Target Needs to Put ‘Pay Less’ Before ‘Expect More’

Discussion
Jul 25, 2008

By George Anderson

The current state of the economy has consumers looking to save money. They know they can save at Walmart and the retailer has seen its same-store sales climb even as the economy has headed in the other direction. At rival Target stores, however, sales have been decidedly less than Target-like. Shoppers, a Reuters report suggests, have identified with the “Expect More” portion of the chain’s tagline. What they have not bought into is the second half of that message that promises they will “Pay Less.”

Recently, Target has begun to emphasize its discounter heritage more in its marketing with television ads, online and direct mail efforts promising consumers savings.

Industry analysts say that price checks show that Target is competitive with Walmart on similar product pricing but that consumers have attached themselves more to the chic than cheap portion of the chain’s value proposition.

“When economic times get hard and the business model is under strain, you need to find a way to refine your advertising to actually make it work harder, and I don’t think they have yet,” Zain Raj, chief executive of loyalty marketing firm Euro RSCG Discovery, told Reuters.

Target’s core middle-income consumer is looking for deals as disposable dollars get eaten up by higher fuel and food prices. The same shoppers, experts suggest, are less interested in getting a good deal on a new clothing item and prefer to save on the laundry detergent they use to clean the garments they already own.

Jeannine Befidi, a spokesperson for Target, said the company is emphasizing categories such as food and pharmacy over apparel to increase shopping frequency. That doesn’t mean, she said, that the company plans “to change what we consider to be a proven, successful long-term strategy.”

Ms. Befidi said Target is looking to strike the “appropriate balance” between “Expect More” and “Pay Less.”

Joseph Feldman, a retail analyst at Telsey Advisory Group, told Reuters that Target needed to “change with the times” and do more “creative marketing and merchandising to convince the customers that prices are the same [as] Walmart.”

Shelli Baltman, head of customer experience innovation at consulting firm What If, told the news service, “Walmart’s done a really good job of letting customers know that they understand what it’s like to tighten their belt.”

Target, she added, needs to let its “customers know that we understand your suffering, and we are going to help you.”

Discussion Questions: If Target’s prices are comparable to Walmart’s then why is it that so few consumers seem to know? What does the company need to do to communicate that message? Does it need to set aside its chic image to accomplish this messaging goal?

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27 Comments on "Target Needs to Put ‘Pay Less’ Before ‘Expect More’"


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Ed Dennis
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Ed Dennis
13 years 9 months ago

I think Target has a larger problem and that is that it completely ignores male shoppers. Look at Target’s sporting goods, automotive, and electronics sections. None compete with Walmart.

Every time I get dragged into Target, if I happen to find what I am looking for, the item price is often higher that a full service department store. However, 95% of the time Target has excluded me from their consumer base by choosing not to handle items I am interested in purchasing. So far, this has included their pharmacy, sporting goods (hey I already have 3 bicycles), automotive, grocery and electronics. I also find that I can buy clothing cheaper at Jos A Banks if I watch the sales. Sorry Target, you don’t earn my business.

Steve Bramhall
Guest
Steve Bramhall
13 years 9 months ago

Target should get closer to its customer base, do targeted marketing, focus on educating and differentiating in terms of service, product and price. Changing its message is wrong. Going head to head with Walmart in a price war is wrong too. Walmart now owns 50% of retail in the US and is growing. Where will all this end other than in less choice for the customer? Choice and competition is needed and Target can do a good job adding value to people’s lives and it needs to get this message out there.

Gene Hoffman
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Gene Hoffman
13 years 9 months ago

It is my opinion that Target has the most innovative and upbeat advertising in retailing. Target has positioned itself solidly as the place to go among discounters for stylish fashion, nifty chic and quality foods, particularly in its Archer Farm line. But the economy has slipped quickly, like on a banana peel, and while Target does have pricing competitive with Walmart on comparable items, Target seems reluctant to project “cheaper chic” and pricing as low as Walmart since that doesn’t compliment the upscale image in its great advertising.

Having said that, the challenge Target faces at the moment is to duplicate the creativity of its advertising in resolving how it communicates its pricing points to consumers in this era of price consciousness…and we wish Target well in that unsolved endeavor.

Anne Bieler
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Anne Bieler
13 years 9 months ago

Walmart is the main destination for stock-up trips, and as the economy tightens, more people are headed in that direction. For Target, shoppers were often on a different mission, but might pick up staples as long as they were in the store. Expanding the message, giving their core shoppers a good reason to make Target the destination of choice may bring more people to the store. But keeping their hard won consumer segment loyal should be key as Target considers its strategy. They have a solid value proposition that is well executed and will keep shoppers coming back in days ahead.

Doug Fleener
Guest
13 years 9 months ago

I would concur with Richard that part of the difference in comp numbers is Target’s food and consumables are less than Walmart’s. The first place consumers turn to when they need to tighten the belt is trying to save on groceries. I was talking with a client the other day on this topic and she admitted that she had just shopped for groceries at Walmart for the first time in her life.

But besides the grocery difference, it’s clear that Target hasn’t sharpened their message for what consumers are now experiencing. I would agree with the other panelists that Target should not move away from their core quality message, but enhance it by letting the customer know that quality at Target does not cost more. I don’t believe the average consumer knows that Target’s prices are close to Walmart’s, and Target will continue to be challenged if they don’t do a better job of telling them.

David Livingston
Guest
13 years 9 months ago

“Industry analysts say that price checks show that Target is competitive with Walmart.” Being “competitive with Walmart” usually means being within 10%. The consumer isn’t stupid. They know prices at Target are competitive, but they also know they are still higher. If Target wants to emphasize low prices then they should guarantee the consumer a lower tape total compared to Walmart. They should honor Walmart’s ad the same way that Walmart honors Target’s ad. Then maybe consumers will get the message.

Charles P. Walsh
Guest
Charles P. Walsh
13 years 9 months ago
I agree with Bob Phipps conclusion that it would be ill-advised to try and dramatically change their core message. Walmart’s attempt at emulating Target’s upscale offerings fell flat in some categories. Their subsequent and carefully crafted makeover has served to reemphasize their EVERYDAY LOW PRICE values while softening their Discount image. These business cycles can result in tactical errors of judgment when they don’t take into account the core strategy of the retailer. Target was flying high just months ago before the economy began to soften and at that time, the conjecture was on why Walmart doesn’t do more to show it offers brands and better products like Target. The two exist and thrive because there are significant “bulges” on each end of the customer base for each of them. Target enjoys a higher concentration of the well-heeled while Walmart enjoys the greatest portion of the lower to middle income group. It is often the overlap that they fight over. That said, Walmart’s new image, which includes a better green story than Target’s, along with… Read more »
Susan Rider
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Susan Rider
13 years 9 months ago

Target needs to forget about the competition and focus on customer needs. Acknowledge that household incomes are tight, Target should focus on reducing cost to their valued, loyal customers and helping them to enjoy the same quality they’ve been used to at better prices. Create a value bundle, budget saver, or family savings message.

When the economy started to turn, Walmart went on the proactive approach and said, “lowering our prices even more to help your budget.” Target is now on the defensive. It is a great company but its marketing message needs to be more in-tune with the customer and more proactive.

Ben Ball
Guest
13 years 9 months ago

“…and the essence of positioning is sacrifice…” I don’t know if there is a Greek god of marketing, but if not, I think I might nominate Rosser Reeves.

This is just another way of saying “you can’t be all things to all people.” Or if you prefer the country music version, I think it was Toby Keith who sang “you have to stand for something or you’ll fall for anything.”

Walmart and Target are two of the best examples of marketing positioning you will find anywhere. Coexisting in a very similar space, they have carved out firmly differentiated positionings and stuck to them. Walmart is price. Target is cheap chic. It is simply Walmart’s time. Consumer confidence will return and Target will rise again. Going “price” right now makes no more sense than going “upscale” did for Walmart two years ago.

Dick Seesel
Guest
13 years 9 months ago

I agree with most of the other panelists that Target can’t win a war with Walmart strictly over price. Its brand positioning has always been more aspirational and it would be short-sighted to abandon a brand equity built over many years.

However, Target’s comps have been less than stellar during the current economic slowdown, in part because its business is less driven by food and consumables than Walmart’s. It can take a stronger stand in its broadcast advertising (not just in print) on the value message, but it also needs to provide a more compelling assortment in its apparel areas.

Bill Bittner
Guest
Bill Bittner
13 years 9 months ago

The Walmart low-price image has been built over many years. I would guess that the vast majority of people, when asked who has the lowest prices, would say Walmart. Today’s bargain hunters are not shopping at Walmart because they are brand agnostic. The economy has created “brand conscious bargain hunters.” These are just the consumers who Target has served over so many years. Perhaps the message needs to be reinforced to increase awareness, but a change in strategy seems inappropriate.

Liz Crawford
Guest
13 years 9 months ago

There is more than price at issue here. Spending anything on a Michael Graves-designed product feels indulgent and imprudent now. That is perception not price, and it cuts to the core of Target’s brand equity. They have a good business model, when times are good, or even moderate. But in today’s climate, fear rules. And no wonder, all we hear is bad news and more bad news.

The closest model here is Costco, which is going gangbusters. Sure they are a club format, but the demographics of the traffic are similar and many of the brands line up, too. Target could perhaps go after Costco shoppers and offer some bulk buys at deep discounts, along with apparel and housewares, but without the membership. Chasing Walmart feels like a fool’s errand, regardless of the sheer numbers shopping there. They’ll never beat them on price perception.

Dan Nelson
Guest
Dan Nelson
13 years 9 months ago

The more telling analysis may be in comparing the items in the basket of a Walmart shopper vs. a Target shopper. Walmart Supercenters have an expanded offering of consumables and no matter what the state of the economy, people must eat. Middle income families in the economic squeeze are turning to Walmart Supercenters for their grocery needs, and while there, buying other non food related items like paper products, cleaning supplies etc, that they quite possibly used to buy at Target stores on their way to a more favored grocery location.

Could it be that the Supercenter concept and one stop shopping with an assurance of savings on all the items in the basket has lured the “big middle” shopper demographic back to Walmart at some expense to Target? The Walmart tag line right now is very compelling…SAVE $$$$ and in so doing…live a little better.

Marc Gordon
Guest
Marc Gordon
13 years 9 months ago

I think Target has always done a great job of positioning itself as a retailer that provides higher quality items than Walmart without higher prices. But as the economy gets tougher, people may tend to forget that last part and drift towards the “roll back” prices of Walmart.

I would suggest to Target that they really start stressing the price advantage, while still touching on the quality and selection. In fact, I think they should go so far as to make direct comparisons. While I generally don’t suggest this to my clients, tough times call for tough decisions.

David Biernbaum
Guest
13 years 9 months ago
Price differentiation from Walmart is not the issue at Target. For the most part, when comparing apples to apples, or more likely toothbrushes to toothbrushes, or name brand clock to name brand clock, etc, prices are similar if not exactly the same. In my opinion, there are other factors that are more likely resulting in Target’s issues during this soft economy: 1. Assortment: whereas Target carries many of the usual staple items that Walmart carries, Target also carries a more upscale assortment at higher costs on many other items throughout the store. Some of these types of items have perhaps become out of reach in a soft economy. 2. “Target” Market: Target has done an incredible job over the past several years appealing to trend-setters that happen mostly to be younger age females whose income has been tightened severely lately by gasoline prices and a soft economy. Target is still on track for great times ahead. Its business is more cyclical depending on economic realities, however, Target has a smart management team that will make… Read more »
Bob Phibbs
Guest
13 years 9 months ago

So Mr. Feldman thinks Target should scrap their carefully crafted message and say, “We’re just as as cheap as Walmart.” Tough times never last but a poorly thought-through “me-too” approach comes and goes with the agency.

Doron Levy
Guest
Doron Levy
13 years 9 months ago

Target was always more label oriented in their campaigns but I have always associated Target with value. Target needs to expand on the message to consumers. Because of all the label pushing, consumers may have disconnected the value message that Target was actually founded on. Focus on what you are giving your customer. In Target’s case it is value on price and selection. Complement the value strategy with excellent service and in no time will people be flocking back to Target. They have the merchandising and the people. They just need to do a better job with the message.

Jonathan Marek
Guest
13 years 9 months ago

I agree with the consensus here that simply “targeting” Walmart with a low price message will erode Target’s hard-earned brand positioning. Why not focus marketing on getting (yet more) consumers to ‘trade down’ from Macy’s, Penney’s, and the like? There are plenty of shopping dollars to be gained, Target already has better price perception versus those concepts, and the positioning is sustainable as the economy and consumer sentiment improves.

Craig Rosenblum
Guest
Craig Rosenblum
13 years 9 months ago

Price image is a culmination of pricing strategy, price communication and the other points of differentiation you offer your shoppers versus your competitors. These unique qualities enable you to determine your Tipping Points as it relates to price. If you are Target, and you have worked so hard on trying to different yourself versus Walmart, why do you want to give away image and margin after working so hard to achieve it?

Look at Kroger… they understood their points of differentiation or value versus Walmart and have gone right to the edge of perceptible zone–8%. Hence, Target’s tag line should be ‘Expect More’ period!

Li McClelland
Guest
Li McClelland
13 years 9 months ago

I think Target and Walmart are both picking up customers who would have previously been embarrassed to let their friends know they shopped there. (Didn’t a recent thread here on RetailWire mention that some people shopped at Whole Foods so they could be seen putting their garbage in Whole Food bags when it went out to the curb?) Well, now with the media’s focus on the economy, saving money where you can and being frugal is IN…IN…IN!!! So now it’s OK, even cool, to shop for some things at Target and at Walmart. I admit it kind of makes me chuckle.

Kai Clarke
Guest
13 years 9 months ago

Target is no Walmart. They have not been, and should not be, since that is not their model. However, with that in mind, Target needs to be sensitive to changing economic times, and how this impacts their model. They cannot continue to be a national, low-price leader and ignore the impact of price on their revenues. With companies like Walmart continuing to grow, despite the economic downturn, Target needs to tweak their model to keep it reflecting the dynamics of a modern, global economy.

Craig Sundstrom
Guest
13 years 9 months ago

Mercy (!) so Tarjhay’s comp sales for last month are up “only” x.y% while Walmart’s are up 0.z % more…so what? They have a model which has done quite well over the past 45 years, and if there is tinkering needed, I’m sure they know best how to do it.

I realize the format of RW inevitably offers unsolicited advice, but let’s offer it to lunkheaded companies (that really need it) like….

Camille P. Schuster, Ph.D.
Guest
13 years 9 months ago

Target should definitely not change its tagline. It has an established image in people’s minds and they should use it. “Expecting more” also includes understanding current circumstances and they could have ads that demonstrate that understanding by providing great value on back-to-school items right now–how the limited budget can stretch further at Target. Expecting more could include expecting more value in tough times.

John Crossman
Guest
John Crossman
13 years 9 months ago

Target needs to make a hard push now on value and service. See Darden as an example. They should not lose who they are; rather focus on the combination of price and quality.

Justin O
Guest
Justin O
13 years 9 months ago
Everyone knows Target is a discounter and they do drive value in their stores – temporary price cuts, comp-shopping Walmart, and offering free gift cards on purchases on items ranging from cereal to iPods. Not to mention that they have one of the largest distributions of a weekly circular in the nation. I truly believe Target is still trying to bring Kmart to its knees, considering there are still over 1,300 locations and they have just under $20 billion in revenue. In fact, K-mart just announced three more closures for this September to add to the stores they quietly closed in Southern California earlier this year. Target is now opening stores in Hawaii where there are still Kmart stores. My point is that Target continues to expand at 100 stores a year and the fact that Walmart has recently seen some decent comp sales doesn’t really affect Target’s long-term strategy on gaining marketshare. If they wanted to compete on price alone then there would be no differentiation of the two retailers. This was Kmart’s mistake… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
13 years 9 months ago

I agree completely with Jonathan Marek. The real opportunity for Target is a fashion/quality/value message for those customers open to trading down from above. This would protect their long-term brand integrity, position them to capitalize on the current environment, and maintain the differentiation with Walmart.

Mark Lilien
Guest
13 years 9 months ago

In the past 12 months, Walmart stock rose 20% and Target stock declined 30%. Walmart’s heavier emphasis on grocery helps improve its comp sales trends, because grocery inflation is way higher than apparel inflation. And apparel is Target’s strength, not grocery. Furthermore, investors are concerned about Target’s credit card income, since all American credit card portfolios are experiencing much higher defaults. And Walmart investors get Sam’s Club and the nonUSA stores, too. Target investors don’t own part of a warehouse club (which is heavily grocery) and they don’t get a multinational business, either. If Target focuses more of its legendary creativity on grocery, it could be positioned like Trader Joe’s.

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