Most publicly traded companies give investors a key metric or two that they're focused on improving. Whether it's a standard benchmark like revenue or earnings per share growth, user or subscriber growth, or something a bit more complicated like contribution margin, management usually points to an appropriate metric to help investors judge performance.
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But Blue Apron (NYSE: APRN) is different. On the company's first earnings call as a publicly traded company, CEO Matt Salzberg told analysts the most important metric his team is focused on is customer lifetime value. "What we're really looking at and trying to drive is revenue per customer over time, and that's how I would encourage folks to think about what we're trying to accomplish," he said. "It's revenue per customer and lifetime value per customer."
The only problem is Blue Apron doesn't provide investors with that metric -- it doesn't even offer the tools to estimate that number.
Is the payback period the same as it was two years ago?
In Blue Apron's S-1 registration, the company includes a nice chart showing net revenue per customer over time. That's exactly what investors want to see.
The problem is that Blue Apron blended data from 2014, 2015, and 2016, and the results have been meaningfully different in each of those periods. The average net revenue after six months of membership was $402 for 2014 cohorts, $451 for 2015 cohorts, and $387 for 2016 cohorts.
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What's more, Blue Apron shows its customer acquisition cost is just $94 per customer, but that number has climbed significantly over the past year. In fact, in 2016, Blue Apron spent about $320 in marketing per new customer.
That number has climbed even higher in 2017 after a big increase in marketing spend in the first quarter and a decline in users in the second. Over the last 12 months, Blue Apron spent $181.8 million on marketing, but it had just 177,000 more customers in the second quarter this year than last year. That amounts to over $1,000 per new customer, and the average customer takes over three years to pay back that amount in net revenue alone, according to the chart above.
What's the retention rate?
While Blue Apron provides data on quarterly revenue per customer, it doesn't provide another ingredient needed to determine lifetime value: customer retention. With a retention rate, it would be easier to estimate how much revenue is coming from repeat customers and how much is coming from new ones. It would also allow investors to develop a model for customer lifetime value.
But retention is likely one of the biggest knocks against this business. Customers sign up, try the service a few times, and learn some recipes, but quickly stop ordering. As such, it's no surprise management keeps that number close to the vest. When asked about retention rates on the earnings call, Salzberg avoided answering the question.
However, if Salzberg wants investors to think about customer lifetime value, the company needs to start providing the numbers we need to think about it. Perhaps management will offer an update on the chart from its S-1 in its annual report. In the meantime, investors just have to trust management. And considering its recent misstep with the launch of its Linden facility, management is quickly losing some of that trust. Until Blue Apron starts providing investors more information, there's not much by which investors can measure management's performance.
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