You remember our article on Blue Apron, don’t you? If so, you’ll remember that Blue Apron’s issues stemmed from focusing too much on customer acquisition, instead of customer retention. This was a big mistake, given that now it’s pretty clear how important customer retention is for subscription-based businesses. Maybe you’re thinking — could this just be an industry problem? It does seem like Hello Fresh, Blue Apron’s biggest competitor, isn’t exactly doing too hot either.
Well, you probably haven’t heard of the name ButcherBox quite yet then. In this same subscription food-kit sector, ButcherBox is an online meat-seller that’s absolutely killing it in the industry. But unlike Blue Apron, ButcherBox did something a little different — and this little difference made a huge difference in the long run. Rather than focusing on acquiring new customers in their marketing campaigns, they targeted existing/past subscribers and website visitors to get them to keep coming back, order more and more, and stay for good. Let’s take a look at how this company avoided coming face to face with the same issues as other companies in the industry.
A Customer-Centric Approach
It wasn’t Mike Salguero’s first time starting a business. Salguero, the founder of ButcherBox, had been recovering from a failed startup that he had pretty high hopes for. But a past failure means mistakes were made and learned from. For Salguero’s next venture, he decided to try focusing more on the customers themselves. And tackling a problem a bit more relevant to his life was the first step. After all, what better way to understand his customers than to be in his company’s target market himself?
In 2014, Salguero figured out a new, more practical way to get meat to his wife, who had a particular disease requiring that any meat she ate was from an antibiotic-free and grassfed source. He was previously buying beef from farmers around town, but this was both inconvenient and way too expensive to be a sustainable option. Instead, he began to buy carcasses himself to split apart, saving a chunk for his family and selling the rest to friends. And there it was in front of him — a golden opportunity to take another stab at entrepreneurship.
Honing in on his customer-centric mindset, Salguero decided to turn to the potential customer for funding, rather than finding equity investors like before. He thought to himself, “What would convince strangers to chip in on his venture?” The answer was simple — I mean, who doesn’t like the word free? Not surprisingly, when he began to wave offers of bacon and wings for life in people’s faces, customers began throwing their money at Salguero. Within a month, he raised over $200k on kickstarter alone — more than enough to make his idea a reality.
Daring to be Different
So how did ButcherBox generate over $5 million in revenue in a singular year? And how did they skyrocket to $105 million in revenue only 2-3 years later? At that time, competitors like Blue Apron and HelloFresh were almost entirely set on expanding their customer bases, failing to think far enough ahead to consider a) whether or not the meal-kit industry would be able to sustain its soaring growth long term and b) how they would be able to do quality control once they reached an overabundance of customers.
Salguero, however, was exceptionally smart about these things. Any decisions he made were calculated. While competitors were focused on grabbing on to as much market share as they could get their hands on, Salguero continued to put the existing customer first. When ButcherBox began to grow at an insane rate, they began to struggle to meet demand since they had been sourcing all their meat from a singular vendor, Niman Ranch. But instead of finding other vendors to close in on demand more quickly, Salguero made a tough choice. He paused new subscriptions, risking losing the interest of these newer customers, in order to give Niman Ranch more time to get up to speed with the massive increase in order volume.
On top of sticking to customer-centric values, Salguero had been realizing that customer acquisition was becoming harder and costlier than ever, especially in a difficult, inflationary economy. Instead of scaling their customer base even more, a mistake that cost Blue Apron their most loyal customers, he decided to focus on not only retaining current customers, but increasing their active loyalty to the brand. So even though ButcherBox was past that crazy period of growth, they were doing an insanely impressive job of having current customers make up for it. And how, you may ask? Let’s take a look!
Data at its Best
Although ButcherBox didn’t originally rely on data analytics to drive their brand forward, they soon realized a resilient retention strategy would call for mighty analytics operations. By analyzing customer data, ButcherBox could find out when, what, and how much to order in its supply centers, which also told them what items were popular and showed them interesting purchase patterns.
ButcherBox was also able to compile large amounts of feedback directly from consumers and use analytics tools to pull insights from the data. For instance, implementing more promotions and freebies was a decision they made after realizing many customers felt each purchase wasn’t optimizing their bang for buck. And seeing how well this has worked in increasing AOV for loyal subscribers, ButcherBox is now diving deeper into how data can continue to help maximize both profitability and customer satisfaction.
The company has recently begun implementing segmentation strategies driven by data as well in order to recommend certain products and subscription programs to customers that fall in relevant categories. Noticing that some subscription plans were leading to more churn than others, ButcherBox began to introduce new plans with different schedules and options that gave customers more flexibility. Based on patterns that they analyzed, they could even recommend specific options that would be better fits for a specific customer.
It’s clear that at $550 million in revenue, the changes they’re making are working.
Cotera works with many clients just like ButcherBox — subscription services that have immense profit potential to unlock. We’ve seen our customers generate over 20X ROI with our analytics platform, whether it’s through optimizing retention, jumpstarting segmentation strategies, or simply uncovering novel insights. ButcherBox is just one success story out of the abundance of data victories out there.