Question: COMPANY Case Target: From Expect More to Pay Less In fall 2008, Target acknowledged the slide...

COMPANY Case

Target: From Expect More to Pay Less

In fall 2008, Target acknowledged the slide and announced its intentions to do something about it. Target CEO Gregg Steinhafel succinctly summarized the companys new strategy: The customer is very cash strapped right now. And in some ways, our greatest strength has become somewhat of a challenge. So, were 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 Targets new strategy, company executives made it clear that Walmart was the new focus. Target would make certain that its prices were in line with Walmarts. 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.

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 Mizrahis clothing line,

Target boasts more than a dozen product lines created exclusively for Target by famous designers. Kathryn Tesija, Targets 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 Steinhafels Pay Less strategy was aggressive, Targets financials were slow to respond. In fact, things initially got worse with sales at one point dropping by 10 percent from the previous year. Targets profits suffered even more. It didnt help matters that

Walmart bucked the recessionary retail trend by posting revenue increases. When confronted with this fact, Steinhafel responded that consumers held perceptions that Targets value proposition was not as strong as that of its biggest rival. He urged investors to be patient, which 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 couldnt stress that point enough.

While Target continued to struggle with this turn-around challenge, it received a new threat in the form of one of its largest investors.

Activist shareholder William Ackman, whose company had invested $2 billion in Target only to lose 85 percent of it, was holding the retailers feet to the fire. Ackman openly chided Target for failing to deal effectively with the economic downturn. He charged that Targets board of directors lacked needed experience and sought to take control of five of the boards 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 Targets 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 reassuring voice singing, This is a brand new day. And its getting better 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 confirmed: 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.

In 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 shoppers 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. Im done, she said, as she grabbed a 99-cent green pepper. I just saved myself a trip.

SIGNS OF LIFE

Targets journey over the past few years demonstrates that changing the direction of a large corporation is like trying to reverse a moving 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 Targets efforts were truly paying off, Walmarts sales growth was slowing during this same period and even showing signs of decline. Customer perceptions of Targets 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. Steinhafels 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.

Targets Pay Less strategy has continued forward without wavering. Pricing seems to have found the sweet spot as Steinhafel 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, Targets 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 Targets 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 having 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.

from the target, practices identify the following question:-

1- target changed its slogan to analyze target branding management

2-identify target competitive edge and market offering in the tough competition with Walmart?

3-in what way does target handle its communication strategy? what is the target pricing strategy as well?

4-Michael Porter used to indicate the importance of being competitive in which way target stays competitive? state its competitive market strategy