Answered: 1. Target is a customer centric retail…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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1. Target is a customer centric retail store .. in what way Target follows marketing orientation to ensure
customer experience?
2. Identify Target competitive edge and market offering in the tough competition with Walmart clarifying its
competitive strategy?
3. Target is about “Customer delight” identify Target market mix integration to achieve this objective
4. In what way does Target handle its communication strategy?
5. What is target pricing strategy?

Transcribed Image Text:COMPANY Case Target: From "Expect More" to "Pay Less" slowdown, posting quarterly increases in same-store sales of dose to 5 percent along with substantial jumps in profits. When you hear the term discount retail, two names that usually come to mind: Walmart and Target. The two have been compared so much that the press rarely covers one without at least mention- ing the other. The reasons for the comparison are fairly obvious. These corporations are two of the largest discount retailers in the United States. Category for category, they offer very similar mer- chandise. They tend to build their stores in dose proximity to one another, even facing each other across major boulevards. But even with such strong similarities, ask consumers if there's a difference between the two, and they won't even hesitate. Walmart is all about low prices; Target is about style and fashion. The "cheap chic" label applied by consumers and the media over the years per- fectly captures the long-standing company positioning: "Expect More. Pay Less." With its numerous designer product lines, Target has been so successful with its brand positioning that for a number of years it has slowly chipped away at Walmart's massive market share. Granted, the difference in the scale for the two companies has always been huge. Walmart's most recent annual revenues of $408 billion are more than six times those of Target. But for many years, Target's business grew at a much faster pace than Walmart's. In fact, as Walmart's same-store sales began to lag in the mid- 2000s, the world's largest retailer unabashedly attempted to become more like Target. It spruced up its store environment, added more fashionable clothing and housewares, and stocked organic and gour- met products in its grocery aisles. Walmart even experimented with luxury brands. After 19 years of promoting the slogan, "Always Low Prices. Always." Walmart replaced it with the very Target-esque tagline, "Save Money. Live Better." None of those efforts seemed to speed up Walmart's revenue growth or slow down Target's. But oh what a difference a year or two can make. As the global recession began to tighten its grip on the world's retailers in 2008, the dynamics between the two retail giants reversed almost overnight. As unemployment rose and consumers began pinching their pennies, Walmart's familiar price "rollbacks" resonated with consumers, while Target's image of slightly better stuff for slightly higher prices did not. Target's well-cultivated "upscale discount" image was turning away customers who believed that its fashionable products and trendy ad- vertising meant steeper prices. By mid-2008, Target had experienced three straight quarters of flat same-store sales growth and a slight dip in store traffic. At the same time, Walmart was defying the economic SAME SLOGAN, DIFFERENT EMPHASIS In fall 2008, Target acknowledged the slide and announced its in- tentions to do something about it. Target CEO Gregg Steinhafel succinctly summarized the company's new strategy: "The cus- tomer is very cash strapped right now. And in some ways, our greatest strength has become somewhat of a challenge. So, we're still trying to define and find the right balance between "Expect More. Pay Less.' The current environment means that the focus is squarely on the 'Pay Less' side of it." In outlining Target's new strategy, company executives made it clear that Walmart was the new focus. Target would make certain that its prices were in line with Walmart's. Future promotions would communicate the "pay less" message to consumers, while also highlighting the fact that Target is every bit the convenient one-stop shopping destination as its larger rival. The new communications program included massive changes to in-store signage. Instead of in-store images and messages high- lighting trendy fashion, store visitors were greeted with large signs boasting price points and value messages. Similarly, weekly news- paper circulars featured strong value headlines, fewer products, and clearly labeled price points. In fact, Target's ads began looking very much like those of Walmart or even Kmart. Further recogniz- ing the consumer trend toward thriftiness, Target increased the emphasis on its own store brands of food and home goods. While making the shift toward "Pay Less," Target was careful to reassure customers that it would not compromise the "Expect More" part of its brand. Target has always been known for having more designer partnerships than any other retailer. From the Michael Graves line of housewares to Isaac Mizrahi's clothing line, Target boasts more than a dozen product lines created exclusively for Target by famous designers. Kathryn Tesija, Target's executive vice president of merchandising, assured customers that not only would Target continue those relationships but also add several new designer partnerships in the apparel and beauty categories. MOUNTING PRESSURE Although Steinhafel's "Pay Less" strategy was aggressive, Target's financials were slow to respond. In fact, things initially got worse with sales at one point dropping by 10 percent from the previous year. Target's profits suffered even more. It didn't help matters that Walmart bucked the recessionary retail trend by posting revenue increases. When confronted with this fact, Steinhafel responded

Transcribed Image Text:that consumers held perceptions that Target's value proposition was not as strong as that of its biggest rival. He urged investors to be patient, that its value message would take time to resonate with consumers. Given that Walmart had a decades-long lead in building its cost structure as a formative competitive advantage, Steinhafel couldn't stress that point enough. While Target continued to struggle with this turn-around chal- lenge, it received a new threat in the form of one of its largest in- vestors. Activist shareholder William Ackman, whose company had invested $2 billion in Target only to lose 85 percent of it, was holding the retailer's feet to the fire. Ackman openly chided Target for failing to deal effectively with the economic downturn. He charged that Target's board of directors lacked needed experience and sought to take control of five of the board's seats. "Target is not Gucci," he said in a letter to investors. "It should be a business that does well, even in tough economic times." Making the changes that Ackman and others were calling for was exactly what Steinhafel was trying to do. Steinhafel refused to give up on his strategy. Instead, he intensified Target's "Pay Less" emphasis. In addition to aggressive newspaper advertising, Target unveiled a new set of television spots. Each ad played to a catchy tune with a re- assuring voice singing, "This is a brand new day. And it's getting bet- ter every single day." Ads showed ordinary people consuming commonly purchased retail products but with a unique twist. In one ad, a couple was shown drinking coffee in what appeared to be a fancy coffee house with the caption, "The new coffee spot. But the camera pulled back to reveal that the couple was sitting in their own kitchen, with a coffee pot on the stove. The caption con- firmed: "Espresso maker, $24.99." In another segment of the ad headlined "The new salon trip," a glamorous woman with flowing red hair appeared to be in an upscale salon. The camera angle then shifted to show her in her own modest bathroom, revealing a small bottle sitting on the sink with the caption, "Hair color, $8.49." Every ad repeated this same theme multiple times, with takes such as "The new car wash," "The new movie night," and "The new gym. addition to the new promotional efforts, Target made two significant operational changes. First, it began converting a corner of its department stores into mini-grocery stores carrying a narrow selection of 90 percent of the food categories found in full-size grocery stores, including fresh produce. One shopper's reaction was just what Target was hoping for. A Wisconsin housewife and mother of two stopped by her local Target to buy deodorant and laundry detergent before heading to the local grocery store. But as she worked her way through the fresh-food aisles, she found everything on her list. "I'm done," she said, as she grabbed a 99-cent green pepper. "I just saved myself a trip." While the mini-grocery test stores showed promising results, groceries also represented a low-margin expansion. Walmart was seeing most of its gains in higher margin discretionary goods like bedding, traditionally Target's stronghold. But in a second opera- tional change, Target surprised many analysts by unveiling a new package for its main store brand...one without the familiar Tar- get bulls-eye! That is, the packages discard the bull's-eye, replacing it with big, colorful, upward-pointing arrows on a white back- ground, with the new brand name, "up & up." Continuing to address the trend of higher store brand sales, Tesija stated, "We believe that it will stand out on the shelf, and it is so distinctive that we'll get new guests that will want to try it that maybe didn't even notice the Target brand before." Up & up prod- ucts are priced about 30 percent lower than comparable name brand products. Target began promoting the store brand in its cir- culars and planned to expand the total number of products under the label from 730 to 800. While initial results showed an increase in store brand sales for products with the new design, it is unclear just how many of those sales came at the expense of name brand products. SIGNS OF LIFE Target's journey over the past few years demonstrates that chang- ing the direction of a large corporation is like trying to reverse a mov- ing freight train. Things have to slow down before they can go the other way. But after 18 months of aggressive change, it appears that consumers may have finally gotten the message. During the first half of 2010, sales rose by as much as 5 percent with profits up a whopping 54 percent. Both spending per visit and the number of store visits increased. All this could be attributed to the fact that the effects of the recession were starting to loosen up and consumer confidence was stabilizing. But in a sign that Target's efforts were truly paying off, Walmart's sales growth was slowing during this same period and even showing signs of decline. Customer percep- tions of Target's value were indeed on the rise. Steinhafel made it very clear that the new signs of life at Target were being met with cautious optimism. "Clearly the economy and consumer sentiment have improved since their weakest point in 2009," said the Target CEO. "But we believe that both are still somewhat unstable and fragile and will likely continue to experience occasional setbacks as the year progresses." Steinhafel's comments reflected an understanding that even as the economy showed signs of recovery, research indicated that consumers everywhere were adopting a newfound sense of frugality and monetary responsibility. Target's "Pay Less" strategy has continued forward without wavering. Pricing seems to have found the sweet spot as Stein- hafel announced that few adjustments are needed. Ads continue to emphasize low prices on everyday items. And the expansion of groceries and store brands has continued. In fact, for 2010, Target planned just 10 store openings, the lowest in its history. "It will be a long time before we approach the development pace of several years ago," said Doug Scovanner, Target's chief financial officer. Instead, Target is putting its money into remodeling existing stores to better accommodate the shifts in inventory. Some Wall Street analysts have expressed concern that Target's recent value strategy may weaken the brand as customers lose sight of the distinctive features that set it apart from Walmart. But the words of one shopper are a good indication that Target may still be retaining the "Expect More" part of its image, despite hav- ing emphasized "Pay Less." "Target is a nice place to go. Walmart may have good prices, but I would rather tell my friends that I came back from shopping at Target." In FINAL Exam of Marketing management: Group basis. On word file Delivery date: Saturday Sep. 25nd, 2021 Emails: drnermintakla@gmail.com Sources: Karen Talley, "Target Profit Rises on Strong Sales, Improved Credit- Card Operations," Wall Street Journal, May 20, 2010, accessed at http// online wsj.com; John Kell and Karen Talley, "Target's Profit Rises 54% on Higher Sales, Improved Margins," Wall Street Journal, February 24, 2010, accessed at http://online.wsj.com; Natalie Zmuda, "Target to Put More Fo- cus on Value, Advertising Age, August 19, 2008, accessed at http://adage .com, Ann Zimmerman, "Target Believes a Rebound Recipe is in Grocery Aisle," Wall Street Journal, May 12, 2009, p. B1; Nicole Maestri, "Target Revamps Its Target Brand as "Up & Up." Reuters, May 19, 2009, accessed at www.reuters.com; Nicole Maestri, "Target, BJ's Wholesale Results Beat the Street," Reuters, May 20, 2009, accessed at www.reuters.com.

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