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As losses mount, Ocado returns to marketing basics.

Discounting was described as a “balancing act” by Ocado’s CEO, as the online supermarket announced it cut its marketing spending by roughly a third in the first half of the year.

 

Ocado, the online supermarket, has made significant adjustments to its marketing strategy in the first half of the year. As part of a broader effort to cut costs, Ocado reduced its marketing budget by nearly £7 million, from £26.6 million to £20.1 million. The company’s Chief Financial Officer, Stephen Daintith, attributed this reduction to optimizing the marketing channel mix and reinvesting the savings into increased voucher offers aimed at attracting new customers.

 

Despite the decrease in marketing spend, Ocado’s revenue saw a 5% increase for its retail operation, and the number of customers grew by 10%. The focus of the current marketing approach is on customer acquisition rather than retention or reacquisition. While incentives are being used to encourage first-time customers, Ocado remains cautious about overusing heavy incentives.

 

Tim Steiner, Ocado’s CEO, described the marketing strategy as “back to basics,” with the current mix resembling that of 2019 rather than the past three years. He emphasized the importance of finding the right balance when offering vouchers to attract the right customers. Larger incentives may bring in many customers, but if they don’t become regular buyers, it can result in wasted money.

 

Ocado’s loss of £289.5 million for the period is partly due to exceptional costs of £77 million accrued during the first half of 2023. To counter inflationary pressures, the company absorbed some price increases through its price promise to customers, impacting gross profit, which saw a smaller increase of 1.2%.

 

Despite the challenges and increased competition, Ocado has achieved positive results, with a higher number of active customers, increased revenue, and slight increases in average orders and basket values. The company’s head of brand advertising also revealed its desire to make the brand more relatable and increase customer frequency through advertising campaigns showcasing the variety of products offered.

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