TARGET CORPORATION Introduction The Target Bulls-eye logo has become instantly recognizable and synonymous with high quality and style at affordable prices. From its origins in 1902 as The Dayton Dry Goods Company in Minneapolis, Minnesota to the opening of the first Target store in 1962 in Roseville, Minnesota, Target Corporation has grown into one of top five retailers in the United States today with over 1,600 stores and 350,000 employees. Total revenues and net earnings for 2008 reached $64. 9 billion and $2. 2 billion respectively (Target Corporation, n. d. ).
Such results rank Target as the 28th largest U. S. Corporation with a market value of $25. 7 billion as of March 2009 (Largest U. S. , 2009). Innovative marketing strategies have certainly contributed to the company’s enormous success over the years. The “Expect More. Pay Less” strategy builds upon the company’s mission to deliver outstanding value, great brands, thoughtful innovation, exceptional design, and unique style (Target Corporation, n. d. ). Target’s market positioning and value proposition have evidently helped build the company into one of the leading retailers today.
Strategic Planning “Financial success often depends on marketing ability” (Kotler & Keller, 2009). Nothing could be truer in Target’s case. From its humble beginnings in Roseville, Minnesota, the company has grown into one of the largest retailers in the U. S. through organic growth and strategic acquisitions. Target differentiates itself from competitors by providing customers with high-quality and trend-forward products at affordable prices. The company incorporates this philosophy throughout the design of its stores, creative advertising, and unique product branding.
As a result of this approach, Target was able to carve out a niche market among consumers that “are on average younger, better educated, and more affluent” (Barwise & Meehan, 2004). Successful design partnerships and clever advertising significantly contribute to Target’s value proposition of upscale discounting. The company has partnered with a number of high-profile designers across product lines as a strategic means of positioning its brands. Target’s strategic decision to form such partnerships provides a starting point for its creative advertising campaigns (Barwise & Meehan, 2004).
Such innovative strategies have helped to build Target’s image into one of the most recognizable brands in the America today (Cuneo, 2003). Building customer value instead of focusing solely on price or quality is central to Target’s success. Companies like Target “not only learn their customers’ needs inside and out, they anticipate what those needs will be in the future, often before the customers themselves figure it out” (Beyond the bottom line, 2001). Target quickly figured out that in order to build long-term sustainability it would have to differentiate itself from other discount retailers.
Although the current financial crisis has certainly impacted the company’s bottom line, Target is building upon the strategies that led to its success. To fulfill customer demand without compromising its vision, Target has emphasized price point competitiveness on an increasing assortment of products (Reena, 2008). In an increasingly competitive retail environment, Target has been quick to offer a wide array of consumer goods from clothing and house ware by famous designers to everyday products like groceries and prescription medication.
In order to change customer’s perceptions that Target offers a higher price point than its competitors, recent advertising campaigns have focused on emphasizing value and promoting Target as a one-stop shopping destination (Cheng, 2008; Target to get into food fight, 2009). The company’s general-merchandise stores now carry groceries and perishables including organic produce options. In-store pharmacies use a distinctive prescription drug packaging emphasizing both functionality and design.
Newly designed Target brand consumer products aptly named “up & up” emphasize the company’s belief that “the things you need can also be the things you want” (Target Corporation, n. d. ). As a result, the company focuses on its target markets and effectively delivers on its value proposition to satisfy its customer’s needs, wants, and demands. Marketing Environment Awareness As markets grow increasingly competitive, new strategies are constantly being formulated to create and sustain competitive advantage.
From a marketing perspective, a growing number of companies have adopted a holistic marketing concept as a strategic application valuable for its completeness and cohesiveness (Kotler & Keller, 2009). For Target, such an all-encompassing strategy is directly correlated to the company’s mission of building customer value. Target’s relationship marketing approach has built an effective marketing network among customers, employees, and marketing partners. Successful branding activities have enabled Target to associate its name with a younger, hipper clientele (Barwise & Meehan, 2004).
Following the success of designer partnerships, Target currently works with a small NY design agency looking for innovative designers that can help with Target’s marketing strategies (Jana, 2008). The company’s relationship marketing approach has also translated well in its e-commerce platform. In 2001, the company formed a strategic partnership with Amazon. com to build its online presence. Target hopes to capitalize on a redesigned site and the established relationships with online buyers and suppliers to deliver even more value to its customers (Edelson, 2009; Waters, 2009, Target to take more control, 2009).
Through integrated marketing, Target effectively utilizes a mix of product, price, place, and promotion to influence buyer activities. Such marketing activities “create, communicate, and deliver value for consumers” (Kotler & Kelley, 2009). It wasn’t until the mid-to-late 1990s that Target’s marketing strategies really differentiated the company from its competitors. The company’s newly revised strategy for growth would be based on a “three-legged stool – to be trend-right, to be completely customer-focused, and finally to be design-driven” (Gogoi, 2005).
Target’s marketing mix has since become associated with innovative ideas and products without an expensive price tag. A critical component of the holistic marketing concept relates to internal marketing. Particularly challenging is the fact that it requires overall support from everyone in the organization. Robyn Walters, former VP for trend, design, and product development, was quick to point out that everyone was on board when it came to adopt the company’s growth strategy based substantially on design (Gogoi, 2005).
Target fosters an inclusive culture as an important component of delivering the best shopping experience to its customers. Judged by the extensive list of accolades including awards for top ethical, reputable, and innovative employer, Target not only distinguishes itself but it ensures that those in the organization have similar principals (Target Corporation, n. d. ). In performance marketing, Target takes a proactive approach in analyzing the contributions that from its marketing activities from both a financial accountability and social responsibility perspective.
Although not always easy to quantify, Target’s effective marketing has not only helped the company differentiate itself from competitors, but it has also helped deliver results that matter. Company data and analysis from Emory’s Brand Institute support Target’s marketing strategies. In 2006, for instance, Target’s gross margin and pre-tax profit margin were 33. 6% and 7. 3% respectively versus those of its main competitor at 23. 8% and 5. 4% (In the retail space, 2007). Target has implemented a number of socially responsible activities as integral components of its corporate culture.
For example, the company has integrated the concept of reduce, reuse, and recycle onto its sustainability practices (Target Corporation, n. d. ). Target not only works to comply with environmental requirements, but it also proactively seeks new ways of improving the environment including developing environment-friendly facilities and product packaging, pursuing greener alternatives, and partnering with government agencies looking to protect the environment (Target Corporation, n. d. ). Sustainable Competitive Advantage Target’s success can be attributed in great part to its value-added approach to marketing.
Rather than focus solely on low prices, the company has effectively become part of the value delivery process. Target has carefully segmented the market, selected target markets, and developed the value positioning of its products as part of its competitive advantage strategy. Target quickly realized there was a niche to be filled for innovative and chic products with a designer appeal but without the customary high price point. It’s no coincidence that Target’s “guests” are often younger and more affluent (Barwise & Meehan, 2004).
With value choice established, Target provides value through specific product features and competitive pricing for items such as limited edition designer clothing and house wares, target-owned brands, and recently redesigned “up and up” label products (Target Corporation, n. d. ). Effective promotion of Target’s products through creative advertising campaigns in the media and online help communicate value to its customers. Not only does Target focus on its “Low Price Promise,” but it also reminds customers about the offered value through its merchandise selection and shopping experience (Steverman, 2009).
Target has recently announced a partnership with DailyCandy. com as an innovative way to further communicate value to its customers by providing editorial commentary of current trends and featured products available at Target stores (Steel, 2009). Retailers constantly evaluate their value chain as a means to create customer value and competitive advantage. Opportunities for competitive advantage exist from “exploiting the interrelationships between the different value chains serving different industry segments (Porter, 1985).
Target narrows its value chain to a particular market segment in order to lower costs and differentiate itself from competitors. An efficient value chain helps Target to improve stock levels, delivery speeds, and overall consistency (Marx, 2005). As globalization continues to impact value chain resources through off shoring and outsourcing, companies must remain focused on its core competencies to sustain competitive advantage. Target has successfully created a niche for design-driven, high-quality products at competitive prices.
Although it is considered a discount merchant, Target has differentiated itself from competitors by not competing in pricing wars. By focusing on its core competencies, Target maintains competitive advantage because such characteristics contribute to perceived customer benefits, effectively impact its target market, and have been difficult for competitors to replicate. Target has “made the decision to compete on the more-intuitive elements of shopping – from the cachet of the brand to making the store a destination to shop” (In the retail space, 2007).
To create and maintain competitive advantage, Target maximizes distinctive capabilities and strategically utilizes the supply chain in a holistic marketing orientation by “expanding customer share, building loyalty, and capturing customer lifetime value” (Kotler & Keller, 2009). The company continues to build a loyal high-income traffic and an extensive retail network, to maintain higher gross margins, and to differentiate itself from competitors (Schlosser, 2003). Marketing Strategies
Understanding, creating, and delivering, capturing, and sustaining customer value are central characteristics of effective marketing strategies (Kotler & Keller, 2009). For a large company like Target, a comprehensive strategic marketing plan is essential to ensure successful results. Target’s mission statement is to make the company “the preferred shopping destination for our guests by delivering outstanding value, continuous innovation, and an exceptional guest experience. To support its mission, Target dedicates itself to “great value, the community, diversity, and the environment” (Target Corporation, n. d. ). Addressing Peter Drucker’s classic questions, Target demonstrates a “clear definition of the mission and purpose of the business” making it possible to achieve desired goals (Drucker, 1974). Most important from a marketing perspective, Target’s market definition is far superior to its product definition in direct support to the company’s customer-focused culture.
Strategic business units and allocated resources help deliver on the company’s promises of low prices, design focus, superior store experience, corporate responsibility, community outreach, and education. Target’s focus on design for instance, does not only fulfill an aesthetic function but it also helps to satisfy a need and simplify everyday life. Its innovative ClearRx concept improves medication packaging and design (Best Inventions, 2005). Home products designed by Sami Hayek are not only multifunctional, but they also support Target’s sustainability efforts (Target Corporation, n. . ). Innovative packaging and limited designer products support the company’s differentiation strategy. Target’s Corporate Responsibility Report demonstrates the continued efforts to fulfill the company’s sustainability mission. To fulfill its pledge to social causes, Target plays an active role in supporting education with innovative giving programs and key partnerships, cultural programs, and social services such as family crisis and disaster relief efforts (Target Corporation, n. d. ). Such strategies play an integral role in Target’s ability to assess growth opportunities.
Designer collaborations have become tremendously popular with customers providing Target with a terrific opportunity for intensive growth. From its early collaboration with designers Michael Graves and Philippe Starck, Target has successfully capitalized on the collaboration trend, gaining market share ever since through effective market-penetration, market-development, product-development, and diversification strategies (Brown, 1999; Target to introduce, 2002, Stankevich & Longo, 2002). From an integrative growth approach, Target strategically acquired a number of competitors since 1962.
As of 2008, Target has expanded its retail network into 1682 outlets throughout 49 states (Growth of Target, 2008). Growth through diversification is supported by Target’s differentiation strategy. By frequently introducing new designer collaborations in existing product categories, Target implements a concentric diversification strategy in hopes of appealing to new customer segments. Target works together with the designers to make products at reasonable price points to cater to the company’s target customers (Rowley, 2003).
Target’s horizontal diversification strategy introduces new products to existing customers. To appeal to its current demographic, Target entered the organic-food market through its private label Archer Farms further solidifying its market position (Grayson, 2006). Target’s corporate culture plays a significant part in the overall effectiveness of its marketing strategies. It “communicates its image in a visual language that reflects its values” (Rowley, 2003). Target’s success can certainly be attributed to its credibility as a company that strives to fulfill its mission on a daily basis.
In support of its social responsibility pledge, Target generously donates 5% of pretax profits to charity on an annual basis since 1946 (Rowley, 2003). As a result of responsible corporate practices and innovative strategies, Target has earned a number of awards and gained extensive industry recognition over the years (Corporate Leadership Award, n. d. ; The Top 20, 2008; The Most Charitable, 2005). Target’s innovative marketing strategies further contribute to its overall success.
From establishing a niche target market for inexpensive, design-driven products to innovative advertising and unique collaborations, Target has successfully differentiated itself from competitors and created competitive advantage. Altogether, Target’s focus on fulfilling its corporate mission and building customer value appears to have resulted into promising long-term sustainability. Strategic Effectiveness “Creative implementation can translate a good marketing strategy into great profits” (Kotler & Kelley, 2009).
A company’s marketing effectiveness is contingent upon the strategic division of components, departmental support, flexible workable options, and a sense of urgency about strategy implementation (Kotler & Kelley, 2009). Despite previous success, Target’s market position has suffered recently due to the economic downturn. Precisely due to such conditions, effective strategic planning is crucial for Target’s long-term horizon. Target’s previous and current CEOs agree that the company’s Expect More. Pay Less strategy is the right direction for Target’s long-term prosperity.
While Target’s value promise and brand commitment remain essential to fulfill its goals, strategic flexibility and staff support will have a significant impact on Target’s marketing approach through the current market downturn. Increased advertising spending is expected to help in Mr. Steinhafel’s strategy for the company. Unsatisfied with current sales, Steinhafel admits that although Target cannot solve the economy’s problems, the company is taking proactive steps in reassessing businesses and spending marketing dollars to sustain competitive advantage. (Tantillo, 2008).
Target hopes that effective marketing for its in-store pharmacies and grocery offerings will help drive organic growth in 2009 (Vomhof Jr. , 2009). CEO Gregg Steinhafel believes that to execute Target’s business model effectively, a collective effort will be required to “sustain, enhance, and extend” Target’s market positioning in uncertain times. (Target proposition 2008). By adding perishables to its product offerings, lowering stagnant inventory levels, and increasing marketing budgets, Target is not only being proactive, but it is also ensuring that customers take notice.
New challenges require new approaches to marketing and strategic management. “Marketing at its best is smart, muscular, responsive and beating with the same pulse as the business it grows out of and is meant to serve” (Tantillo, 2008). In Target’s case, a larger marketing budget may indeed translate into greater competitive advantage in the long run. References Barwise, P. , Meehan, S. (2004, August 16). Bullseye: Target’s cheap chic strategy. HBS Working Knowledge. Retrieved September 10, 2009, from http://hbswk. hbs. edu/archive/4319. html Best inventions 2005: Healthy options (2005, November 13).
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