Target Marketing & Merchandising Case Competion

TARGETCASE COMPETITIONTeam #8

Table of Contents

Company Background

Key Issue

Proposed Solutions

Future Outcomes

3-7

8-11

12-20

21-28

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The Company

The Philosophy• “We are committed to providing guests with

great design through innovative products, in-store experiences and community partnerships.”1

• “We will offer high-quality merchandise at low margins, because we are cutting expenses. We would much rather do this than trumpet dramatic price cuts on cheap merchandise.”2

Mission | Financial Comparison | Marketing HistoryCompany Background | Key Issue | Proposed Strategy | Future Outcomes

4

Competitive Profitability

• Target has an exclusively high operating margin in this industry, while maintaining reasonable revenue growth

• Good capitalization of underserved markets such as urban areas, while pricing to cover additional expenses

Mission | Financial Comparison | Marketing HistoryCompany Background | Key Issue | Proposed Strategy | Future Outcomes

5

Operating Margin3 7.52% 2.63% 6.08%

Revenue Growth3 3.10% 12.5% 2.8%

The Challenge

• Drive profitable market share growth

• Achieve and maintain guest loyalty

Purpose | Objectives | Current AnalysisCompany Background | Key Issue | Proposed Strategy | Future Outcomes

9

During the Back to College* (BTC) Season...

* “Back to College Case Study”

Goals for BTC*• “Attract the guest as s/he takes a mental trip

to the future”

• Create a “sense of urgency”

• Leverage “non-traditional marketing channels” to convey “a message that is meaningful and credible

• “Connect with parents of BTC guests”

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* “Back to College Case Study”

Current SWOTStrengths

– Store Layout

– Brand Recognition

– Brand Loyalty

– Socially Acceptable

– High Quality

Weaknesses– “Jack of all trades, Master of

none”

– Disorientation/Lack of Vision

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Opportunities

– Bad Economy

– Perception of Value

– Positioning of “Value” Items

– Capturing Younger Customers

Threats– “Soccer Mom” Perception

– Lower cost alternatives

– Low Disposable Income

The Strategy

Expect More. Pay Less.®

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Merchandising Strategy | Economic Strategy | Traditional Strategy | Innovative StrategyCompany Background | Key Issue | Proposed Strategy | Future Outcomes

Team Value Differentiation Reliability FrequencyQuality

Distinction ✔ ✔

Offering by School ✔ ✔

Inventory Allocation ✔ ✔ ✔ ✔

School Promo ✔ ✔

New Slogans ✔ ✔

Loyalty Program ✔ ✔ ✔

Virtual Room ✔ ✔ ✔ ✔

Room within a Store ✔ ✔ ✔ ✔

Product Branding ✔ ✔ ✔

Sticks & Carrots ...actually just carrots

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• Aim to offer more selection of quality levels for any given BTC product

• Target Bed, Bath and Beyond in providing premium brands at low prices

• Stay away from ultra-affordable products, as perception of quality is more important than competing on lowest price

Quality Distinction• Tailor selection to the

socioeconomic median of the nearby school, eg.

- Higher end products at Northwestern

- Mid-range at University of Illinois-Urbana Champaign

- Low-end at Illinois State

• Not necessarily sacrificing quality, but rather details such as a stainless steel fridge versus a plain white one

School-Based Offerings

Inventory Management• In order to decrease costs while increasing BTC selection,

determine inventory by college market

• In markets such as Chicago, with schools starting at different times

- Place 60% inventory at Target closest to first college, spread 40% amongst all other college targets

- 1 week after first schoolʼs rush passes, transfer remaining inventory to college that starts second

- Repeat until at last college Target"

• Advantages:- Leverage stores served by same logistics centers

- Reduce need to clearance items that are still in demand

- Increase availability to BTC customers at low cost15


Madison Ave Would Be Proud

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• Partner with colleges to increase number of busses running to Targets during orientation week

- Currently almost 2,500 students per school use these busses

- Need is present, offers a win-win solution for schools and students

• Also work with colleges to include a suggested list of items for BTC when mailing Freshmen during the summer

Promotions through Schools• “Get Schooled in Target-ology”

• “Undecided major? Donʼt worry—youʼre right on Target.”

• “Your Mom Away From Mom”

• “Your School. Your Rules.”

Fresh Campaign Signatures

Loyalty Card• Target ʻGive and Getʼ:

- Donate $20 to Target local charity of choice

- Earn 5% ʻcashbackʼ for Target credit card purchases the rest of the year, in the form of a gift card sent out in February

• Draws customers back in- With discount and credit card in Q4

(holiday)

- With gift card in Q1 (winter)

• Provides increased sense of value

• Highlights Targetʼs role in the community

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For the Facebook Generation

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Virtual Room Decorator

• Customizable floor plans and 360° views of model rooms

• Available on Target.com and mobile application (see below)

Mobile App

• iPhone, Android, Blackberry, Windows, Palm

• Innovative in-store positioning software helps find products quickly

- Point Inside offers an easily adaptable WiFi solution

• Additional to current Target app (barcode scan, online shop, etc.)

Room Within A Store• Set up example rooms with

popular Target furniture in the BTC section

• Allows shoppers to visualize just what it is theyʼre buying, following the IKEA style

- Also creates great potential for an upsell

• Dissuades any concerns about quality, appeal

• Also creates a more inviting, BTC-oriented feel for the entire section

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• Leverage Americaʼs strongest brand*

• Bring the Bullseye into every dorm room

- Subtle branding (e.g. imprints) significantly increases visibility

- Immediately recognize as from Target, similar to IKEA

• Low marginal cost for production

Incorporating the Bullseye

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* 97% recognition

The Future

Suggested Implementation

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Priority | Market Analysis | Cost Estimates | ROI | Future AnalysisCompany Background | Key Issue | Proposed Strategy | Future Outcomes

School Promo

New Slogans

Virtual Room

Loyalty Program

School-Based OfferingLow

PriorityHigh

Priority

Room within a Store

Quality Distinction

Inventory Allocation

Target Product

Branding

Itʼs a Big Market

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• College spending has become an enormous market in recent years

• Fast growing market, despite recession

• Only 31% is expected to be online

Where It All Goes...

24


Return on Investment

26


Increased Revenues$39m

Expected Growth due to New Initiatives

2%

Assume 10% is due to BTC$1.95b

Target Home and Décor ÷ Overall Revenue =

30%4

* Based on current operating margins (see slide 5)

$2.93mNet Profit from increased BTC sales*

Expected Results• Self-sufficient, profitable campaign

• Increased Target visibility will have positive externalities:

- Increased sales in other product categories while customers shopping for BTC

- Hook young customers with “cheap chic” vision at an early age

- Encourage repeat sales throughout college for additions to college dorm room, apartment

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Solution SWOT

28


Strengths– Younger customer base that can

usher in a new generation of buyers.

– Focus on “long term value” through high quality products with durability.

– Even greater brand recognition with the use of logo on more products.

Weaknesses– More efficient shopping could

lead to a decline in smaller ticket items and impulse buys

– Alienating 3rd party brands

Opportunities

– Expanded sales through mobile app and Internet

– Partnering with schools

Threats– Losing customers to lower cost

competitors

– Creating one time customers through too much efficiency

– Getting stuck between affordable and high quality, and ending up either neither

Bibliography

1. "Target : Investors : Financial News Release." Target : Investors : Target Investors. 21 Jan. 2010. Web. 25 Sept. 2010. <http://investors.target.com/phoenix.zhtml?c=65828&p=irol-newsArticle&ID=1377500&highlight=>.

2. "From Roseville to Greatland, Target Still Hits the Mark - Dayton-Hudson Corp. Target Stores - Growth Retailer of the '90s" Find Articles at BNET | News Articles, Magazine Back Issues & Reference Articles on All Topics. 17 Sept. 1990. Web. 25 Sept. 2010. <http://findarticles.com/p/articles/mi_m3092/is_n18_v29/ai_8970766/>.

3. "TGT Competitors | Target Corporation Common Stock Stock - Yahoo! Finance." Yahoo! Finance - Business Finance, Stock Market, Quotes, News. Web. 25 Sept. 2010. <http://finance.yahoo.com/q/co?s=TGT Competitors>.

4. "Stock:Target (TGT)." Wikinvest - Investing Simplified. 24 Sept. 2010. Web. 25 Sept. 2010. <http://www.wikinvest.com/stock/Target_(TGT)>.

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Target Marketing & Merchandising Case Competion

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