Asos Shifts Focus: Investing £30m in Brand Building, Moving Beyond 'Seductive' Performance Marketing
Asos shifts focus from performance marketing to brand building, investing £30m to transform its marketing strategy and aims to achieve profitability by 2025
'Asos Your Way'
To reinvigorate its fortunes, Asos plans to allocate an extra £30m to its marketing budget in the upcoming financial year. This increased investment will primarily focus on brand building, as the company adopts a more comprehensive marketing approach that covers all stages of the customer journey.
The troubled retailer has criticized its previous performance marketing-led approach in recent years. Asos senior customer director, Dan Elton, revealed that 90% of its marketing budget was spent on short-term channels during a call with investors on November 1. To enhance its brand building efforts, Asos has launched 'Asos Your Way', a multi-channel brand campaign. Elton described this campaign as their first full-funnel effort and it includes various marketing activities such as 'guerrilla' marketing, influencer marketing, social media, and out of home advertising.
As Asos looks to shift its focus away from performance, CEO José Antonio Ramos Calamonte mentioned that some of its performance investment this year has been redirected towards reducing product prices in order to clear excess stock. This decision was made due to the company's significant increase in stock levels from 2018 to 2022, which required a temporary sacrifice in growth margins.
In addition to this, Asos has also invested £30 million in marketing specifically for branding purposes. This investment is separate from the majority of their marketing budget. Despite this increased focus on branding, Elton acknowledged that the majority of their marketing investment will still be allocated to performance. He further emphasized that the current allocation of funds towards performance is yielding positive results.
On the whole, the marketing investment we make will continue to be in performance.
Ben Elton, Asos
In the 12-month period ending on 3 September, Asos allocated £195m towards marketing, marking a decrease from the £223.5m invested the previous year.
Asos issued a cautionary statement today, predicting a further decline in sales of approximately 15% for the upcoming fiscal year. In the preceding year, Asos experienced a drop of 10% in sales. The company's total revenue for the year was £3.5bn, down from £3.9bn the previous year. Asos reported an operating loss of £248.5m for the year.
Asos reported earlier this year that its least profitable customers, which account for 6% of its total customer base, have cost the business over £100m. As a solution, the retailer announced today that it has limited promotional advertising to these customers. Elton further stated that although performance marketing may be enticing, the brand is determined to shift away from this dependence, as it considers it a one-dimensional model that is not meeting its objectives. Asos is also making efforts to be more proactive in its pricing strategies.
Many retailers, such as H&M, Zara, and Boohoo, have started charging customers fees for product returns in the past year. However, Asos considers its free-returns policy to be crucial, as customers often need to try on clothes at home. Although Asos has introduced some returns fees in other markets, they are only applicable after a 14-day period. This strategy has allowed Asos to facilitate "faster returns" and quickly restock items on their website at their original price.
During a call with investors, Calamonte was asked about Asos' competition with fast fashion brands like Shein and Temu. In response, he stated that Asos does not aim to be the lowest-priced option in the market. He emphasized that Asos does not believe in selling t-shirts at extremely low prices, such as £2. Calamonte acknowledged the current trend of lower prices due to the crisis, drawing a parallel to the rise of Primark in the past.
He stated that Asos will "battle with them" using the company's new strategy and "the ultimate marketing journey". Calamonte expressed confidence that the business will successfully reverse its fortunes by the end of 2025, describing 2023 as a year of significant progress for the brand. He further emphasized that Asos will emerge from the year as a smaller but substantially more profitable company.
