‘Choice, value, service’: Ocado’s customer chief on driving growth by ‘unlocking consideration’

Having experienced a tricky few years, Ocado’s move to optimise marketing and focus more on customers as as part of its wider “back to the future” strategy is showing positive signs. The online grocer has been the fastest growing supermarket for the past three months in a row, and posted a new record share of the market at the beginning of the month.

Driving that effort is chief customer officer Dan Elton, who joined from Asos in June, drawn to an organisation that he describes as “hungry” and “ambitious”, and “wants to keep doing new things”.

Since then he has been busy developing the Ocado’s customer strategy, which is focused on “unlocking consideration” and then “profitable customer growth”, all the while building a world-class experience.

He says customer acquisition is the “major driver” of Ocado’s growth, as 75% of its growth last year came from newly acquired customers, which he feels is harder to achieve for the retailer than its high-street competitors.

Elton says the brand’s partnership with Marks & Spencer is a key priority in this. He calls it “the number one reason new shoppers choose to shop at Ocado”.

Yet he says there are “still too few customers who are aware that Ocado is the exclusive home of M&S food online”, calling it a “brand inertia” that needs to be overcome. One way Ocado is looking resolve this – although he can’t share many details yet – is by through “closer cooperation” with the M&S Sparks loyalty programme.

“That will be a great way for us to grow the value of our existing shoppers,” he says, adding that Ocado’s SmartPass subscription service also supports customers to “get over the barrier of the cost of online”.

“We really see frequency grow when customers sign up for that. So, we want to make that more rewarding, more exciting, and keep adding benefits in,” he says.

[There are] still too few customers who are aware that Ocado is the exclusive home of M&S food online.

Dan Elton, Ocado

Elton calls Ocado a “personalisation OG” and “pioneer” in the space, yet admits he is “cynical” of the term personalisation, calling it a “slightly amorphous subject that marketers really struggle to pin down”.

Where he feels Ocado has succeeded in this area is its search algorithm prioritising customers’ favourites which they’ve shopped before – as the “majority of cash” that is added to a basket at Ocado is done through search.

“Having a high-quality search algorithm that is tailored to the individual is a much more important part of our customer experience than doing personalised CRM, for example,” he says. “That isn’t to say that personalised emails aren’t important, but they’re a much smaller driver of revenue. And they’re a much less frequent part of the customer experience.”

Elton says Ocado will “continue to prioritise” the personalisation space, but this will be focused on content onsite, such as recipes aimed at what consumers are buying to “inspire” them.

He also plans to focus on “serving more immediate shopping needs” for customers, echoing what he sees as a wider shift towards customers booking food deliveries 24 hours out, which is why the company is in the process of rolling out the ability to do same-day deliveries.

“That opens up the ability for customers not just to do their main shop with Ocado, but to do more frequent missions like top-ups or shopping for tonight,” he says, adding that the shortest lead time from checkout to delivery at the moment is two hours and 15 minutes.

Navigating optimised spend

As part of the customer focus, Elton also plans to build on Ocado’s ‘Life Delivered’ brand platform, which was launched shortly before he joined. Its next iteration is set to launch in January through an upcoming ‘Save and Splurge’ push, suggesting that if customers can save on certain products, they can splurge on others with the retailer.

Ocado has reined in its marketing spend in recent years, with former CEO Tim Steiner, saying it was taking its marketing strategy “back to basics” and slashing marketing spend by nearly a third in the first half of 2023, after revealing a loss of £289.5m for the period.

“Optimising” its marketing spend has been key in recent quarters, as part of its “back to the future” approach to prices, marketing and budgets.

In its half year results published in July, the company credited its customer growth to “improvements in marketing, driven by channel efficiency”, despite marketing spend as a percentage of revenue decreasing to 1.4% compared to 1.6% a year prior.

When it comes to the marketing mix, Elton says the key is “staying absolutely at the cutting edge while not throwing away things that are working for you”, which means some of the team talking about how to use AI, while others focus on more traditional techniques like advertising its acquisition offers on vans.

In order to optimise marketing, Elton says the brand is moving away from operating on a cost per acquisition basis, and towards a value-based marketing approach, saying that “the pure volume of customers is less important than the value they bring”.

This involves having a “more flexible budget” to “constantly find new tactics”, and make sure there isn’t growth left “on the table”. Right now, he says the most effective tactics include Google Shopping, Meta and direct mail or door drop.

Budget is split into three categories – proven channels with no set budget, emerging channels with a fixed budget, and a truly experimental category, which gets 5-10% of the total spend.

Transferable skills

Prior to joining Asos, Elton held senior marketing roles at Made.com, Google, Sainsbury’s and Tesco, with his tech and retail experience a big pull for Ocado.

He says going back into grocery was a no-brainer for him as, despite falling into it “accidentally” in 2010, he “quickly fell in love with it”.

“What I love about grocery is the scale. We operate at such a scale and we’re able to influence a customer proposition that affects millions of customers,” he says, adding that the sector’s “pace” and “agility” also enticed him.

“We pull a lever in the morning, and we see the change by the afternoon, or before the afternoon. And there’s not a lot of businesses that can say that,” he adds.

We think about Ocado being all about choice, value, and service. That is our value proposition.

Dan Elton, Ocado

Having worked in a variety of sectors, he says the most “transferable” skills he has are the ones that affect his overall approach to leadership. “The importance of clarity and over communication” is included in this, as well as the ethos that “you can’t fix a problem in an ivory tower”, as everyone in the organisation works closely together.

He claims “there is no objective truth when it comes to marketing effectiveness”, and his team’s job is to “take lots of different answers” and “apply a bit of common sense to it, de-risk it, and triangulate a lot of data sources” to “open up opportunities”, rather than obsessively focus on performance marketing. Instead, he notes the importance of brand building.

“The learning I’ve taken from previous roles is this flawed mental model that a lot of marketers have, which is this idea that what I’m seeing in my attribution models, what I’m reading from econometrics, that’s the objective truth. And I don’t believe that to be the case,” says Elton.

Going forward, the marketer says there is “enormous headroom” for Ocado to grow, given that it is “14% of the online grocery market and 2% of the total grocery market”. This is illustrated by the fact Ocado has been the fastest growing grocer for the past three months, according to figures from Worldpanel by Numerator. It increased sales by 15.9% in the 12 weeks to 2 November, helping it achieve a new record share of 2.1%.

Elton credits its value proposition for its success.

“We think about Ocado being all about choice, value, and service. That is our value proposition. The best choice of independent brands, M&S, and the bigger brands, as well as Ocado-owned brands,” says Elton, adding that its service is “unrivalled” and the Ocado price promise and Tesco price match also offers good value.

He says there is “a bit of a job to do” to continue to take the value proposition to market, yet notes that its appeal geographically is “really spreading” across the country, with the brand growing faster in the North of England, North Midlands, West Midlands and Wales than it is in any other regions.

“In terms of how we’re going take it to market, we think about Ocado as being a brand with food at heart and life in mind,” he says.