Blue Apron Case Analysis Assignment

Blue Apron - Strategic Marketing Plan Blue Apron is a market leader in the meal kit delivery business, but despite this their declining revenue may be attributed to their intense customer acquisition approach and inadequate retention strategies. The key marketing issue is that exorbitant customer acquisition costs (CAC) were exceeding customer lifetime value (CLV). Strategic Analysis Blue Apron’s mass marketing approach attracted large numbers, with their customer base split into two segments: low loyalty and high loyalty. Low loyalty customers typically joined due to discounts then cancelled the subscription once it expired. This segment had low retention, churning after two months. It is evident that this segment lacked the psychographic and demographic characteristics of the high loyalty segment. High loyalty customers average retention was 13 months. Presumably, this segment enjoyed the convenient healthy lifestyle Blue Apron meals offer as users explore their passion for cooking, integrate cooking into busy lifestyles and removes difficulty in cooking. Blue Apron’s growth strategy ignored the importance of segmentation as they did not target a specific group. They needed a target market that found value and benefit in their offering, to build profitable customer relationships. As customers’ needs and desires change, so does their relationship with Blue Apron. Blue Apron’s limited subscription range did not account for changing customers, whether it be lifestyle, financial or other change. With only two meal plan options that are subscription based, Blue Apron was not catering to all customer needs. A weekly 6 serving couples plan and 16 servings family plan excluded singles, or those who required flexible serving amounts. Competitors with niche value propositions or non-subscription-based service offer more flexibility and choice. Blue Apron were not critically managing customer and market dynamics. As competitors react, a tight competitive landscape for the meal kit delivery industry was fuelled by hyper competitive pricing. The top 3 market leaders were mass marketers, the rest being niche marketers. Competitive pricing lead to higher CAC’s, and in 2016 Blue Apron outspent its closest competitor, HelloFresh by 5 times in the radio and podcast media channel alone. Their ubiquitous marketing efforts proved to be effective as their customer base rapidly increased, but Blue Apron lacked a long term sustainable competitive advantage (SCA) and new customer relationships were short lived. Blue Apron desperately needed a competitive advantage their competition could not replicate – something they only could do better. It is possible that the low loyalty customers switched brands after promotions ended or shortly after as their service was not differentiated. Blue Apron’s resource allocation may have exacerbated their problems of customer profitability. All resources are limited, requiring them to be strategically prioritised. A significant amount of their budget was spent on marketing so they could improve their growth by acquiring more customers. Of 2016’s marketing expenditure, offline media, online media and customer referral program spent $66 million, $43 million and $35 million respectively. New customers were enticed with steeply discounted promotions and other advertising, increasing the CAC to $100 in 2016, up from $63. As newer customers generated less revenue, leaving before Blue Apron could profit off them, the CAC is unsustainable. Over-prioritisation on advertising did help grow the subscriber base number, however significant aspects such as market research and keeping current customers were overlooked and needed more resources. Their spending approach backfired, producing non-robust results. Recommended Marketing Strategy Given Blue Apron’s subscription-based business model, CLV needs to exceed CAC. With current CAC’s, customers need to stay for at least 6 months before profit is made. Thus, a viable marketing strategy would entail a mix of customer acquisition, and more importantly, keeping their existing ones through an AER model and BOR strategies. Blue Apron needed to find a target market, reallocate their resources and expand their product line. Blue Apron can change from mass marketing to niche marketing to better manage customer heterogeneity. It can be deduced that high loyalty subscribers of meal kit delivery may be time poor, need convenience, dieting or struggle with cooking. Thus, key segments would be convenience seekers and health fanatics. A profitable target market can be convenience seekers as meal kit deliveries take the time and effort out of shopping, finding recipes, food preparation and portioning. Health fanatics share similar values, as maintaining a healthy lifestyle can be time consuming and difficult. Thus, by targeting customers who possess these values, Blue Apron can build a customer base who need long-term service, and not joining based off discounted promotions. Blue Apron can re-prioritise their resources of time and money to include market research. To figure out why customers leave and what factors influence their decision, research must be conducted so necessary change can be implemented. Conducting research to gauge the profitability of potential new lines such as breakfast, lunch, dessert, specific dietary requirements (e.g. vegetarian, extra protein) or other customer wants, extracted from research. This can help decision making surrounding new products and help manage changing dynamics. This may require cutting expenditure on certain media channels. To better manage customer dynamics, Blue Apron could expand their product line beyond the current two person and family meal plans. Introducing single meal plans or customisable number of meals offers more flexibility, choice and can cater to different customers, in turn helping manage heterogeneity and adds SCA. Allowing more flexibility and convenience means customers who are in-between meal plan sizes due to life changes do not have to quit their subscription when it is no longer suitable – they can customise it to their individual needs. A change in their promotional strategy could consider promotions that are not as steeply discounted upon sign up, but promotions that provide incentives to stay long term. For example, free meals and discounts after a certain number of months or after hitting a certain spend threshold. This encourages customers to stay and reach milestones with the brand, increasing their new customer retention and ensuring that CLV exceeds CAC. Blue Apron could make cost their SCA, and work with their food suppliers or delivery partners to slightly lower their costs to make their offering cheaper than their competitors. Blue Apron needs to position themselves as the most convenient, cost-effective, and healthy meal kit service.