Blue Apron: Turning Around the Struggling Meal Kit Market Leader

by: Daniel M. McCarthy, Eric M. Schwartz

Publication Date: August 9, 2018
Length: 18 pages
Product ID#: 5-177-309

Core Disciplines: Entrepreneurship & Innovation, Information - Technology & Management, Marketing/Sales, Strategy & Management, Sustainability

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Teaching Note

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In 2016, Blue Apron was the leading meal kit delivery business in the United States. The initial registration form it filed in advance of its initial public offering (IPO) showed a successful business in a rapidly growing industry. Meal kit sales had grown to $5 billion in 2017 and were expected to grow at a 20% annual rate in the years to come and Blue Apron held a commanding 53% market share. But Blue Apron’s customer metrics indicated long-term trouble. Focused on sales growth, the company was acquiring more customers but at a higher cost. Additionally, the new customers generated less revenue on average than customers acquired earlier in Blue Apron’s history.

This case focuses on measuring customer lifetime value (CLV) and using it to make customer management decisions. Students will follow new Blue Apron CEO Brad Dickerson as he tries to determine how to manage customer relationships to improve profitability. The case also presents customer retention curves and a segment-based approach to calculating customer value. Students can obtain the curves by using the estimates and financial data provided in the spreadsheets accompanying the case.

Teaching Objectives

After reading and discussing the material, students should:

  • Distinguish between aggregate financial performance and customer metrics.
  • Interpret customer retention curves.
  • Conceptually explain CLV and its components.
  • Compute CLV with the provided formula.
  • Use CLV to value customers with a segment-based approach.
  • Explain and calculate return on investment for customer acquisition.