Purplebricks CEO blames ‘poor’ marketing effectiveness for £42m loss
Along with operational challenges and a tough housing market, new Purplebricks CEO Helena Marston blames the online estate agency’s dismal financial results over the past year on ‘wrongs’ in its strategy marketing.
Marston, who took over as CEO in April from his previous role as chief operating officer, says marketing and advertising have “largely” contributed to the “power” of the Purplebricks brand over the years. However, while the marketing budget has increased considerably over the year to April 30, “its effectiveness has been mediocre”.
In particular, she took aim at the brand’s national advertising campaign ‘Let’s get you sold’, which saw Purplebricks move away from an emphasis on its low fixed costs.
“We missed the opportunity to communicate our key differentiator in a market that was experiencing significant house price increases and where our model could have saved consumers thousands in commissions,” she says.
The campaign launched in September as the online estate agency’s biggest offline marketing spend in five years, led by a TV ad featured by broadcaster and comedian Mo Gilligan.
According to Purplebricks’ annual results, marketing costs increased by 33% over the year, from £18.9m in 2021 to £25.2m. Marketing spend in 2021 was partly lower due to lower real estate activity during the pandemic.
With such a formidable proposition, it has been incredibly frustrating to retrace a series of missteps that have meant that we have so far failed to leverage the strength of this platform.
Helena Marston, Purplebricks
However, during the year the group’s revenue fell 23% to £70m and the company fell to an adjusted EBITDA loss of £8.8m from a profit of £12m. million pounds in 2021.
Gross profit margin fell 340 basis points to 60.1%, while the company recorded an overall operating loss of £42m, after posting a profit of £6.8m l ‘last year. The company has warned that it is unlikely to break even before 2024.
The marketing cost per statement (a property the agency was tasked with selling or letting) was £629, up “significantly” from £326 in 2021. Marketing costs as a percentage of revenue rose from 21% to 36%.
“With such a formidable proposition, it has been incredibly frustrating to walk back a series of missteps that have meant that we have so far failed to leverage the strength of this platform,” says Marston.
“Our marketing campaigns for the year did not capture the benefits of our offer. It is an important goal for me to ensure that we help customers fully understand all the benefits of our proposition, something that we are urgently addressing during this exercise.”
Purplebricks has taken “decisive steps” to reverse its fortunes this year and next, adds Marston, including adopting a “radically different” and “more focused” sales and marketing plan that will focus more on price.
“Our approach to marketing will be radically different this year, a change designed to drive better results. We need to make our marketing investments work harder than ever to reposition ourselves as the preferred choice for our customers,” she explains.
“We will go back to shouting about what makes us great and reminding customers that there is a better, more profitable way to sell their home. We will remind them that “discounted price” does not mean sub-optimal service, but rather the opposite. We will set clear expectations for what it looks like and feels like as a Purplebricks customer, whether online, offline or on the app, and create a cohesive experience that customers want to shout about. .
Former CMO Ed Hughes has been brought back into the business to once again take over the marketing reins, replacing Ian Cafferky who joined the company in February. On LinkedIn, Hughes said he was “back to make Purplebricks different again”.
Our approach to marketing will be radically different this year, a change designed to drive better results. We need to make our marketing investments work harder than ever.
Helena Marston, Purplebricks
Overall, Purplebricks is embarking on a cost reduction program which aims to deliver £13m in savings over the next year, which equates to a 16% reduction in the cost base of the company. exploitation.
Under the program, Marston says the company’s marketing investments will be “smarter” and “more targeted”, using “a range of channels throughout the year”.
Focus on prices
Purplebricks is also making changes to its pricing strategy, including price increases across the board.
After conducting “meaningful” trials last year, the company has introduced two new customer propositions, including its Classic and Pro plans, as well as a money-back guarantee.
Both the Classic and Pro packages have been “well received” by customers, Marston said, with the two-tiered proposition helping customers feel more in control and enabling the company to provide a more cost-effective way to sell their home. Adoption of the Pro package has been “particularly encouraging”.
However, the impact of the money-back guarantee was “well below” the levels indicated by the trials. It did not result in the expected increase in instruction volumes and was phased out in July. ‘Time to shout about the brand’: How Purplebricks plan to win over doubters
Going forward, the company is exploring new revenue opportunities to “capitalize” on its brand, with plans to launch a mortgage offering by the end of next fiscal year.
According to Marston, the firm expects supply dynamics in the housing market to remain “challenging,” especially with the current macroeconomic environment. Nonetheless, she is ‘confident’ that the steps taken by the company, alongside its marketing plans, will generate revenues of between £67.5m and £72.5m next year.
“I am convinced that the potential of Purplebricks is enormous. We have a more relevant and valuable proposition for our customers, as well as the best known brand in the industry. I am confident that the actions we are taking this year will put us clearly on the path to a return to sustainable and profitable growth,” she said.
Speaking to Marketing Week as he launched the Let’s get you sold campaign in September last year, Ben Carter, then chief marketing officer, acknowledged the challenge Purplebricks face in disrupting the traditional estate agency model .
Having previously worked for disruptive brands such as Just Eat and Notonthehighstreet, he said Purplebricks was “definitely up there in terms of the toughest”, in part due to the impact of Covid-19 on the housing market.
The other difficulty is consumer “apathy” towards the online real estate agency model, which Carter says is driven by a “misconception” that local high street agents are more responsible because they have a physical store and they have a more extensive property black book.
Let’s get you sold was launched with the aim of changing perceptions of Purplebricks, highlighting its proven success as an agent and promising clients that it will sell their property.
“[Perception] has been our problem for about two years,” Carter said. “We are very well known, we have a very high reputation, but people don’t understand our model.”
“The way to approach that is to go out there with a very confident platform – a very attitude-driven platform – that is engaging and will also allow us to be part of the larger conversation.”