For marketers who work for a business, hearing that they need to cut the marketing budget is not too uncommon. People often look at the marketing budget as a waste of money, or at least something that can be reduced to cut costs. That is exactly what happened when Blue Apron (the meal in a box delivery company) went public. The investors demanded that the marketing budget get slashed, and management at the company complied.
In its first earnings report as a public company, Blue Apron managed to beat analysts’ estimates on revenue, but that was the only good news. The company said it didn’t raise as much as it expected in the IPO and also cut deeply into the marketing budget. The result: it lost customers during the quarter. In a conference call, Blue Apron executives warned that the second half will be even worse than the first as the company spends heavily on automating its fulfillment centers and continues to pull back marketing. That in turn will push back plans to expand menu offerings.
The drop was from $34.5 million to $32 million, which brought it to 14.5% of revenue, down from 15.9%. It is an even bigger drop from the first quarter of 2017 when they spent 24.8% of revenue, or $60.6 million.
“We are beginning a new chapter as a public company, and remain focused on our long-term strategy to build an iconic consumer brand, develop a more diverse product portfolio, and further build out an end-to-end supply chain platform,” CEO Matt Salzberg shared in a statement accompanying the financial report.
Of course, it doesn’t make sense to just dump endless amounts of money into marketing without any thought into the type or results. Smart marketing, however, should be seen as an essential investment into the company. When done right, every marketing dollar spent is going to produce an excellent return. If Blue Apron were spending millions and not having customers sign up, the concern would be valid, but that is not the case here.
Instead, we see investors forcing budget cuts, and then abandoning ship when the results of their demands were seen.