Target Corporation

“Expect More, Pay Less”

Consumer Audit
Amy Brantley
Michael Deppa
Carla Johnson
Jen Jurs
Anna Meyer
Ray Roquemore

MKTG 4150
Mon./Wed.
11:00 – 12:15
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Table of Contents:

Market Analysis ................................................................................................................ 2

Market Segmentation ....................................................................................................... 4

Product Positioning........................................................................................................... 7

Impact on the Consumer.................................................................................................. 7

Consumer Decision Process ........................................................................................... 12

Marketing Mix ................................................................................................................ 14

Market Plan Assessment ................................................................................................ 18

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Market Analysis

The Target Corporation is part of a company that goes back over a hundred years

when the first Target store was opened in 1962. For the past forty years, Target has been

committed to providing an inexpensive, yet chic and savvy shopping experience to their

customers. As a result of Target’s continued success, in 2000 their parent company, The

Dayton Hudson Corporation, was renamed the Target Corporation. Target continues to

grow financially; in January 2006 they announced success of $50 billion in sales for a

single year (Biesada). In more recent news, Target reported in mid-November that there

third quarter profits have risen 16% and sales rose 11%. Target attributes these recent

successes to the increases they have made in building new stores; in 2003 Target had a

total of 1,225 stores, but currently they operate 1,494 (Freed).

There are many economic, physical and technological conditions that influence

consumer needs and behaviors to a corporation such as Target. An example of the

economic conditions that have affected Target has been the recent war in Iraq. Because

of the war, prices on certain items have increased, particularly gas prices, over the past

couple years; but it is primarily the customers of competitor Wal-Mart that suffers,

leaving Target to reap the benefits. The average Wal-Mart shopper makes an average

annual income $20,000-$25,000 versus the average Target shopper at $50,000-$75,000.

Wal-Mart shoppers stay loyal to the purchasing of cheap staple products, but because of

the rise in gas prices, they avoid the items that are not absolutely necessary. On the other

hand, Target’s customers are not as price sensitive to economic conditions and can

somewhat afford to maintain their lifestyle. In the end Target keeps their numbers up,

while Wal-Mart reports losses (Yerak).

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Target Corporation has many different kinds of competitors as a result of the

various types of merchandise they provide. They do have competitors with clothing

retailers, grocery stores and even drugstores; however, their main competition is

concentrated with other discounters or wholesale clubs. The top competitors of Target

include: Wal-Mart, K-Mart, Costco and BJ’s Wholesale Club. In a recent Gallop Poll

about 1,000 consumers were surveyed on which of the three discount retailers they would

prefer to shop at. The results came back with Wal-Mart leading the way at 52%, Target

in second at 29% and K-Mart falling quickly behind at only 13% (Grant). If Target

became successful in becoming the number one discount retailer in the industry, Wal-

Mart would likely be one of the few retailers with sufficient financial resources to

respond. Therefore, it is very important to the Target Corporation to ensure that their

own marketing strategies are kept current and relevant with accurate information.

According to a study performed by Maritz Research there 20% of Target shoppers

are highly loyal to shopping at Target. The demographics in which 20% of consumers

are loyal to Target, there are more females than males, 80% are under the age of 40 and

are also college educated, and they are in the middle to upper income range. Customers

of Target also prefer to shop at a place where there friends and family are likely to shop,

and they are not price sensitive; these customers are willing to pay more at a store in

which they feel good about and are treated well. In order to close the gap between the

percentages of Target at 20% and Wal-Mart at about 50%, Target will have to analyze the

reasoning behind Wal-Mart’s 50% mark. Research indicates that those who shop at Wal-

Mart are attracted by the low prices and although 20% of consumers would still shop at

Target despite higher prices, in order to catch up to Wal-Mart Target Corporation would
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benefit from looking into ways of decreasing their prices of products offered (Wal-Mart

vs. Target Customers).

Market Segmentation

The store offers a wide range of selling from clothes (male and female), groceries,

pet supplies, athletics, electronics, home accessories, pharmacy and shoes. Target has

accomplished a lower median consumer age than its competitors at an age of 41. The

median household income is $58,000. Approximately 80 percent of Target customers are

female, of whom 43 percent have children still living at home (delayed full nest II, full

nest II, and single parent II), and 80 percent have attended college with 43 percent

completing a degree program. In a recent poll done by CNN, consumers were asked to

choose between Target, Wal-Mart, and Kmart. The results found a sliding scale upward:

- 16 % of people in the less than 20,000 annual income chose Target

- 23 % of people with 20,000 to 29,000 annual income chose Target

- 26 % of people with 30,000 to 39,000 annual income chose Target

- 29 % of people with 40,000 to 74,000 annual income chose Target

- 47 % of people earning more than 74,000 annual income chose Target

The results show a high level of educated consumers lean more towards Target than they

do their competitors with 59% of people with annual income of $20,000 or less preferring

Wal-Mart (Grimm).

Target likes to view its retail position as a “discount department store”, instead of

primarily a discount store. This could be due to the companies desire to go above and

beyond the basic customer needs of a discount store. They are trying to perceive
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themselves as a store presenting name brands at low price by cutting expenses, then

lowering prices on lower quality items similar to Wal-Mart.

The visual perception of a Target store is very important to the company. Target

Corporation takes great pains in the presentation and appearance of the store and

merchandise. Using wide isles and drop ceilings, the store portrays more of a department

store feel. By using this strategy Target is understandably portrayed as more upscale than

its competitors by many of its consumers. This strategy is also portrayed in the way

Target Corporation presents itself. The customers of the stores are called “guests”,

employees are “team members” and supervisors are “team leaders”. Through this

approach, Target presents more of a comfortable environment; it also proves effective as

many of targets customers refer to it as “Tarje” or “Tar-zhay”, as if it were an upscale

French department store.

Target became one step closer in achieving its desire to have the appearance of a

department store when they collaborated with designer Todd Oldham. This partnership

will pave the way for a newer, more youthful brand to appeal to the younger consumer.

Think about what Martha Stewart has done for Kmart. Now make the endorser less

relevant to middle aged homemakers and shift them toward the left of the culture, where

it’s less about environmental conformity and more about self-expressive art. Now

putting them amid what has become the trademark artsy, rock ‘n’ roll TV spots for

Target. In recent years, Target’s spectacular co-op advertising in this vein has put

profoundly younger frames on such vendors’ brands as Tide and Coca-Cola. When a

Target commercial appears you wonder why such a direct approach is taken to market

their product. Then the red Target logo appears. Oldham, bringing his new artistic
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designs for clothing and home furnishings – back to college, kids – builds this aesthetic

on the fashion end of Target’s business with a kind of edge that Stewart could never

claim. In addition to its new acquisition for its clothing line, Target has also enlisted the

help of designer Michael Graves to design a set of distinctive home furnishings and

appliances (Grimm).

When dealing with culture, all businesses have to take in effect what is around

them. In 2002 Target had to pull merchandise clothing off the racks, which was

embroidered with “88” known to a lot of people as the white supremacist symbol. Target

also has a new advertising campaign for the holidays. Instead of referring to “Christmas”

in their promotions they use “holiday” to keep from offending those of different religions

who shop at Target (Answers.com).

Target is known for the bull’s eye of the store logo. Whether it is the dog with the

bull’s eye over the eye or just the bull’s eye in advertisements, promotions, or the store

logo, the company is well known for the symbol.

Target also has a web site online that enables the consumer to browse, review and

buy online. This hits more of the tech savvy buyers that like to use the internet to search,

review and buy products online than going to the store. Other than showing products, it

also allows the customer to see where their money is being contributed to by the

company (education, communities, etc.). Also Target has a Visa credit card service that

allows for the customers to be able to buy products and receive a promotion of 10%

discount just by using the card, through the store and online with certain products

(Grimm).
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Product Positioning

“Pay Less + Expect More”- is how Target sets its self apart from its competitors

(Berman). It also has a famous red bulls-eye symbol that most consumers know; and

research shows that 96% of people recognize the Target bulls-eye over Apple and

Swoosh (Behind the Bullseye). Target seems to offer high quality products at low prices.

Target is seen as an upscale discount store, because it has many major designers that

design a line of products just for Target (Berman). Since Target seems to focus its

marketing on women- not only does it offer a variety of clothing and intimate apparel that

would appeal to just about any women but it also is offering power tools for women

(Hawkins). Target’s mission statement focuses on “great guest service, clean stores, in

stock merchandise, and speedy checkout” (Lhe). This corporation is a “purveyor of all

that is cheap, yet chic” (Biesada).

Impact on the Consumer

Target’s influence on consumers differs than other leading retailers. Their image

and product offerings provide for a wide range of customers. Target strives to

differentiate its products through an image of cheap stylish and elegant clothing (Yerak).

There consumers are up market families, as well as young singles, who shop at Target

because they offer products that are fun and trendy, as well as the availability of general

merchandise. There niche is based on young, affluent families that are typically

cushioned from economic fluctuations (Bull's-Eye on Target).

Based on their customers, there are a number of internal influences that affect the

customers. Target has positioned their stores from other retailers, particularly Wal-Mart,
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as being a chic, upscale discount chain that is a hipper alternative to Wal-Mart. This

brand image is evident in current distinctive marketing campaigns developed for Target.

They are positioning ads to reinforce the concept to the consumer that they offer “style.”

The ads show consumers that they do not have to pay top dollar for lucrative well-

designed products. The ads are being designed and finished so that they can stand beside

ads for luxury items, and to help bring style to the masses by making “cheap” look cool.

Thus they are making the product the key focus, instead of the offer. They are able to

balance price and image to build the brands and brand loyalty (Tilley).

The brand that they have established with the customers can be conveyed through

the use of personality in their marketing practices. Their chic, upscale discounter image

is used as their focus in building and enhancing their brand personality, with the ability to

better target key customer groups. Of the five dimensions of brand personality, which

include sincerity, excitement, competence, sophistication and ruggedness, Target belongs

in the excitement area. They could possibly be in the sophistication area, but this pertains

to mostly upper class, higher end items. Target is high scale, but at a discounter level.

They are focused on the daring, spirited, imaginative and up-to-date excitement brand

personality. There product offering includes modern designs, fashions, styles and

merchandise items. They have to make sure they stay on top of the trends as products in

this category tend to fade in excitement over time, thus keeping current on consumer

preferences is important (Hawking, Mothersbaugh, Best).

There are several attitude aspects of Target consumers that can be seen. Shoppers

tend to be more affectively loyal to the brand. They prefer to shop in an atmosphere

where they are treated well and feel good about the store. This results in a willingness to
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pay more for items, and individuals who are not as price sensitive. They consider the

store brand important, and they shop at stores their friends and family prefer. A decision

to purchase or not to purchase items at Target is part of the behavioral component of

consumer attitudes. In a recent survey of 1,200 people, 70% say they shop at Target at

least bi-weekly or more, while they have an average historical share of 70%. Also within

this component lies the ability for a Target customer to recommend the stores as a place

to shop. Ninety six percent of Targets current customer base would recommend the store

to their friends (Wal-Mart vs. Target Customers).

Target customers fall into the category of “esteem” based on Maslow’s Need

Hierarchy. These individuals are looking for status, superiority, self-respect and prestige.

There need relates to the individuals feeling of usefulness and accomplishment. The

consumers that can buy trendier, more in style fashions at Target, whether it is clothing,

furniture or anything else, will feel they have products that are seen as being better, even

though they are shopping at a discount store. They will be able to buy products that give

them better image or status, but at a reasonable price (Hawking, Mothersbaugh, Best).

McGuires’s Psychological Motives will place a majority of Target customers

under the affective preservation motive of need for expression. This motive fits with

Target’s current trend of offering fun, trendy and fashionable items which is a model for

the need to express one’s identity to others. For example the purchase of clothing allows

consumers to express a particular image to others. This is also evident in the marketing

of their own exclusive, stylish merchandise (Hawking, Mothersbaugh, Best).

Hedonic, or reasons for shopping, reasons related to McGuries’s typology for

Target consists of value shopping and idea shopping. Target is able to attract those who
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enjoy going to discount stores to find great deals, along with those who enjoy keeping up

with new trends (Hawking, Mothersbaugh, Best).

Target customers fall mostly under the achievers dimension of the VALS

Segment system. The achievers have a percent female of 56%, a median income of

$67,000 and a median age of 40. These VALS demographic characteristics fit with

Targets major demographics (Hawking, Mothersbaugh, Best). Target has more females

than males, and majority of their customers fall in the middle to upper income levels.

Achievers are more committed to their family, which demonstrates their efforts to

recommend brands to their family members. Though they are not as risky, or value self-

discovery, as other segments do, achievers are still active in the consumer marketplace

and favor image. They are going to want products that demonstrate success to their piers.

Target allows them the opportunity to get trendy fashionable clothing or other items, and

can save these individuals time in their busy lives, by providing them the availability to

purchase a large variety of products in one trip (SRIC).

Target has been able to tie in the perception of their logo design with their

marketing strategy. Target bulls-eye logo can stand alone, as almost 94% of Americans

recognize it. They also focus on keeping their marketing, store design, product offering

and website consistent in an effort to further their brand message. The expectation

associated with the brand keeps individuals interpretation consistent (Brown).

Target’s product position relative to other major retail outlet centers can be

derived from price, either high or low, and the type of merchandise they offer, whether

specialized or for the masses. Target, Wal-Mart and K-Mart fall in the area low priced,

mass merchandise. Target in comparison to these companies offers products that are
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slightly higher in price, beside mass merchandise items, and more specialized products.

The perceptual map below relates these three companies with other well know retailers:

Perceptual Map:

One out of two people shop at mass merchandisers every week. Target has to

make sure that they are focused on satisfying the consumer’s functional and emotional

issues. Target is able to balance this with a variety of general products with the

excitement of the latest affordable trendy item, while enticing consumers at all income

levels (Liebmann).

Target is able to understand that sales are made in the head and the heart. They

are able to take ordinary products and make them desirable. Cheap products to some are
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presented through Target in a way that makes them “cool.” There ads are used in a way

that makes the company stand out. The look, tone and message all respect the reader.

They do not pack every available space of an ad with a “selling, selling, selling”

mentality. Target makes the product, not the offer, the important aspect. They are able to

balance the price and the image, to drive sales and build brand loyalty, day after day.

(Tilley)

Consumer Decision Process

When consumers are starting the consumer decision process many would start

with looking at the physical surroundings when deciding which store to frequent. Target

stores have been designed to display items in a clean, organized and welcoming

environment (Roger). Most Target Supercenters are laid out in a fashion so that

crowding is not an issue for customers to deal with. Target tries to make the stores more

intuitive by placing related departments close to each other; such as toys and sporting

goods, as well as home improvements near the home decorations (Roger). Rather simple

things like these are important to the customer. It shows that Target is thinking about the

customer and their needs when making design/layout plans; and it makes customers want

to return to their store. Target’s goal is to attract more affluent and better educated

customers, and attract them they do; consumers that shop exclusively at Target are more

likely to shop at more high fashion retailers such at Nordstrom and Macy’s (O’Donnell).

These customers are less likely to be “one-stop” shoppers.

Target consumers are more likely to fall into the nominal decision making

category. They recognize the problem and after doing an internal search, they have their
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solution by choosing to go to their preferred store or buy their preferred brand.

Consumers go to Target to purchase items that they have previously purchased from

Target. Target’s clothing, for example, is of a great quality, and that is recognized,

especially by women shoppers. Women spend more each year on business/casual clothes

and health and beauty aid products at Target each year than any other products in the

store (O’Donnell).

Time plays a huge role in the consumer decision process. Consumers have less

and less time to spend on things like shopping each week, so many are turning more and

more to online shopping to fulfill their needs. Online shopping helps to reduce the time it

takes to actually purchase the product as well as allow the consumer more control as to

when the purchase is being made. Of all Target exclusive customers 58% made online

purchases last year; 45% of them spent over $100 in online purchases last year

(O’Donnell). Women are emerging as the stronger internet buyer in recent years. The

key items that women have been purchasing online are clothing or accessories, consumer

electronics and toys or games (O’Donnell).

Women Online Purchases:

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Target has had the ability to offer designer as well as store brands in their stores

such as Mossimo, Isaac Mizrahi and Sonia Kashuk to name a few. These store brands are

important attributes to the company; if consumers like the designers, they have to go to

Target to get the product due to the fact that no one else carries them. These high quality

designers/products attract the type of customer that Target is looking for: affluent, better-

educated, younger and more upscale.

The shopping orientation of Target customers would best fit into the Chameleons

category. Their shopping styles are situation specific and can frequently change. Their

approach is different for different products and for different purposes of shopping (gifts,

personal, etc.). Target customers could also fall into the Scavengers category. They

enjoy shopping and consider it to be a form of entertainment and many are prone to make

unplanned purchases.

Marketing Mix

Target offers a wide array of products for every type of consumer. A recent study

showed that ¼ of all U.S. primary household shoppers visit a Target store at least once a

month (“Chain Store Age”). Consumables and commodities make up about thirty percent

of Target’s sales (Hoover’s). In September 2006, Target launched organic foods and

beverages, sold under the Archer Farms label, into their stores. The purpose of the move

into organics was to attract younger, female shoppers. Electronics, entertainment,

sporting goods and toys make up twenty-three percent of sales (Hoover’s); however,

Target along with other entertainment retailers have begun to struggle with the profits

from entertainment items because of online web sites that offer music and movie
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downloads at a discounted price, such as iTunes. Apparel and accessories account for

twenty-two percent of sales (Hoover’s). Target offers chic, inexpensive yet trendy

apparel and accessories which attracts more young and affluent consumers. Eighty

percent of Target’s products have private label from big name designers such as Colin

Cowie, Behnaz Sarafpour, Tara Jarmon, Paul & Joe, and Isaac Mizrahi. Home

furnishings, décor, and other items, such as seasonal products, make up the remaining

twenty-five percent of sales (Hoover’s). Each store has “The One Spot” which is a

section of the store, usually located near the entrance, which contains products that only

cost one dollar. The items change frequently and the consumer sense like they have

found a bargain.

Target currently has 1,494 stores in forty-seven states. The corporation has three

types physical store formats, Target, SuperTarget, and Target Greatland. A regular

Target is an upscale discount store that is usually 123,000 square feet. SuperTarget

carries groceries and general merchandise while Target Greatland is about seventy

percent larger than a regular Target store (Hoover’s). Target.com is the third most visited

retail web site only to be surpassed by Ebay and Amazon. The online store currently

offers 90,000 products and that number is estimated to exceed 200,000 by the end of the

year. According to a study conducted by Scarborough, Target has a higher market

penetration than Wal-Mart (O’Donnell).

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Market Penetration:

Promotional campaigns play a vital part to the success of Target. Advertisements

and inserts in newspapers allow the company to reach a large segment. The company

spends a lot of money for advertisements and inserts in the newspaper weekly. Free

shipping is offered periodically at Target.com. During the holidays, Target offers special

extended holiday hours as well as special promotional pricing for new products or

products with a high demand. The stores open early and close late. Private label

designers are usually featured in commercials for Target. This is a very good

promotional strategy because it allows the designer to get their name and product lines

into the market, and it also gives Target the competitive advantage because the designers’

products are only sold at Target stores. Clearance items and prices change every week.

This promotional strategy is beneficial because it makes the customer return to the store.

Everyone wants a good deal and they are willing to take the risk to see how much the

product’s price will be reduced and if the product will still be available when its price is

marked down. The signature logo for Target is the bulls-eye. This has become a

trademark for the company and when people see it, they associate it with Target.
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Target Logo:

In a recent study conducted by Retail Forward, Murray Forseter said “Instead of

focusing primarily on price, Target strives to differentiate.” Even though the company’s

products are more expensive than their leading competitor, Target remains popular

because they have unique and differentiated products. The average household income for

Target customers is $50,000 per year (Robin). The company is considered to be an

upscale discount store and its pricing structure is reflected by the title. As mentioned

earlier, Target’s products are more expensive than its leading competitor, but the products

are considered to be more chic.

Target services its customers through the decision process as well as with the post

purchase. Most products can be returned within 90 days, and damaged or defective

products will be replaced. The Club Wedd and Target Baby Registry have been a very

successful service for couples. This service allows couples to register for products that

they need and helps the person giving the gift to choose the right product for the couple.

Registries can be viewed, and products can be purchased online or at any Target store.

For added convenience, the pharmacy and the photo center allow customers to order

medications and photos online. Target has also opened several in-store medical clinics

that provide basic medical services without the hassle of having to make an appointment

with a doctor. Prescription drug bottles are now being colored coded to keep the

customers from taking the wrong medication and the pharmacy will match Wal-Mart’s

price on generic drugs.

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Market Plan Assessment

Targets product positioning is strong. As stated above, ninety-six percent of

people recognize the Target bulls eye (Behind the Bullseye). This seems to show that

Target is well known, but Target is not for everyone. Target does target its market

towards consumers with the income of $50,000 or greater (Robin), because Target does

have higher prices than Wal-Mart. Since Target’s prices are higher, lower income

consumers do find if more difficult to purchase items there. However, losing the lower

income bracket does not affect Target in anyway. As seen in the beginning of the year,

Target was excited to announce that it made $50 billion in sales in 2005 (Biesada).

Therefore, Target is growing and continues to grow by adding new stores, but its growth

does not affect the way Target feels about its customers or the way the customers feel

about Target. Target shoppers are more brand loyal, are treated well, and because of this,

are willing to pay more for what they get (Wal-Mart vs. Target Customers).

Target does create a need for its customers. Because Target is seen as an upscale

discount store, customers are more likely to go there and by their clothing, furniture and

appliances. They can buy trendy and stylish clothing at a lower cost than many retail

stores.

In conclusion, Target is the second most preferred discount retailer, only coming

in second to Wal-Mart. Target is growing and bringing in new consumers as it expands.

They seem to know and understand their target market, giving them an edge for future

growth.