Ocado Retail's Success Story: A Strategic Shift in Marketing

Strategic Marketing Shift

Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, has seen a remarkable 5.9% increase in active consumers in the fourth quarter. This growth is attributed to a strategic shift in the company's marketing strategy, with a clear focus on customer acquisition and retention. CEO Hannah Wilson emphasizes the material improvement in customer retention, driven by better targeting and an enhanced customer experience for first-time shoppers.

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Moreover, the company has witnessed a notable increase in mature customers, up 9% from the previous year. This growth is particularly impressive considering the reduction in the marketing budget by \\[£7m] in the first half of the financial year. The CFO, Stephen Daintith, highlighted that this reduction was part of an optimization of the marketing channel mix, with the saving reinvested into increased voucher offers to attract new customers.

The strategic evolution, which began in January 2023, focused on acquiring long-term consumers rather than relying on short-term discounts to attract new customers. The brand's emphasis on offering lower prices through price matching baskets to Tesco has significantly improved customer satisfaction scores on value, as evidenced by YouGov's BrandIndex.

Customer Behavior and Revenue Growth

The shift in marketing strategy has not only increased active customers but also positively impacted customer behavior. Average orders per week on Ocado.com grew by 4% year-on-year, reflecting the increase in active customers. Additionally, the average selling price (ASP) increased by 7.9% year-on-year, demonstrating Ocado's commitment to improving pricing relative to the market.

The broadening of Ocado's product range, with nearly 50,000 products live on the site, has contributed to increased customer retention. The company's retail revenue has also experienced significant growth, reaching £609.4m in the 13 weeks to 26 November, marking a fourth consecutive quarter of growth. The peak Christmas trading period further showcased the brand's strength, with an overall sales increase of 7%.

Outlook and Future Plans

Looking ahead, Ocado Retail is optimistic about its future prospects, starting the new year with over 1 million active customers. CEO Hannah Wilson expressed her excitement about building on the strong platform laid in 2023 and raising the bar for online grocery shopping. The company aims to embed the foundations laid in the previous year and is committed to achieving even greater success in 2024.

Furthermore, the company's focus on creative effectiveness and strong foundation within the business reflects its dedication to achieving commercial objectives. The collaborative efforts across the customer function, as highlighted by Sarah Emerson, the head of brand advertising, demonstrate Ocado's commitment to ensuring that every aspect of the business works cohesively to drive commercial success.