Next opts for targeting over mass reach to boost sales

Next is cutting its investment in ‘non-digital’ advertising in favour of digital as it looks to reach online customers who are more likely to convert.

next brandNext doesn’t believe that its decision to spend a growing proportion of its marketing spend in digital channels has impacted brand awareness in the UK, nor does it believe brand advertising will help to grow the business overseas.

“Brand awareness isn’t something we spend a lot of time worrying about. We worry about sales and numbers of customers we recruit, because in the UK brand awareness is so high,” Next CEO Simon Wolfson told Marketing Week at a press event this morning (19 September).

“Our challenge at the moment is not making people aware of the brand, it’s making our online customers aware of the breadth of offer we have.”

Next cuts print and TV ad spend after seeing ‘impressive’ results from digital

Building the Next brand outside the UK is, however, of growing importance and where the retailer will be spending a lot more of its marketing budget next year.

Over the past 12 months, Next has increased its international customer base by 21%, with more than 80% of that growth in countries where it is actively marketing. Next also attributes 35% of its overseas growth to its “successful and profitable” investment in digital marketing, which is generating £2.05 in incremental orders for every £1 spent.

Overseas marketing £m January 2018 January 2019 January 2020 (e)
Display 1.4 1.2 3.1
Search 1.2 1.9 3.4
Social 0.7 1.9 4.0
Non-digital 2.7 1.8 0.7
Total marketing spend 6.0 6.8 11.2

Next plans to increase its overseas digital marketing investment by £4.4m to £11.2m in 2020, with spend split across display, search and social. Meanwhile, investment in non-digital marketing is set to fall from £2.7m in 2018 to just £700,000 in 2020.

“[Overseas], no amount of brand advertising could possibly talk to everybody,” Wolfson said. “This is where digital marketing has been so useful, in that it’s allowed us to pinpoint people we are most likely to get sales from and make them aware of the brand.”

Outperforming the high street

While Wolfson would not comment on the competition (namely Marks & Spencer) he did say having a catalogue business gave Next a “head start”.

“We are incredibly fortunate that we started this millennium with a mail order business because a mail order business in essence has all the assets, other than a website, that you need for online trading. We then established a customer base, credit business and warehouse infrastructure suitable to that,” he explained.

Next continues to perform well compared with many other high street retailers. Total sales were up 3.8% year on year to £2.01bn in the first half of 2019, while operating profit was up 3.1% to £340.9m. Compare this to John Lewis, which posted an underlying loss of £61.8m in the first half of the year, and M&S where sales and profits fell in the year to the end of March.

Sales via Next’s online channel overtook stores in the first half, with online sales up 11.9% year on year to £1bn, compared with a 5.5% decline in retail sales to £874m.