Marketing as an investment, not a cost: The secret to one brand’s digital marketing transformation

Hugo Galvenius, Emmy Gustavson Adebola / March 2020

You may think it would be difficult to pinpoint the average customer of a retail company whose products range from fashion and beauty to home décor across more than 700 brands. But Mathias Ekström, chief marketing officer for the Ellos Group in Sweden, knows exactly who their average customer is.

“She is a Nordic woman probably 42 years old,” he says. “She wants to be served something that is on trend right now, and offered what she sees as value for money.”

Reaching the same audience in new ways

Ekström takes great pride in the fact that their average customer is exactly the same now, even after the business underwent a radical digital overhaul, as she was five years ago when the Ellos brand was best known as a mail order catalogue company.

“That’s something we cherish and take great pride in, and it’s what we set out to do when we started our digital marketing transformation,” says Ekström.

“We were extremely happy with our customer base and our target audience, and we’ve always catered for her with our legacy model. So, even though we were dedicated to transforming our business model, we were determined to remain as important to her in the new media landscape as we were in the old.”

Becoming fully digital: an opportunity for more relevant, dynamic content

Perhaps the biggest driver behind their digital marketing transformation was that Ellos faced the challenge of producing a catalogue, as well as the time and cost involved in that production. And Ekström admits this approach didn’t always provide their customers with the best experience.

“Naturally, our legacy model meant being tied to specific media and the costs associated with that. Printing a catalogue of several hundred pages is not cheap and has a very long lead time.”

“That is why we decided we needed to change, to remove the catalogues altogether, and transform our marketing mix to be fully digital instead. This allows us to offer more relevant collections and instead of creating marketing content for a catalogue that just sits there for several months, we can now create dynamic marketing content that changes sometimes on a weekly basis,” Ekström adds.

Rethinking marketing cost as an investment

By taking away the catalogue investment, Ellos found it had a substantial amount of marketing budget that it could invest in more efficient ways. The first step was to move away from a fixed budget, determined at the start of each year, to a flexible budget determined by customer demand and profitability constraints.

“At the very beginning, I think that we tried a lot of different digital media solutions, just trying to get a feel for the media landscape and to understand what would work best for us given our unique challenges,” Ekström says.

“We spent a lot of time and investment in performance marketing, specifically on Search, which gave us a very good ROI immediately, and we grew that over the years. There were also various digital media approaches we tried out that didn't have as big an effect but did teach us a lot about the new ways we needed to communicate.”

How Ellos’ legacy business model helped their digital transformation

As part of their desire to streamline their marketing efforts, Ellos moved from the manual optimisation of some parts of their campaign towards a more technological approach, including automated bidding and examining audiences. And it was here that a part of their business model that dated back over 50 years became very useful.

“I wouldn’t say any part of digital transformation is easy,” laughs Ekström, “but one thing we had in place from our mail order business was the fantastic structure of our company database and the quality of that data.”

“It meant we could leverage several sources of data — applying machine learning to work with predictive modelling and automation — to determine what sort of content to serve to various types of customers, and when. This gave us a head start on most companies.”

Digital transformation has a massive impact across all aspects of the business

Digital transformation helped Ellos lower their marketing cost of sale (total marketing costs divided by revenue) by 33%. And as well as driving marketing efficiency, it has also sparked growth, with the retail group now recruiting half a million new customers per year.

But Ekström says the results are not just felt within Ellos’ marketing department. “In terms of changing the business model, there has also been a substantial change in how we run the business and our organisational structures. But the biggest change is that we now realise as a group that you always need to ensure you have a strategy that aligns with that vision.”

“A digital transformation is as much about attention to the nitty gritty of minor details as it is about a big vision. And you need a team who are all on the same playing field to support that.”

Key takeaways:

  • Ensure that your marketing strategy aligns with the vision of the business
  • Listen to different perspectives (even competitors) about what you need to change
  • Establish key performance indicators to keep you on the right track
  • Don’t focus on budget, instead invest in your marketing mix where demand is highest
Digital marketing transformation: A 3-step organisational action plan