Customer

In the Operations Analysis, the goal of gaining 35,000 new subscribers in 2020 was set. For the purposes of this analysis, the assumption will be made that to gain 35,000 new subscribers, the brand and its products/services will have needed to be exposed to 700,000 people over the course of the year, if we assume a conservative 5% conversion for an introductory offer. Since we’re pursuing customers with specialty diets, we can evaluate the likelihood that a particular customer might be attracted to a particular allergy ad.

So, for example, Blue Apron could consider developing a collection of meals and snacks that cater to customers with a specific allergy and create a series of Twitter posts and ads based on that allergy set to run over the course of a month. However, it’s best for the company to choose one allergy at first since company funds are limited and less risk would be taken on at one time. It stands to reason that when one person in the household has an allergy to peanuts, milk, or eggs (3 of the most common allergies [“Common Allergens,” n.d.]), that family can find it challenging to source safe meals for the entire family. So which allergy is likely to be the most profitable for Blue Apron? Table 1 shows estimated Twitter impressions based on each of the three allergies. Additionally, the states of nature are broken into two categories. “Good Targeting” represents a condition in which the Tweet’s targeting based on content and ad settings result in a high number of impressions. “Targeting Too Narrow” indicates that the ad/post was ineffective and/or the organic reach was low. The table also shows the probability of these conditions.

Table 1. Twitter impressions payoff table considering three common allergies.

The number of Twitter impressions is an indicator of brand presence and gives an idea on how far the Tweet went (“Twitter Impressions,” n.d.). While there are a few other important metrics for Blue Apron to track on the Twitter platform, impressions are the focus in this analysis. The decision-maker would not have total control over how many impressions a Tweet receives. While turning a Tweet into an ad would help boost impressions, the number of organic impressions earned can’t be known for sure. This analysis takes a cue from Google trends (“Google Trends Comparison,” 2020) and will consider peanut allergy-related Tweets as the most likely to achieve higher organic reach and egg allergy-related Tweets to receive the lowest relative organic reach. These assumptions are factored into the Table 1 figures.

            Figure 1 shows a decision tree to help the decision-maker evaluate risk for each of the allergies.

Figure 1. Risk decision tree for allergies with calculated expected values showing peanuts as the decided allergy.

As seen in Figure 1, the peanut allergy is the best choice to maximize the likelihood that Blue Apron will gain the highest number of impressions to entice new customers with specialty diets.

            Going one step further, the concept of utility can be applied to the customer category of people with a peanut allergy. Table 2 shows the number of products and/or services purchased by this type of customer and the total and marginal utils likely to be measured. (Utils are a measurement of customer “happiness” where an increase in utils means that a customer is better off and a decrease means a customer is worse (Welker, 2017).

Table 2. Total and marginal utility measured in utils for Blue Apron purchase items.

Table 2 shows that the happiness level of a customer making a purchase of a box of meals and/or a snack that is peanut-free goes up for the first four items. Though if looking at the marginal utility, it’s especially clear that the satisfaction diminishes as the number increases. With the fifth item, the utils plateau. Finally, the sixth item shows a reduction in happiness. Certainly, the customer is still happy, but more doesn’t infinitely mean better. In this case, the customer might lose enthusiasm for the variety and want some familiar, more comfortable food. Or perhaps the dishes or snacks aren’t as good as some other brands or old favorites so the customer isn’t willing to spend more than a certain amount. But even with the law of diminishing marginal utility in effect, there is much profit to be had from even a handful of weekly or monthly purchases from a customer with a peanut allergy. And subscription cancellation is less likely because Blue Apron would be providing a service for this customer that can be difficult to source elsewhere.