Next, And The Rise Of The Digital Marketing Budget
According to Marketing Week, UK retailer Next plans to cut back on its traditional advertising activities while doubling its digital advertising budget in 2019.
Next’s CEO Simon Wolfson said the move is due down to the fact that traditional forms of marketing such as direct mail and TV advertising no longer provide the level of ROI they once did.
As a result, Next will more than double its digital marketing budget next year to £28 million up from £12 million in 2018. With the majority of that directed toward the mobile advertising space.
Meanwhile, traditional ad spend will be cut by more than half, falling from £23 million in 2018 to £11 million in 2019. Investment in its catalogue business, formerly known as Next Direct, will also be reduced, falling from £103 million in 2018 to £92 million in 2019.
The scaling back of traditional advertising such as TV and direct mail is representative of the changing landscape of the retail market in the UK. Next is at the forefront of that change as it transitions from being a high-street retailer into a more online-focused business.
To highlight the change, during the first six months of 2018 Next’s online sales climbed to £892.3 million – a rise of 16.8% – While in-store sales fell to £925.1 million – a fall of 6.9%. That means close to half of Next’s revenue now comes from online sales which, if current growth rates continue, looks like eclipsing in-store sales for the first time in the company’s history at some point during the first quarter of 2019.
And Next is not the only advertiser scaling back traditional advertising budgets. Unilever, one of the world’s largest advertisers, is also shifting ad spend to digital.
Much like Next, Unilever is a company in transition, as it moves away from its traditional wholesale business model towards a direct to consumer one. This new model requires the consumer giant to refocus its adverting and build direct relationships with its customers. And what better way to do that than using social media and mobile?
The success of the model is already bearing fruit, as Unilever saw underlying sales increase by 3.1% to €53.7 billion in 2017, with pre-tax profits climbing 9.2% to €8.15 billion. This, despite what the company described as “challenging market conditions” caused by increased competition in key European markets.
What these examples prove is that smart marketers are focusing on digital to provide growth going forward, but far from using the scattergun approach that typifies most digital marketing (an approach that values ‘likes’ and retweets over real-life customer engagement). These companies are laser targeting consumers with relevant timely messages.
As consumer preference and customer channels shift, traditional advertising methods are becoming less efficient. Digital, however, is still proving to be one of the best methods brands can use to communicate effectively with their customers, no matter where they are or what device they are using.