Integration. Integration. Integration. It’s a maxim we’re all very familiar with, and yet there are still leading brands – brands that are the marketing pinups of their industry – not getting it right. This is not about whether ‘matching luggage’ or ‘shared attitude’ is the correct approach to multi-channel communication. Rather it’s about integrating the total business system, which is more fundamental and much harder.
This is particularly true for brands such as Waitrose that have been focussed on bricks and mortar, and are now looking to expand online. The stakes are especially high for them as customer expectations derive from excellent delivery through traditional channels, and great communications. A dramatic test of true integration is being played out in the struggle for supremacy between Ocado and Waitrose, and the urgency is heightened by the 2017 break clause in their contract.
Being long-term Waitrose customers and having signed up to Ocado in May 2004, the Pringle family have ringside seats as this drama unfolds. With four children, and both of us working full time running Blooming Marvellous and the IPA respectively, Ocado was ideal. For over a decade Ocado has had 80 per cent of our grocery spend and we’ve spent nearly £47,000 online with Ocado – an average of £90 a week – largely on Waitrose goods. The purpose of getting this number from Ocado is to make a key point about integration – it’s essential to look at lifetime customer value when forecasting the potential return on marketing investment, and then ensure the total business system is geared up for success.The Waitrose/Ocado relationship has evolved and since the exclusivity period ended, the two have entered into a phase of direct competition. Ocado now claims that 25 per cent of its sales are from products that are unavailable in Waitrose, while only 33 per cent of its turnover is from Waitrose own-label products. With the Morrisons deal Ocado is clearly changing its business model in anticipation of 2017. Meanwhile Waitrose is in a pitched battle to steal business from its largest customer, and the stakes are high. A recent Deloitte/eBay report revealed that there’s a ‘super shoppers’ segment – the 18 per cent of the population who account for 70 per cent of all UK retail spending – and these are the sort of customers Waitrose and Ocado are fighting for.
The gloves came off at the turn of the year. This is when Ocado’s annual delivery fee of £109 comes up for renewal while Waitrose.com offers free delivery for orders over £50. The brand also ran a big ad campaign offering free champagne and £70 worth of vouchers against future purchases, tempting us to give Waitrose.com a try. But we soon discovered the Waitrose.com experience wasn’t up to Ocado’s, and didn’t match up to the level of service experienced in Waitrose’s physical stores. Crucially, on Waitrose.com time slots were limited with a two-day wait while Ocado had plenty available the following day. Waitrose.com had no star ratings, the site was less visual, and many products had to be ordered in more complicated ways, such as by weight rather than by pack. When the Waitrose.com delivery arrived there were five substitutions (far more than is usual for Ocado), many of which were not of equal value to the order and a refund had to be claimed. Clearly a decade in home delivery has enabled Ocado to fine-tune its operation, and it showed.
As promised in the advertising, we duly received our free bottle of champagne and vouchers worth £70 off our next four shops. So a week later we were back online to book another Waitrose.com delivery, but none were available for three days. However Ocado had slots for the following morning. So here we had an example of a classic error in marketing. Waitrose had spent heavily on communications but not enough on the supply chain to meet the new customer demand their campaign created. Meanwhile, perhaps having spotted a missed order and non-renewal of their annual delivery fee, Ocado had made an offer of £70 for the year, which we took. So, after rebuffing a serious challenge, Ocado is back securely in the driving seat, with Waitrose.com’s persuasive multi-media campaign being let down by its online user experience and delivery problems.
At this stage Ocado should be building up its brand values as a defensive bulwark against Waitrose.com getting its act together, as it no doubt will. We’re early adopters and huge Ocado fans, but that’s based on rational and functional benefits – see how easily we were seduced by Waitrose.com’s free delivery in the context of a strong emotional attachment with its brand. Ocado hasn’t got long to create this strength of bond with its customers.
Maybe we’re a bit sad but when we see one of their vehicles we say, often in unison, “I wish that was my Ocado” and would love them to run an ad campaign to capture that powerful feeling. Ocado should also be making much more of the ethical benefits of its electronic vehicles, recycling plastic bags, responsible sourcing, and waste reduction. It could be seen as both a great and a good brand – and there’s so much it could do at every touch point to communicate it.