These are important ingredients to the overall customer-based corporate valuation recipe.
The conclusion: Blue Apron doesn’t retain customers for very long, and the cost to acquire customers has been on the rise lately. Being LTV-centric is at the heart of being customer centric.ĭoes Blue Apron, which recently priced its IPO at a very healthy ~$3 billion implied valuation (or almost 3.5 times trailing twelve month revenues), pass the test? In my last note on Blue Apron, which was recently cited in the Wall Street Journal, I showed that while Blue Apron disclosed nothing explicitly about its customer retention, and very little about how its customer acquisition cost (CAC) has been changing over time, it disclosed just enough to use an extension of the modeling approach that I advocated in a recent journal article to “back out” what these figures are most likely to be.
Putting it simply, the litmus test of any company’s financial success is the ability to acquire many high lifetime value (LTV) customers. Good companies can acquire many customers cheaply, retain existing customers for extended periods of time, and generate a lot of revenue while those customers are alive.
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