Direct, Digital, Interactive And Social Media In The Digital Age

Answer :

1. Executive Summary 

The online supermarket sector is constantly expanding all over the world. UK is the third largest online shopping market in the world after South Korea and Japan. The percentage of people in UK who buy groceries online is 68% currently and is growing. This industry is highly competitive and companies are doing whatever they can to stay on top. Tesco is the leading brand in this industry and holds 38% of the total market, followed by Sainsbury in the second position with 15% and Ocado holding the third place with 14% of the share in this market. The main challenge for Ocado in comparison to its competitors is the lack of physical stores, whereas its competitors have stores all over UK, enhancing the in-store experience for its consumers. Ocado has a virtual relationship with its customers assuring them fresh and premium quality, excellence in customer service as well as low competitive prices. Ocado is known for using various digital platforms for reaching out to its consumers. In this report we will be creating a new campaign for Ocado called ‘Eat Fresh Stay Fresh’ aiming to increase brand visibility and brand awareness. The campaign will have two stages: Acquisition and Retention. With acquisition the campaign wants to attract new shoppers belonging to class AB females, age group 20-34 years, whereas for retention the goal is to retain the existing customers enhancing their shopping experience online with Ocado. 

2. Macro Analysis 

2.1 Market Overview

As per Mintel, the online grocery shopping is a sector in expansion. UK is classified as the third largest country in the world for online shopping. Its market share is 6.9% after South Korea which holds a global record of 16.6%, followed by Japan 7.25% (Dunning, 2017). This year the sales are globally reaching £11.1 billions , a rise from £9.9 billion in 2016, seeing a growth of 10.8%.

In UK ,73.7% of the market share is counted by the retailers with online stores, and 26.3% by shops online. Tesco is the market leader constituting 38% of the market share. Its sales decreased in 2015 due to a rise in competition. Ocado has seen a rapid growth in the last few years, accounting to 14% of the market share in 2015 (Mintel, 2017).

As mentioned earlier, UK has the highest percentage of online grocery usage and London leads with 68%. The graph below shows the shopping pattern in different region in UK.

As per Mintel, online retail sales have a well established pattern i.e. peak season during winters festivities such as Christmas and other promotional events during black Friday etc. It has been noticed that the online retail sales in the recent years have grown by one percentage point a year with an increase of two percentage points in 2016. This increase has taken place due to rise in the reliability of online retails, more familiarity with online shopping and with the success of amazon prime, which has positively affected other sites as well. (Mintel,2017)

2.2 Market Trends and Market Segmentation

People aged between 25 to 34 have the highest share for shopping online (Mintel). These consumers prefer to receiving their shopping at their doorstep. 

Online grocery is more common in urban areas due to the busy lifestyles of the people, whereas rural areas are also use online shopping frequently because of the distances with the retailers. 

Supermarkets online are convenient in terms of time and transport but involve some additional costs such as delivery and minimum spending (normally £40) which is not affordable for all. The social grade who shop online mainly belong to AB social group. Such consumer have a healthy lifestyle. 

According to Mintel report, there are two different opinions on the new way of shopping food and drinks. For consumers who prefer shopping from supermarkets online, the main reason is time convenience, discounted offers and the easy delivery service. Consumers who don’t prefer this type of shopping have tried it at least once but stopped due to lack of freshness.

The chart below demonstrates social grades and their grocery buying patterns. 67% of group A and the 61% of the group B shop online on a regular basis. The groups C1 and C2 shop lesser with 45% and 46%. 

2.3 PESTLE factors: Implications

As UK is currently experiencing the Brexit, there have been certain noticeable changes in the economy that have had an impact on the purchasing power of the consumers causing a decline in the employment rates.

2.4 Porter’s Five Forces

2.5 Competitive Landscape

There are four leading players in the online grocery market which are Tesco, Sainsbury’s, Ocado and Asda. In comparison, Ocado sets a minimum spend of £40 same as Tesco and Asda, while Sainsbury’s minimum order is the cheapest at £25.

These four brands have similar ‘Delivery Pass’ promotions in order to grow their loyalty amongst customers. Therefore, they offer free delivery anytime during off-peak hours after one-off payment. Ocado’s rates for a month, 6 months and 12 months are lower as compared to Tesco but more expensive than Sainsbury’s and Asda. It is noticed that Ocado is the only brand that does not have physical stores. This is the reason why Ocado cannot offer click and collect service.

2.6 Market share

According to Mintel (2016), Tesco leads the market in online grocery, holding 38% of market share followed by its four dominant competitors. Sainsbury’s accounts for 15% although its online revenues have gradually declined. Ocado shows an outstanding performance in sales growth of 17% in 2015 and holds 14% of total market share. In the last few years, many innovations were made by Ocado in terms of launch of wearable technology in integration of grocery facilities with Apple Watch and MasterCard applications making it easier to track orders.  

3. Micro Analysis 

3.1 Company overview: History, Mission and Values

Ocado is a British-based online grocery retailer, founded in UK in 2000. In 2002, they started a partnership with Waitrose and opened their first Customer Service Center (CFC) in Hatfield. In 2008 they presented Ocado Delivery Pass and in 2009 launched the mobile application "Ocado on the Go".

Over the years, Ocado has expanded its range of brands available as Fetch, Sizzle, Ocado Everyday and Fabled and, in the meantime, they have increased deliveries up to 100,000 orders exceeding  £1bn in annual sales (OcadoGroup. com, 2017).

The company does not have any physical stores, but provides home delivery of premium food, beverages and consumer goods directly from its warehouses. Every year since 2010, Ocado has been voted as the largest online grocery retailer in the world. The corporate mission is “to revolutionise the way people shop forever; by giving them a uniquely innovative and greener alternative to traditional grocery shopping” (Ocado.com, 2016).

3.2 Lifecycle
The life cycle for Ocado is more service based rather than product based. It begins with the customers placing their orders online using Ocado’s website or mobile app through which the order reaches Ocado’s warehouse. Once the order is completed at the warehouse, Ocado sends it to the customers using Ocado logistics as per the delivery slot booked.

3.3 Ocado Marketing strategy 

Ocado differs from traditional grocery stores as they provide customers with easy, fast, convenient, accurate and fun service without having to move homes.

Since Ocado is an exclusively online platform, it does not have the ability to interface directly with its consumers. Therefore, to improve its relationship with the consumer, Ocado seeks to focus on the quality of service, the availability and freshness of  products and the competitive prices.

Ocado uses several marketing channels like digital, direct mail, especially press and door drops, except TV advertising. However the brand recently announced in March 2017 to start using TV advertising.

Ocado's marketing strategies are mainly focused on press and door drops channel as the latter delivers highly targeted material to consumers in their own homes. Overall, the main objective of its marketing strategies is to attract customers and increase brand awareness. Ocado does not make much use of the digital channel and, as a matter of fact, it has never done digital marketing campaigns.

One of the most successful Ocado marketing strategies was the launch of the Ocadolife magazine, a perfect mix of content marketing and branding as it promotes Ocado products and sponsors promotional events, which increased the brand awareness.

3.4 Financial & Marketing performance

Based on data in figure 8, Ocado sales growth is steadily rising from £598.3m in 2011 to £1,217m in 2016. The other financial key performance indicators such as EBITDA and operating profit have also improved, but the most interesting and surprising growth figures are investments, which reached £550.9m in 2016 and continue to increase in 2017. Overall, from this table you can see that Ocado represents perfectly the market trend of rising online grocery shopping in UK. 

The Figure 9 below shows the value percentage of each grocery retail channel in 2016 with projection in 2021. Through this graph, we can see that in 2016 the online grocery retail channel values 5.8% of the overall grocery market (Statista, 2016).

In 2016, the market share of Ocado accounted for 12.8% of the overall online grocery retailing, lesser than the year before (13%). This decrease is not due to its  poor performance but because of new businesses expanding their parameters in online grocery and causing market growth at a faster pace (Mintel, 2017).

Ocado’s marketing expenditure has been one of the highest in the industry  ad are known to spend the most on advertising since 2000 (Mintel, 2017). In 2015, its marketing expenses reached £10.5 million accounting for only 1% of its retail revenues. The same percentage (1%) is also valid for 2016 (Results15.ocadogroup.com, 2017). Press is the marketing channel where Ocado focuses more, spending 46.5% of its marketing expenditure, followed by door drops (40.7%), digital (9.2%) and direct mail (3.7%). 

3.5 The Marketing Mix

3.6 Ocado Brand Wheel

The Brand Wheel is a brand analysis that explains in five categories the substance of the brand. It enables us to understand the core mission of the brand (Cameron and Green, 2015).

4. Conclusion

4.1 SWOT Analysis

4.2 Implication for company

After analysing the SWOT, we concluded that that Ocado is a well performing brand but has a long way to go before it makes its mark in the market. Consumers nowadays want everything with ease and without any hassle, with services getting delivered to their doorstep. 

Ocado depends on Waitrose for some of its products. Approximately 4,300 items sold by Ocado are provided by Waitrose, Ocado needs to improve their independent image among its target market, so that their reputation is not affected by Waitrose.

Collaborating with a social media influencer who will convey a positive message of Ocado when it comes to quality and freshness will help the brand to gain awareness and build trust among its audience. The benefit of using a social media influencer will be to promote the brand to social media users and create awareness among them.

Retail market is highly competitive and there are many companies that are struggling to maintain their market position. Ocado has invested in offers and promotions to hold a high competitive position in the market, but it has affected their overall growth and profit which is why they have not been very profitable for a long period. Lowering the prices can also affect the perception of the consumers in terms of  quality of the products, which can further damages the brand image.

Finally, there is a big concern amongst consumers regarding online frauds. There are IT procedures to reduce this risk, using whatever precautions to avoid fraud. 

5. Campaign Delivery 

5.1 Campaign’s Objectives

5.2 Target Market

According to YouGov and ONS (2017), Ocado consumers are mainly young females, aged between 20 to 34, accounting to 6,001,396 in total. 27% of them fall in AB class or around 1,620,377 people which is the number of target market. This kind of customers belonging to AB social grades live in urban areas such as London. People who purchase groceries online normally have a busy and high lifestyle, having less time to shop in stores and prefer purchasing online from the website or the app. Ocado customers are techno savvy and use digital devices to make their shopping convenient. These  people generally prefer to cook at home rather than eating out. 

6. Campaign

6.1 ACQUISITION CAMPAIGN

AIM: With the acquisition campaign we aim to reach out to new customers and make them a part of our Ocado community by making it their first choice and encourage trial among them, delivering them the best quality products in the market.

Target to acquire: 162,300 females who fall in the AB social group, aged between 20-34

• Direct Marketing 

Strategy 1: Direct emails 

We will use a warm list ,with highest level, provided to us by a reputed agency, which we will then use to send emails to our target audiences with the voucher code FIRSTOFF to use with their first purchase. Using this strategy we plan to provide our customers with an offer to choose a free veggie box or a fruit box on their first purchase above £60. The cost of each box is £14.99 that the customers will be able to get for free. The veggie box will contain 8 seasonal varieties of organic vegetables and the fruit box will include 7 seasonal varieties of organic fruits.

If the first purchase is above £80 then the customers will have an option to choose a veggie box or a fruit and veggie box worth £19.99 for free. These boxes will have 11 seasonal varieties of veggies and the fruit and veggie box will have 12 seasonal varieties mixed.

Strategy 2: Cosmopolitan Magazine

For the Cosmopolitan Magazine we will be presenting the same offer to our target audience, which will be included inside the magazine as an insert. We plan to use the magazine as one of our channel because this magazine focuses on a wide percentage of females who fall in the AB social group with a readership of 1.18 million and combined circulation of 405,308.

We are focussing on this strategy because we want to build trust among our target audience giving them a chance to witness the quality of our products themselves. As stated on Mintel a large percentage of the people are reluctant to buy edibles online because they are not certain about the quality of the product they are purchasing.