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Hello Fresh. Hungry for More! Equity Research! Part 2/3
Hello Readers!
Today I bring the second part of my Hello Fresh Deep Dive!
This digital-native food subscription company has increased its business 10X since 2016. However, today, its business is undergoing some changes. In this report, we will discuss what methods Hello Fresh uses to acquire and keep customers. How massive economies of scale drive them forward! Are competitors doing something about it? And what risks is the company facing?
Before getting to it, to understand the full picture, I recommend you start with Part 1!
1. Marketing Strategy
2. Scale
3. Reviews
4. Churn
5. Competition
6. Part 3
1. Marketing Strategy
As a direct-to-consumer company operating in a highly competitive food industry Hello Fresh must successfully acquire and keep customers.
Thus, marketing is their core competency!
It is essential to identify what customers value the most, their pain points, desires, and wishes. Understanding the customer hierarchy of preferences is crucial for Hello Fresh to successfully market their products. Throwing money at the wall is not necessarily the most effective marketing strategy, smart and targeted marketing builds long-lasting profitable customer relationships.
Customer Hierarchy of Preferences
Food is high on the customer hierarchy of preferences, so it is relatively simple to acquire customers.
In this industry acquiring new customers is the easy part, servicing and keeping them is the hard part!
Price is the first level of the hierarchy. Food is a necessity for survival, so customers will always spend money on it. However, their ability to pay is the first factor determining what kind of food they consume. Thus, large introductory discounts are one of the main strategies that Hello Fresh uses. New customers receive a 50% discount for their first order, which is a great way to get someone to try your product. The goal is to convert beginner customers into long-term subscribers.
Taste is next hier