A business's payback period is a measure of how quickly it recoups its customer acquisition costs from a new customer. Blue Apron (APRN) has never been very clear about how well its ad dollars turn into profits, but its fourth-quarter presentation included a big clue into its overall marketing efficiency.

Blue Apron says the top 30% of customers produced 2.5 times their customer acquisition cost in adjusted gross profits in their first year. However, the bottom 70% produced just 0.2 times their customer acquisition costs. Combining those two numbers, Blue Apron's total payback in the first year of its average customer is just 0.89 times its customer acquisition costs.

In Blue Apron's IPO registration, it said its payback period was less than six months. Now it's extended past a year.

A family cooking a Blue Apron recipe together

Image source: Blue Apron.

Blue Apron's plan to shorten its payback period

CEO Brad Dickerson's plan to make Blue Apron a more efficient (and more profitable) business relies on attracting more customers like its top 30%. The ones that pay back marketing costs 2.5 times over within 12 months.

It's still very early in this strategy, but Dickerson says the results are good so far. He points to average revenue per customer, which increased 1.6%, as the most notable sign its customer base is strengthening.

Total customers fell to 557,000 in the fourth quarter, down 89,000 from the third quarter and down 189,000 from a year ago. That's likely a result of a continued pullback on marketing spend, which fell to $20.3 million down from $23.3 million in the third quarter and $25.2 million in the fourth quarter last year.

Blue Apron will likely continue to see its total customers decline as it focuses its marketing on attracting higher-value customers. But it's not clear if the plan will really work to improve Blue Apron's marketing efficiency.

Is the strategy really working?

A 1.6% increase in average revenue per customer isn't going to move the needle when total customers fall 25% year over year. Blue Apron will need to show significant improvements in the metric to show its focus on a smaller user base will actually prove more efficient and profitable.

More importantly, though, Blue Apron doesn't give investors a very good measuring stick to see if it's moving toward profitability. There are no details about customer acquisition costs or gross new customers. No details about customer retention. Blue Apron is only showing investors what it wants them to see.

What investors can see, though, is that marketing as a percentage of revenue increased by 1 percentage point year over year last quarter. That points to a challenge of Blue Apron's strategy to focus marketing on finding more high-value customers.

A growing portion of Blue Apron's marketing budget goes toward online ads. Highly targeted advertising like referrals has fallen from 18% of the budget to 8% over the past year. Less-targeted offline ads fell to 24% of its budget from 37%. Online media accounted for the other 68% of its ad budget in the fourth quarter, up from 45% last year.

Check out the latest Blue Apron earnings call transcript.

I point this out because online advertising can, indeed, be the best way to attract customers who look similar to Blue Apron's existing best customers, but that kind of targeting requires higher ad spend per conversion. It's unclear whether Blue Apron will be able to gain significant efficiencies in its marketing expenditures from highly targeted but expensive online advertising. That's especially true since there's no guarantee new customers who look similar to its best customers will actually behave the same as its best customers.

If Blue Apron could magically attract only high-value customers for its marketing dollars, it would instantly become a profitable company. But customer acquisition costs and its average payback period will take a long time to improve. Investors should listen closely to what management is saying -- but also pay attention to what it isn't saying about its customer acquisition strategy.