Life on the Rocket Ship

In my previous two articles I have explored two different scenarios for an imaginary start up facing a decision on whether - and how - to embark on Brand Marketing to fuel their next stage of growth.

In the first , I explored what might happen if this business decided to stick with a focus on Performance Marketing activity as they hit a ‘Performance Plateau’ and struggled to grow further.

In the second article , I did a ‘pre-mortem’ to explore the many ways a business could screw up an attempt at Brand Marketing for the first time.

For my third article, I want to explore what happens when a business embarks on an investment in Brand Marketing successfully. Luckily for me, I can do this without an imaginary start-up or a thought experiment because I have a fantastic real example to share with you.

Cazoo is an online used car retailer that was founded in early 2019 and launched in the UK in early 2020. It was the fastest UK start-up to get to unicorn status and the fastest to get to ￡1bn of annual revenues (in under 3 years) It was also the fastest to exit a new market after launch, so not all plain sailing! Investing in both Brand and Performance Marketing from the outset was a key part of this success. (As was hiring a top class Brand Marketing Director by the name of Lucas Bergmans )

I spoke to Darren Bentley, Chief Customer Officer at Cazoo on his experience of leading a true Rocket Ship from its inception through this period of breakneck growth and what his top tips are for other scale ups looking to do the same.

Me: Hi, Darren and welcome to ‘Notes from the Rocket Ship’. Can you tell us about yourself and give us some highlights from your career so far?

Darren: So, I’m Chief Customer Officer at Cazoo where I’ve been for just over four years. Prior to that I spent seven years at MoneySuperMarket. I've spent my career primarily in digital growth environments where Marketing, Customer Experience, Data and Product Engineering all come together to build an amazing business and to disrupt a key sector. For the last four years at Cazoo I’ve led Marketing, Customer Experience, Customer Insight and Customer Support and I’ve been part of the Exec team driving growth for the business.

You were one of the first people hired to set up Cazoo back in early 2019 and you've been through an incredible journey in that time. Can you give us a bit more of a feel for what that’s been like? What have been the big challenges and what's been good and bad about it?

I got introduced to Alex (Chesterman, Founder & CEO of Cazoo) in late 2018 and joined the following summer but it’s a start-up so you’re getting involved before that stage. The first year was all about getting ready for launch – getting the proposition up and running, developing the digital platforms, designing and building the customer experience and getting ready for launch. The second year was really about proving that customers want to buy cars online. That’s something we take for granted now because there are now all kinds of ways you can buy or sell a car entirely online, including your financing. Cazoo was the first to do that in the UK. When we launched in December 2019, we were the only place you could finance and buy a car entirely online without sitting down with a dealer signing pieces of paper and waiting around for hours.

Then towards the end of the end of the first full year of trading, we started our first round of M&A, bought Imperial Cars, and opened up our first retail sites - our Cazoo Customer Centres. Shortly after that, we offered customers the ability to sell their cars to us. Cazoo floated in New York in the summer of 2021, and we rolled out internationally later that year, starting with France and Germany, and then later Spain and Italy. And then in the last 12 months – as anyone paying attention to Cazoo in the press will know – we’ve moved back to being a UK focussed business and speeding up our path to profitability.

One of the key highlights of my experience of Cazoo is that customers love the proposition. When it goes well - which is most of the time - the feedback we get is incredible. Customers say that it’s the best car-buying experience they’ve ever had and they’re never going back to doing it in the old way again. They say they’ll buy from Cazoo next time and tell all their friends and family to do the same.

Another is the speed of growth we have achieved. Within three years we’ve got to the point where we are in the top 10 of UK used cars dealers in terms of market share and we’ve sold over 100,000 cars. We’re competing shoulder-to-shoulder with businesses that have been around for over 50 years, and we’ve built an incredible brand with over 80% awareness and over ￡1bn in annual revenue. We’re a household brand in the UK and everybody knows who Cazoo is and what we do.

The other highlight for me has been the quality of the team. As we had a high level of funding at the seed stage, we could afford to hire an amazing team from the start. The strength of the Exec team and the senior leadership team at Director level has been amazing. I’ve worked with some of the best people I’ve had the opportunity to work with for my whole career.

Some of the biggest challenges have been around getting the balance right between speed of growth and profitability, especially when the external environment is changing quickly. There’s a need to understand the customer experience and where you invest to genuinely add value and how you balance that with the need of a business to be profitable. This includes having the right size and quality of inventory, the right pricing, the ease of the transaction digitally and then how we follow that up with amazing customer support and a market-leading handover experience. What are the parts of the experience that customers really value? How do we evolve and refine the proposition over time so that we can become profitable and still invest in driving distinction and differentiation in our customer proposition?

What would your top three tips be for new businesses that are looking to scale up?

1.????Start brand building as early as possible.

In the last 12 months we’ve dialled down our investment in offline advertising and marketing investment overall while we optimise the business model. Despite reducing brand investment (short term) recently we still consistently have well over half of our customers come through direct and brand driven channels. This shows the benefit of early investment in Brand Building in the previous 2 or 3 years and proves out the data and modelling that you see in studies like ‘The Long & The Short of It’.

By doing this, you create a solid platform for your business to grow from and you don’t suffer that shrink back in sales volumes as soon as you start adjusting marketing budgets down.

At Cazoo, we started investing in the brand very quickly at launch. Getting our marketing mix balanced between both long-term brand building and short-term performance marketing has enabled us to not only meet our growth ambitions, but also improve spend efficiency over time. An effective marketing mix that drives growth at the required ROI is essentially what every business is after. We’ve reduced our customer acquisition cost by over 80% since launch, and we invested in building the brand from day 1.?

2. Get econometric modelling in place as soon as you can.

In our case we could only really do it when we had a good two and a half years of trading data, so it’s only now coming into its own and driving real value. But the work we have done on econometric modelling has enabled us to get more refined. When we started out, we had none of our own data to base our decisions on in terms of Marketing mix. We just went with a 60:40 split between Brand and Performance. Then at the point at which we had enough data to start doing full econometric modelling you can start to refine it from there and optimise. You can understand how pricing and marketing investment come into play, understand the role of inventory and range and make your whole business more efficient.

And the other thing I would say is to do that independently of your teams. Don’t have your team generate your econometric model and don’t have the media agency do it. If you’re trying to keep the CFO and CEO onside with how much you’re spending on Marketing and how it drives business performance and growth, having independent counsel and guidance definitely helps.

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3. Invest in top talent ahead of where you are today.

My third top tip is to invest in top talent and developing your team. Both in terms of your in-house team and your agency partners. I think one of the things that we benefitted from the most at Cazoo is that we invested ahead of where we were, for example you, Lucas , on Brand, Ercan Kamil on Digital Marketing and Katherine Hurst on Customer Experience. For the early stage of business that we were at, these were big hires. But then when you’re three years in and delivering over ￡1 billion in revenue they are the right hires. So, invest ahead of where you are and where you’re trying to get to, not for where you are today.

And what mistakes would you suggest scale-ups try and avoid?

I would recommend to try and pace your growth carefully. This is tough, because you have to balance high ambition and taking market share quickly without over-extending yourself, your team, your funding, your infrastructure or the capacity that your business has to perform. At Cazoo, we launched into our first European market when we had been trading for less than 2 years, but we already had over 50,000 customers telling us they love the proposition in the UK. At this point, the funding was basically free and your investors are saying that they only care about top-line growth and market share gain. And then very quickly (in early 2022) we saw inflation and interest rates go up, the crisis in Ukraine and all the pressure from the pandemic starting to release itself. Almost overnight the brief shifted from growth at all costs to profitability at all costs. We’ve had to respond very, very quickly and right-size the business and it’s painful. The last three or four years have hardly been favourable conditions for starting an online car business.

So, try and balance that pace of growth and not over-extend yourself. Cazoo is the fastest ever UK business to list on the New York Stock Exchange. We're the fastest European business to a billion in revenue, the fastest ever UK business to unicorn valuation, but we're also the fastest ever UK business to open and close operations in France. So hyper growth at all costs isn’t necessarily something to celebrate. It doesn’t come without its challenges, and you’ve got to be profitable at the end of the day.

Thanks for sharing your experience and your top tips, Darren and best of luck!