Final Blue Apron - MARKETING PLANNING & STRATEGY ASSIGNMENT PDF

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MARKETING PLANNING & STRATEGY ASSIGNMENT...

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PROJECT REPORT

Shaileen Kumar 13371947 -0-

External Environment Blue Apron Holdings Inc (Blue Apron) is a meal kit delivery service launched in 2012 in the US. Blue Apron is a company with a vision to deliver fresh, high-quality ingredients and original recipes to consumers. Additional to the meal services, Blue Apron Wine was introduced in 2015 offering wine delivery services directly to consumers. Target Market: Blue Apron targets the millennial demographic aged 25-34. Millennials that enjoyed the cooking experience and shared pictures on social media of their meals additionally appreciated the convenience of direct delivery service brought success to Blue Apron as the company focused its marketing strategies based on this sub-segment. Market Trends: Blue Apron experienced rapid growth in the first few years of operations, by positioning its brand as a product that saved time in food preparation and cooking this attracted a high consumer base and received positive feedback on their services. Company revenues increased by 338% from 2014 to 2015 as the company sold 8 million meals a month in 2016. This made Blue Apron successfully open fulfilment centres around the US and launch its Blue Apron Wine delivery service. However, upon the success of Blue Apron, between 2014-2016, the company spent an average of US $94 on marketing for each consumer and resulted in negative free cash flow for the company. Additionally, the new entrants of competitors such as Amazon also impacted Blue Apron’s retention of consumers and the overall growth of the company. Major Competitors: Blue Apron was the pioneer of the meal kit industry in the US and had successfully created a strong customer base experiencing a progressive increase in customers and orders throughout the years of 20152017. However, upon Blue Apron success of a fast-growing company, intense competition arose. Although Blue Apron did own the majority (40.30%) of the US meal kit delivery market share in 2017, competitors offered new options with fewer calories, preparation and cook time of which generated a greater consumer appeal. Amazon.com Inc is a major competitor for Blue Apron as it acquired a popular, well-known company in the US called Whole Foods Market Inc. By Amazon already being the company that is known for its costconscious consumers to shop at, increases its competitive advantage over Blue Apron. Additionally, Amazon also trademarked the phrase “We do the prep. You be the chef” of which increases customer retention and awareness. Other examples of competitors include HelloFresh, which differentiates its service by implementing vegan, nut-free and dairy-free options whilst offering lower average calories per meal and lower costs per serving than Blue Apron. Other competitors on the market include Home chef, Green Chef and Purple Carrot of which all differentiate its service against Blue Apron. Relationship with Suppliers and Consumers: In terms of distribution, Blue Apron partnered with local farmers to provide crops. Instead of Blue Apron using the traditional method of matching the supply of food with demand, the company takes into

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consideration of the seasons for the crops, size of crops and availability and storage time when creating its menus this has enabled efficient service and quality crops at low prices. As the company’s regional distribution centres sources the ingredients and stores it in refrigerated warehouses. In terms of consumers, Blue Apron lacks a consumer relationship, although the majority of funding goes towards the promotion of the company. There are insufficient insights of the consumer needs and wants in the changing marketing environment.

Threats and Core Problems Threats The threats are portrayed using the five porter forces of Blue Apron’s competitive rivalry, supplier power, buyer power, the threat of substitution and threat of new entry. Competitive Rivalry: Blue Apron has six significant competitors, Amazon being the most prominent competitor against Blue Apron, offering consumers with meal kit delivery services from a well-known retailer in the US called Whole Foods. By Amazon already being the company that is known for cost-conscious consumers to shop at, increases its competitive advantage over Blue Apron. Additionally, Amazon also trademarked the phrase “We do the prep. You be the chef” of which increases customer retention and awareness. Other services include HelloFresh, which differentiates its service by implementing vegan, nut-free and dairy-free options whilst offering lower average calories per meal and lower cost per serving. Home Chef, Green Chef and Purple Carrot also offer other options, have a lower average calories per meal and lower average preparation and cook time than Blue Apron. These companies can attract Blue Aprons customers with its differentiation of service and price cuts. Additionally, Blue Apron has no switching cost for customers, making switching to competing services quick and easy. Supplier Power: Blue Apron’s partnership includes local farmers to plan for crop production, usage of pesticides and fertilizers, crop rotation and efficient management of crops. This can pose a threat to Blue Apron as the local farmers can easily increase their prices upon seasoning and crop issues due to unforeseen circumstances. Blue Apron seems to have no other alternative suppliers for crops other than local farmers due to this lack of suppliers can lead to local farmers having a dominant position with high bargaining power to charge Blue Apron more impacting the companies’ profits. Buyer Power: Blue Aprons consumers can easily drive the company’s prices down. Blue Apron has differing factors such as environmentalists voicing their concerns on packaging issues and carbon footprint issues which can pose as a potential threat. As consumers are continually changing and wanting more from a company, failure to do so can be seen through Blue Apron’s orders per customer drastically decreasing from 4.5 in 2016 to 4.1 2017. Additionally, the company offers zero switching costs to rival companies making Blue Apron consumers overall being strong enough to have buyer power over the company.

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Threat of Substitution: Difficulty convincing cost-conscious consumers to spend on quality in-home catered meals. This substitution of purchasing food from the grocery store to cook at home or purchasing prepacked microwavable meals from the grocery store can be viewed as a more accessible and cheaper alternative which can weaken Blue Apron position and threaten profit margins. Threat of New Entry: Providing meal kits delivery services is an easy and effortless market to pursue as rivals such as Amazon can quickly enter into this market and establish dominance and weaken Blue Apron position posing a significant threat towards the company.

Core Problems/Challenges 1. Unclear company vision with rapid growth Blue Apron had a rapid growth rate starting in 2012 and working its way up throughout the years. It can be seen that Blue Apron had issues with its marketing program and inconsistent managerial principles due to its rapid growth that has led to an unclear company vision and supply chain management for Blue Apron. The company vision was “developing better standards for higher quality ingredients, supporting regenerative farming practices to replenish our land, eliminating the middleman to deliver fresher food and reducing food waste to create better value”. Although, this vision is still relevant does not cater to consumers perceptions, competitors, offering differentiation and its supply chain workers in a constantly changing market. Blue Apron needs to update its vision and strategize to tackle consumers needs and wants in a meal delivery service and gain a clearer vision on supply chain management by creating a marketing program and principles not just on value and quality of the service but on customer and supply chain experience. Customer experience can largely be influenced by the level of service they receive. Blue Apron is not providing an interpersonal connection with its customers of listening to their wants and needs for the service instead there are predominantly funding promotion strategies such as content marketing of which this increased spending on marketing resulted in negative cash flow for Blue Apron. Additionally, Blue Apron warehouse employees have noted that working conditions are chaotic and violent as Blue Apron lacks efficient supply chain management skills. Without a clear strategy/vision to improve supply chain and listen to consumers need and wants, there is an inability to provide customers with a differentiating service against competitors and create a memorable experience to gain consumer retention without spending a large amount on promotion strategies. Failure to make improvements in this sphere will see Blue Apron continue to struggle, eventually falling into greater decline. 2. Blue Apron’s lack of product and pricing strategies In terms of product, Blue Apron is experiencing lower profit margins seen in their declining average revenue per customer from US$265 in 2016 to US$236 in 2017 signalling that customers have placed fewer orders and spent less per order. This can be due to Blue Apron offering products that fail to cater to customers taste. A core problem for the company is the lack of variety and differentiation of their products compared to its competitors which is detrimental in a bid to attract greater market share. For example, HelloFresh offers vegan, nut-free and dairy-free options which are ultimately compelling to consumers.

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Hyper-competitive pricing and epic marketing budgets is a core problem for Blue Apron to turn its service into a profit generator. In Q1 of 2017, the company reported a loss of US$52 million into logistics and marketing. As reducing the funding on promotion tactics and focusing on implementing a competitive pricing strategy for Blue Apron can ultimately meet consumers needs and wants for a cheaper alternative. Blue Apron prices are typically mid-range with an average cost to be around US$9.99. However, compared to its competitors offer a lower price alternative such as HelloFresh US$9.90 and Home Chef US$9.95. Additionally, other alternatives such as prepacked meals from the grocery store or home-cooked meals can seem like a more accessible and cheaper option towards consumers. Furthermore, Blue Apron has zero switching costs as a customer dissatisfied with Blue Aprons services can easily switch over to its competitors. In result has a negative effect on Blue Aprons bottom line as a competitive pricing strategy needs to be implemented to stop consumers from easily switching to its competitors.

Exploring alternative solutions Problem 1: Blue Apron’s lack of product and pricing strategies Solution 1: Blue Apron customer loyalty program Blue Apron needs to implement a competitive pricing strategy as the average cost per meal is US$9.99 against its competitors. Blue Apron is mid-range with HelloFresh US$9.90 and Home Chef US$9.95. Although not a significant price difference, consumers still have other cheaper alternatives such as prepacked meals from the grocery store. By Blue Apron, focusing on its price offerings can introduce a customer loyalty program and other incentives within this program. The program can operate at bronze, silver, gold and platinum tiers with incremental rewards provided at each level. The rewards will implement price discounts, free bonus meals, and even gifts like from Blue Apron Wine packages. As a result, this newly proposed loyalty program caters towards a greater proportion of existing customers’ tastes and preferences. Additional to the loyalty program, incentives such as free trial memberships can be implemented to attract new consumers into the market without heavily funding promotion marketing. This loyalty and incentive programs are designed to generate long-term customer-brand relationships to improve customer experience with Blue Apron over competitors such as HelloFresh and Amazon, which in result leads to a higher probability of Blue Apron reaching their financial performance metrics. Advantages and Disadvantages of Blue Apron Loyalty and Incentives Program Advantages Disadvantages • Providing a new incentive to shop at Blue • Short term financial costs for Blue Apron Apron • Consumers may use up the free trail • Attracting new and retaining existing membership but not sign up to the consumers program • Meeting consumers needs and wants • Creating differentiation and competitive advantage over Blue Apron competitors

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Solution 2: Customer Relationship Management

In order to improve Blue Apron’s positioning and allow them to retain their market share of 40.30% in the US meal kit delivery market. Implementing a customer relationship management program through market research on consumers’ needs and want is essential to tackle differentiation and incorporate consumer preferences in the company for the long term. There are several steps for market research to occur: 1. Problem identification as the core problem is Blue Apron massive spending in the promotion and little focus on consumer preferences upon service offerings. 2. Research design can be done by conducting interviews and surveys with customers and run user tests on Blue Apron’s website. 3. Data collection making sure data is valid and unbiased to get the best insights. 4. Analysis and interpretation of the data 5. Research plan into action as Blue Aprons will know what consumers prefer in their service; they will then need to incorporate these findings into their menus, services and goals. In result, Blue Apron can provide unique and tailored services enhancing its brand positioning leading to increased and stable market share and subsequently enhancing sales. Advantages and Disadvantages of Customer Relationship Management Advantages Disadvantages • Providing customers with their wants • Market research can be costly as Blue ensures an increased financial return Apron is currently experiencing financial losses • Differentiation of a unique and tailored service ensuring a competitive advantage • Greater appeal to new customer segments Problem 2: Unclear company vision with rapid growth Solution 1: Redesign company vision To redesign the company vision not only to encounter the value and quality of their service but to implement a more targeted approach to its consumers. Therefore, one solution that could assist Blue Apron in improving its offering is by building an interpersonal relationship between consumer and service. Using a B2C business model, Blue Apron can create little pop-up stores around the US not only selling their product but offering cooking lessons using their products while simultaneously promoting their service. As current Blue Apron marketing strategies consist of predominantly online content marketing such as social media, email marketing, company's mobile application etc. therefore lacks face to face interaction. This will allow Blue Apron to differentiate itself from competitors. Furthermore, omnichannel marketing can be the new company vision by utilising its already established marketing strategies with the creation of pop up stores for a more impactful vision. In result, Blue Apron will attract consumers and improve brand positioning.

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Advantages and Disadvantages of Redesigning Company Vision Advantages Disadvantages • Omnichannel allow for enhanced brand • An extensive marketing campaign will need to be created can be time consuming positioning and costly • Pop up stores will help bring customer • Long-term plan will not achieve instant awareness, help through pricing such as results transportation and delivery costs • Competitive advantage through differentiation Solution 2: Refining supply chain As Blue Apron experienced a rapid growth rate, managerial principles and efficient supply chain management are affected seen in Blue Apron warehouse working conditions being described as chaotic and violent due to the increased number of sale orders putting pressure on the warehouse employees. Blue Apron needs to understand consumer demand and preferences to determine the type of meals and quantity of stock to order beforehand from the local farmers. In result can improve the speed of inventory turnover and create a form of risk mitigation that can minimise inventory issues that can arise with stock due to unforeseen circumstances such as weather conditions and crop issues. In result, this strategy will improve inventory turnover, and subsequently enhance sales. Advantages and Disadvantages of refining supply chain Advantages Disadvantages • Improved inventory turnover • New changes to supply chain can be costly to keep stock in warehouse • Minimize supply chain risks and issues • Employees issues on adapting to changes • Efficient supply chain management and implementing training programs

The Best Solution These four marketing strategies presented are the most efficient ways to deal with and combat marketing problems. However, due to Blue Apron financial issues, time restraints and decline in consumers the best and most feasible solution can be defined as in the short-term will, be the introduction of Blue Apron loyalty and incentive program and in the long term is the redesigning of the company’s vision.

Recommendations/Action Plan Short-term Action Plan: Introduction of a Loyalty Program Tasks 1. Undertake market research

2. Creating the loyalty program

Steps 1. Problem identification 2. Research design 3. Data collection 4. Analysis and interpretation 5. Reporting the results Based on data, create discounts, free meals and

Duration 1-3 Months

6-8 Months

Performance metrics Create data by completing interviews / surveys on what consumers are looking for in a loyalty program to enhance customer satisfaction. - Implement a point system with tiers of

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gifts for the longer the consumer stays within the service.

3. Implementing customer loyalty program

4. Evaluating effectiveness of new customer loyalty program

Promote the loyalty program using already established promotion techniques. Analyse financial metrics to see if there is an increase in revenue and monitor the number of sign-ups.

Long Term Action Plan: Redesign Company Vision Tasks Steps 1. Undertake market Focus on consumer research preferences by implementing B2C model.

2. Implement the pop-up stores

3. Redesign company vision 4. Evaluate effectiveness of the pop-up stores with the company’s new vision

Creating little pop up stores around popular US locations based on research. Implementing the new standard of omnichannel marketing. Track measures of customer satisfaction, supply chain efficiency and profitability.

Ongoing

Ongoing

Duration 6-8 months for research on trends and popular locations in the US to set up the pop-up stores.

1-2 years

bronze, silver, gold and platinum. - Adding a tracker system to see how far away from discounts. - Social media - Email marketing - Influencers - Company’s mobile app - Analyse average loyalty points made by customers and the number of customers who have redeemed their rewards. - Analyse number of customers before and after the proposed program.

Performance metrics Primary data: Interviews/survey’s on customer needs and wants and research most popular locations in the US. Secondary data: Similar services sales data such as HelloFresh. Logistics and marketing team to set it up and organise it.

2-3 years

Return on investment data.

5 years +

- Increased revenue and profits, with a stable market share. - Improved customer long lasting relationship and attracting new customers.

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