Blue Apron is a company that appeared out of nowhere and is valued at more than two billion dollars. They started in 2014 selling meal kits directly to consumers.
CEO Matt Salzberg told Quartz, an online publication in February 2016.
“We’re helping people learn new ingredients, new techniques, new recipes. We’re helping them spend time in the kitchen with their families rather than eating things like Domino’s Pizza or Chinese food in front of their TVs at night in an antisocial way.”
But they have a problem. A big problem. A bucket problem. But the bucket is leaking…customers.
Their recent IPO reveals that customers aren’t sticking with them. The company spent $144 million dollars on marketing and customer retention is an issue. Despite steady growth, customers don’t stay in their franchise. So, they must keep filling their leaky bucket with new customers.
Are Your Customers Dripping Away?
In many of the mergers and acquisitions I have been involved in, one of the key details I like to look at is the retention of customers. If I have 100 customers and lose 20% every year, I have to find 20 new customers just to stand still. What does this churn indicate about service, quality, price, value and other issues?
A Critical KPI
- Are you in a churning business environment where customers buy once and leave? That’s a concern.
- Are you in a more stable business that isn’t growing because you are constantly losing customers and have to find new ones? That is a problem?
- Are your customers sticking around and repurchasing from you over and over again? If so, that’s the sweet spot of success.
Measuring customer churn each quarter is the job of top management. Watching growth quarter by quarter of both the number of customers and the dollar value of each customer is mission critical to seeing the arc of your business prosperity.
Feeling Blue
I don’t know enough about Blue Apron’s problem, but instead of acquiring more customers with that big pot of money, maybe they’d be better served investing in understanding the churn and finding solutions to fix that problem.
If they did a root cause analysis and deeply understand why customers leave, maybe they could spend money to plug the holes in their value proposition before refocusing on growth. You can’t grow your way out of this problem.
There is only so much water you can pour into a leaky bucket.
Does your company struggle from having too many one-time customers? How are you fixing that problem? Maybe I can help? I’ll bring some putty to fix the leak. Call or text me at 919 720 0995 or email me at jeffslater@themarketingsage.com
Photo: Mandy Klein https://pixabay.com/en/users/igrow-335413/
Spot on, Jeff.
The problem for Blue Apron retaining customers is that there’s ultimately no incentive to stick around (and yeah, Amazon/Whole Foods will make this worse).
The thing about food (or is it cooking?) is that you don’t always plan your meals a day or several days ahead of time. So while the idea is FUN (I’ll order, stuff will show up, it’ll be “high quality” , include recipes and cost “less”), the truth after the first time or three you try that idea is that going to the market is just … better. You can see the ingredients. You can buy (“order”) and use same day or even same hour. You never really thought the prices from Blue Apron were that great anyway.
THERE’S NO INCENTIVE TO KEEP USING THEM.
Create incentive, or game over.
Jeff sounds like you have first-hand experience with their issue. Most families don’t plan meals because schedules change so quickly. I always believed grocery stores would ultimately own this space where they would do home delivery of meal kits if ordered by noon each day. Fresher ingredients, a green solution and not difficult to execute. But most grocery stores aren’t paying attention to customer experiences – they are focusing on how grocery stores behaved thirty years ago.
Thanks for your insight.
Jeff