing current problems because its initial public offering led to the financial performance deteriorating. This influenced customer retention negatively making the company to lose its loyal and recently acquired customers. Lack of customer retention made the company customer population to decrease by 17% making the net revenue to fall at 14% (McCarthy & Schwartz, 2018). This is has influenced the company is experiencing the problems it has today as the company finds it hard to make profits without customers. Additionally, Blue Apron Inc. is experiencing its problems because of stiff competition. Amazon acquired whole foods and other companies like Walmart, Williams Sonoma, Albertson’s, and Martha Stewart also started investing in the meal kit delivery industry. Therefore, the reason as to why Blue Apron is experiencing its current problems is because of stiff competition, poor customer profitability and poor customer retention.
Challenging Unit Economics
The drivers of blue apron’s challenging unit economics is customer profitability and retention rates. The company used referral programs, online media and offline media to acquire new customers. The company had used $2.41 million in radio advertising and podcast as compared to its competitor HelloFresh Inc. which used $446,000 on the same advertising platforms (McCarthy & Schwartz, 2018). However, the company had invested more in advertising but the new customers were valuable making the revenue per client to reduce at 14% which was $387. The more the newly acquired customers stay with Blue Apron Inc. the more profits the company will get. Furthermore, Blue Apron Inc. lower rate of customer retention is an essential driver of challenging unit economic. The company incurred losses due to the deterioration of customer profitability which was influenced by lower rates of retention.
Blue Apron Inc. needs to examine its return on investment to increase its customer profitability. The company needs to examine and treat its customers as assets. Additionally, the company ought to minimize the amount of money it spends on acquiring new customers and maximize the amount of money the company it gets in return from customers. Furthermore, the company can concentrate on customer retention as this will help the company incur profits. The longer time a consumer remain with blue apron, the company will also get profits thus improving customer profitability. Customer profitability is also improved when profitable customers are with the company.
Profitable customers play an essential role in improving the profitability of an organization. The company should aim at retaining profitable customers to acquire maximum profits (McCarthy & Schwartz, 2018). Additionally, the company can improve its customer profitability by minimizing its spending on acquiring customers according to customers profitabilities. Companies need to look for new customers to market their brands and look for more profit. Blue Apron Inc. can also improve its customer profitability through enhancing its customer lifetime value management. Customer lifetime value management will help boost blue apron customer profitability as it determines the new changes needed to improve the net present of both future and current customers (McCarthy & Schwartz, 2018). Therefore, Blue Apron Inc. can improve its customer profitability through enhancing its customer lifetime value management, improving customer retention, increasing profitable customers and minimizing customer acquisition costs.
Blue Apron Inc. should focus on its loyal customers and new customers. Customers play an essential role in an organization as they impact the organization positively. However, Blue Apron Inc. is currently facing stiff competition and it may be hard for them to acquire new customers. the company can focus on regaining the trust of its loyal customers who will then purchase its meals. Furthermore, the company can focus on new customers and also strengthen its efforts of retaining these customers. Therefore, Blue Apron Inc. should strongly focus on its loyal customers and new customers who can be easily retained.
Brad Dickerson Focus
Brad Dickerson should focus on improving customer profitability and enhancing customer retention. According to McCarthy & Schwartz (2018), The company has been greatly affected by customer profitability as it is unable to make profits after acquiring new customers. Furthermore, the company has poor customer retention which makes them lose customers to their new competitors. Dickerson also needs to measure his customer’s profitability which is essential in helping the company improve its customer profitability. Brad Dickerson needs to change from customer lifetime value measurement to customer lifetime value management. This will help him and his management the changes that would improve the Blue Apron net value of customers. Therefore, brad Dickerson needs to focus on improving customer profitability, customer retention and changing to customer lifetime value management that would help Blue Apron Inc. improve its status.
I recommend that Blue Apron Inc. should switch to a premium product strategy to retain its customers. Furthermore, this will allow the company to get enough profits due to the premium packages. This will make the company develop loyal customers which will reduce the expenses that they would use in marketing their program to attract new customers. This will also allow them to focus on customer retention. Customer retention will allow them to focus more on customer lifetime value management that will help the company to increase its customer profitability. Changing to this strategy will make the company to be successful as this strategy will make it turn to premium package thus retaining their customers.
Blue Apron Competitive Advantage
According to Braun et al., (2019), Blue apron has a completive advantage over its competitors. Its subscription meal delivery service has placed it amongst the best service provider in the industry. Furthermore, Blue Apron Inc. has a direct relationship to its clients which make the company to control the market place. Blue apron fulfil its consumer needs by supplying fresh ingredients with lower prices. Moreover, the company is efficient at its operations as it does not allow its customers to customize its menus. Most importantly, the organization has focused on providing quality services which have made the company to control its quality of products to its consumers. Blue Apron Inc. subscription meal delivery service, direct relationship with clients, customer needs satisfaction, efficient operations and quality services gives it a competitive advantage over its competitors.
Overall, Blue Apron Inc. is one of the best leading meal service companies in the United States. However, the company is experiencing problems due to customer profitability. Customer profitability is the number one driver of Blue Apron Inc. challenging unit economic as customers have become less valuable. Blue apron should focus on customer retention and minimize on advertisement cost to improve customer profitability. Additionally, the company should focus more on its loyal customers. Brad Dickerson should adopt customer lifetime value management to improve customer profitability. Most importantly, the organization should advance to premium packages to retain its loyal customers. The company has a competitive advantage due to its professionalism. Therefore, Blue Apron Inc. still stand a chance to dominate the industry and make profits.
Braun, M., Latham, S., & Cannatelli, B. (2019). Strategy and business models: why winning
companies need both. Journal of Business Strategy.
McCarthy, D, Schwartz, E. (2018). Blue Apron: Turning Around the Struggling Meal Kit Market