COMMENT: How focusing on profits led Littlewoods Ireland to success

How should retailers identify the categories that drive profit, rather than chasing vanity metrics? Google UK's head of retail Martijn Bertisen looks at the success story of Littlewoods in Ireland to help explain.

Google UK head of retail Martijn Bertisen: How focusing on profits showed Littlewoods Ireland the path to success
Google UK's Martijn Bertisen explains how the right advertising and marketing prioritisation paid off for Littlewoods Ireland.

In retail, it can be tempting to think that when it comes to price, bigger means better in every respect. When a customer puts a big ticket item in their basket, it’s easy to imagine that it is the ultimate success for a retailer. But big ticket doesn’t always mean a big win.

There’s no argument that the higher the price tag, the higher the revenue. But what really matters is profit – and one doesn’t necessarily follow the other. Littlewoods Ireland recently found this to be true. Electricals was one of its highest revenue-driving categories and as a result, saw the lion’s share of marketing investment. However, while revenue growth was strong, the bottom line wasn’t growing at the same pace.

In reality, clothing and footwear – much lower-priced items on average – were responsible for the lion’s share of profit creation. That insight alone makes the case for a switch in priorities, but Littlewoods Ireland also operates as a bank, offering customers products on credit. With that in mind, it made sense to prioritise a €3000 TV over a €40 dress.

Small is beautiful

While the revenue is far lower per purchase, clothing and footwear were responsible for a whopping 70 per cent of Littlewoods Ireland’s margin. You don’t need an extensive consumer study to tell you that people buy dresses, trousers and shoes more often and in more volume than €3000 TVs.

This evidence supported moving marketing investment focus from electricals to clothing and footwear. But for Littlewoods Ireland it wasn’t a simple copy and paste job. Electricals has just a handful of brands, making creating impactful marketing messages relatively simple, whereas clothing and footwear encompasses something in the region of 200-plus brands.

Driven by meaningful numbers, the retailer decided to focus on the most profitable brand within that category, which happened to be the retailer’s own-brand line, V by Very. It generates around 65 per cent of the margin from the top five most profitable brands on the site. Increase sales here and you deliver a big boost to the bottom line overall. Now Littlewoods Ireland knew what to market – it was just a question of where and how.

Be where customers are

Being where your customers are might sound like marketing 101 but that doesn’t make it any less important. Insight from Google Analytics showed that over a third of all sales occurred after the customer visited Littlewoods Ireland’s site more than 12 times in a single journey. That’s all sorts of different forms of awareness, interest, intent and action at different points in the funnel. So it is crucial for retailers to see these signals and be ready.

“There’s no argument that the higher the price tag, the higher the revenue. But what really matters is profit”

Primed and ready

Recent innovation across YouTube has allowed Littlewoods Ireland to warm customers to the brand long before they get to that vital last click, increasing propensity to buy and ultimately driving margin in clothing and footwear up by 12 per cent – well beyond the initial target of nine per cent.

Littlewoods developed two key audience categories: custom intent audiences to cover generic search terms from the most relevant users, and custom affinity audiences to target users who had shown interest in competitors’ apps. The brand targeted these segments with YouTube campaigns that drove awareness of V for Very and the Littlewoods Ireland brand at large.

Standard TrueView campaigns developed customers’ interest, showing them the benefits of creating an account or highlighting free delivery and other benefits to existing account holders. TrueView for shopping and TrueView for action helped guide customers who had clicked on an ad further down the funnel with intelligent audience targeting. Every tool, from early call to action to machine learning-based remarketing moved customers closer to the end goal – a sale.

A total of 5.75 million views on YouTube was awesome, but what really made the campaign a success was that the cost per view was less than a cent – 75 per cent cheaper than the previous campaign. The campaign produced real results – with 8035 conversions, Littlewoods saw an ROI of €16 and €15 for every euro spent on YouTube or search respectively.

Bigger isn’t always better in retail, and Littlewoods Ireland showed how impactful marketing can be for a business when you start at the bottom line and work up. Amazing results can occur when advertising and marketing prioritisation is based on real, sustainable metrics and KPIs.

Martijn Bertisen is the Director of Retail at Google UK

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