Ocado’s marketing strategy needs innovation not business as usual approach

Another year, another loss. The latest figures from Ocado mean the online grocery firm still hasn’t managed to turn a pre-tax profit in its 14 years of business. This despite the UK grocery market hitting what CEO Tim Steiner describes as an “inflexion” point as shoppers rapidly move online.

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That shift to ecommerce is benefitting Ocado. Sales were strong over Christmas, with Ocado reporting 21.3 per cent growth in the 6 weeks to 5 January, allowing it to grab share in the grocery market.

It has also begun rolling out its distribution deal with Morrisons, just this week expanding it to Yorkshire. That agreement has left analysts cock-a-hoop over Ocado’s prospects as a distributor for other retailers, particularly after Steiner admitted the firm is building a platform to allow it to run multiple businesses globally.

However despite all this Ocado still can’t work out how to turn a profit. The main reason why analysts are pinning their hopes on distribution deals is that Ocado’s business performance hasn’t matched up to promise.

Yet there appears little reason for this. It is actually difficult to find fault with the service. The product range is good and expanding, now at 36,000 lines, order accuracy has increased to 99 per cent and more than 96 per cent of its deliveries are on time or early.

That’s a customer experience that no other supermarket can match and Ocado knows it. It invested early in service and accuracy and has left rivals in its wake.

The problem is Ocado doesn’t have a brand to match. Customers are confused about who Ocado are.

The association with Waitrose suggests an upmarket offering yet a marketing campaign last year promoting value and pricing initiatives suggests they want to be perceived as offering low prices.

Are they just going after people that can’t be bothered to shop in stores and if they aren’t what is their target market?

Ocado has done some brand building through a sponsorship of Channel 5’s Big Brother and ads in OK! and the Daily Express. It has also started doing some guerrilla marketing outside rivals’ stores but these are small scale and unlikely to grab the attention of the wider public.

Yet none of this is making people excited about the brand. On YouGov’s Brand Index it floats around the middle of a list of 25 supermarkets for almost every metric, behind all of the big six plus Aldi, Lidl and Iceland. That isn’t where a forward-thinking online grocery company with some of the best customer service should be.

Ocado seems happy to simply tick along, using marketing to acquire new customers without setting the online grocery market alight. Steiner told Marketing Week in a call with journalists earlier this week that its current marketing strategy “will continue” this year.

There is no doubt it is working because its market share is growing and its customer acquisition is up 40 per cent year on year, while active customers increased to 385,000, up from 355,000 in 2012.

Yet if Ocado wants to build a profitable company for the long term it needs to do a better job of explaining to people what the brand stands for, why it’s different, why they should be shopping with it rather than rivals.

Ocado’s marketing team needs to take some risks and bring some innovation to its strategy to get people talking about the brand.

Now is not the time for a business as usual approach to marketing.

It is the time for something inspirational.

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