Purplebricks CEO blames ‘poor’ marketing effectiveness for £42m loss
Former CMO Ed Hughes has been brought back into the company to once again pick up the marketing reigns, replacing Ian Cafferky who joined the business in February.
On top of operational challenges and a difficult housing market, Purplebricks’ new CEO Helena Marston is blaming the online estate agency’s dismal financial results over the last year on “missteps” in its marketing strategy.
Marston, who stepped up to the position of CEO in April from her former role as chief operating officer, says marketing and advertising has contributed “greatly” to the “power” of the Purplebricks brand over the years. However, while the budget for marketing grew significantly for the year to 30 April, “its effectiveness was poor”.
In particular, she took aim at the brand’s national advertising campaign ‘Let’s get you sold’, which saw Purplebricks move away from a focus on its low fixed fee.
“We missed the opportunity of communicating our key differentiator in a market that was seeing significant rises in house prices and where our model could have saved consumers thousands in commission,” she says.
The campaign launched in September as the online estate agency’s biggest above-the-line marketing spend in five years, led by a TV ad fronted by broadcaster and comedian Mo Gilligan.
According to Purplebricks’ full year results statement, marketing costs increased 33% over the year, from £18.9m in 2021 to £25.2m. Marketing spend in 2021 was in part lower due to lower housing activity during the pandemic.
With such a great proposition, it has been incredibly frustrating to look back at a series of missteps that have meant we have so far failed to capitalise on the strength of this platform.
Helena Marston, Purplebricks
However, over the year group revenue plummeted 23% to £70m and the company fell to an adjusted EBITDA loss of £8.8m, down from a £12m profit in 2021.
Gross profit margin was down 340 basis points to 60.1%, while the company reported an overall operating loss of £42m, after making a £6.8m profit the year prior. The business has warned it is unlikely to break even again until 2024.
Marketing cost per instruction (a property the agency has been instructed to sell or let) was £629, “significantly” up from £326 in 2021. Marketing costs as a percentage of revenue rose from 21% to 36%.
“With such a great proposition, it has been incredibly frustrating to look back at a series of missteps that have meant we have so far failed to capitalise on the strength of this platform,” Marston says.
“Our marketing campaigns in the year did not capture the benefits of our offer. It is an important goal of mine to ensure we help customers fully understand all the advantages of our proposition, something which we are urgently addressing this financial year”
Purplebricks has taken “decisive action” to reverse its fortunes this year and next, Marston adds, including adopting a “radically different” and “more targeted” sales and marketing plan, which will focus more on price.
“Our approach to marketing will be radically different this year, a change designed to deliver better results. We need to make our marketing investments work harder than ever before to reposition us as the preferred choice for our customers,” she explains.
“We will go back to shouting about what makes us great and reminding customers that there is a better, more cost-effective way to sell their homes. We will remind them that ‘cut price’ doesn’t mean a sub-optimal service, but rather the opposite. We will set clear expectations on what it looks like and feels like to be a Purplebricks customer, whether that’s online, offline, or on the app, and create a consistent experience that customers want to shout about.”
Former CMO Ed Hughes has been brought back into the company to once again pick up the marketing reigns, replacing Ian Cafferky who joined the business in February. On LinkedIn, Hughes said he is “back to make Purplebricks different again”.
Our approach to marketing will be radically different this year, a change designed to deliver better results. We need to make our marketing investments work harder than ever before.
Helena Marston, Purplebricks
Overall, Purplebricks is embarking on a cost reduction programme which aims to deliver £13m in cost savings over the next year, equivalent to a 16% reduction in the operating cost base.
As part of this programme, Marston says the company’s marketing investments will be “smarter” and “more targeted”, using “a range of channels throughout the year”.
Purplebricks is also making changes to its pricing strategy, including price rises across the board.
After conducting “significant” trials last year, the business introduced two new customer propositions, including its Classic and Pro packages, as well as a Money Back Guarantee.
The Classic and Pro packages were “well received” by customers, Marston says, with the two-tier proposition helping customers feel more in control and enabling the business to provide a more cost-effective way to sell their home. Take-up of the Pro package has been “especially encouraging”.
However, the impact of the Money Back Guarantee was “far below” levels indicated by the trials. It did not drive the anticipated increase in instruction volumes and was cut in July.‘It’s time to shout about the brand’: How Purplebricks plans to win over sceptics
Moving forward, the firm is exploring new revenue opportunities to “capitalise” on its brand, with plans to launch a mortgage offer by the end of the next financial year.
According to Marston, the business expects supply dynamics in the housing market to remain “challenging”, particularly with the current macroeconomic environment. Nevertheless, she is “confident” the actions the company has taken, alongside its marketing plans, will deliver revenue of between £67.5m and £72.5m next year.
“I am convinced the potential for Purplebricks is huge. We have a proposition which is more relevant and valuable for our customers, as well as a brand which is the best known in the industry. I’m confident that the actions we are taking this year will set us on a clear path towards a return to sustainable, profitable growth,” she says.
Challenges for the brand
Speaking to Marketing Week as he launched the Let’s get you sold campaign in September last year, then-CMO Ben Carter acknowledged the challenge Purplebricks faces in disrupting the traditional estate agency model.
Having formerly worked at disruptive brands including Just Eat and Notonthehighstreet, he said Purplebricks is “definitely up there in terms of the more difficult”, in part due to Covid-19’s impact on the housing market.
The other difficulty is consumer “apathy” towards the online estate agency model, which Carter explained is driven by a “misconception” that local high street agents are more accountable because they have a physical shop and they have a more expansive black book of properties.
Let’s get you sold was launched in a bid to change perceptions of Purplebricks, highlighting its proven success as an agent and promising customers it will get their property sold.
“[Perception] has been our problem for about the last two years,” Carter said. “We are very well known, we’ve got very high awareness, but people don’t understand our model.”
“The way to address that is to go out there with a very confident platform – a very attitude-led platform – which is engaging and will enable us to become part of the broader conversation as well.”
“Marketing cost per instruction (a property the agency has been instructed to sell or let) was £629, “significantly” up from £326 in 2021. Marketing costs as a percentage of revenue rose from 21% to 36%.”
Still can’t see where its defendable USP lies.
Purple bricks still hasn’t found a precise, compelling proposition. Low fees sound good, but what really matters is selling for the best price. I see no evidence that Purplebricks know how to do this.
They can’t compete on service levels (I assume) , but I do agree with the CEO that the “Let’s get you sold” idea was hopeless – turning a house sale into a Gumtree transaction.