Does Target Have an Image Problem?
By George Anderson
Could Tar-jay be a liability in Target’s plans for continued growth?
A recent report in the Star Tribune of Minneapolis questioned whether the discount chain with the hip advertising and store merchandising has positioned itself for a rough time in a post-Katrina U.S. market where prices on everything appear likely to increase.
“It doesn’t matter how high your income. When gas hits $4 a gallon, you’re going to start paying attention to prices,” said Richard Guha, a principal at the New England Consulting Group. “Now is the time for Target to change its advertising to the world at large … and to reassure people that, yes, you can find low prices here.”
A survey conducted by BigResearch in July found that women who only buy clothing if the price has been discounted rank Target as number five on their list of retailers to shop.
The perception that Target’s prices are higher than rivals is just that, according to the Star Tribune.
The newspaper recently conducted a market basket comparison of 14 identical items, such as liquid detergent, DVDs, jeans and diapers, purchased at Wal-Mart, Target and Kmart.
When the items were tallied, Target was 87 cents cheaper than Wal-Mart and $17.08 less expensive than Kmart.
Jeffrey Klinefelter, a retail analyst at Piper Jaffray & Co., said the newspaper’s findings (while obviously based on a limited number of goods) was representative of his firm’s findings. According to the Piper Jaffray analyst, Target’s pricing is competitive with Wal-Mart and often times lower than its larger rival.
“It’s not widely known, but Target shops every one of its competitors within a five-mile radius of its stores each week,” said Mr. Klinefelter. “They have a deliberate strategy to be competitive, particularly on commodity items.”
Moderator’s Comment: Does Target have an image problem when it comes to the perception that many consumers have about its pricing practices? Should Target
change its advertising message to emphasis price more, considering the current economic environment?
Paula Thornton-Greear, a spokesperson at Target, described the chain’s philosophy on value.
“At Target, value is about more than low prices — it’s about trend-driven merchandise with the everyday basics, a unique shopping experience, and a commitment
to the community,” she said. –
George Anderson – Moderator
Target needs to stay the course! Wal-Mart is moving to more upscale merchandise – a move that may confuse current shoppers and may or may not attract higher demographics. Target sends a consistent message to consumers and my guess is that those who are Target loyal customers already know their prices are competitive.
For Target to waver at this point would be foolish and I don’t think they will. Their recently-announced branding and product initiatives beg for “stay the course.” Their new garden/home initiative with the Smith and Hawken brand is going to give the first serious competition to Martha at mass, and Greg Steinhafel’s announcement of a women’s career apparel brand that will rival Banana in quality but at drastically reduced prices is right on. This is an exciting time for Target to seal the deal on their upscale-at-a-price brand promise and truly differentiate.
Stay the course. Their reputation is “good stuff cheap.” Why change to “cheap stuff that might be good”?
So far everyone is right – stay the course. Value is more than price and Target shopping is an experience. So don’t fix what is not broken.
If one of Target’s discount competitors doubts the value of its compelling and reputational draw with its loyal and established customers, they should try to emulate it for their own financial benefit and retail health. Target may not emphasize price enough in its clever, innovative advertising, but it is still growing its same-store sales effectively.
Sometimes a company is presumed to have image problems by sage writers and industry observers when there is not much else to write or talk about. At the present moment, Target appears ahead of the sales curve as they work their strategy. That’s a nice place to be. My advice: Target – keep being Target.
I totally agree that Target should stay the course. While very similar to Wal-Mart, Target enjoys a slightly more upscale, but value-driven, image. Price differentials are not enough to justify going head-to-head with the behemoth on score. Rather, Target needs to identify Wal-Mart’s weaknesses by department (e.g. garden) and capitalize on them.
As mentioned, if you are a Target shopper, you already know that you are getting a very competitive price and so much more. “See Spot Save” just about says it all.
Adding my voice to this choir: A lasting retail price image is not created through advertising messages. It is the outcome of repeated actual price impressions over time. When shoppers repeatedly encounter what they perceive to be good value – as is apparently true at Target – the belief thus formed is more powerful than any ad claims. Since Target enjoys a favorable price image and is, in fact, competitive on price every day, the strategy to emphasize style in its ads is rather a brilliant one.
I agree that Target should stay with their present strategy for the reasons mentioned. They have managed to differentiate themselves from Wal-Mart and that is a very good thing, especially since it seems to be working. I was surprised at the price surveys mentioned in the article as I was under the impression that they were higher than Wal-Mart. I would guess that most people are under the same impression and that is a testament to W-M’s advertising.
Our local Targets are much cleaner than Wal-Mart and also much less heavily shopped as well. They do, however, seem to be doing a good volume of business, just not at the level of W-M.
I agree that Target should continue doing what it has been doing over the last few years. They should probably focus a bit more on groceries and pharmacies; these lines of business can be growth engines for them. We just moved to the United States and did quite a bit of shopping from our home, from laundry baskets to microwave ovens. We did hunt around for the best price but didn’t buy even a single big ticket product from Wal-Mart. We either went to Best Buy or to Target. I am sure there are several thousand out there thinking in the same way. And I love the way associates help you at the Target store. David is right — the grocery section is relatively unknown and it will serve them well advertising a bit more on that. It will be interesting to see whether they pick up Albertsons or decide to go international.
It has been my impression that Wal-Mart uses the food side of the business to drive home its low pricing strategy, whereas Target does not. Perhaps Target should differentiate its food business so customers do not use it as an indicator of its overall pricing strategy.
Target is the experience of shopping…not the price to shop. It would make as much sense for them in their current strategy to do a price position message as it would be for Neiman Marcus to do a half price sale.
Yup – that’s what we should all do. Play the price war game. Let’s all look like Kmart, sell the same junk, show signs with prices falling off. Change your image so you look cheap like everyone else. I’m telling you, there’s a real winning strategy in there somewhere.
I mean, the more we can all blend in together so there’s no differentiation between us, the sooner we can turn all our products and services into mere commodities! Think of how energizing that will be to our customer service people and to innovative thinkers if we have any working for us!
We’d save money by not traveling around looking for Best Practices because there wouldn’t be any. And then, with just a little effort, we can brow-beat our suppliers to get their prices down too and soon they’d be just like us making no profit whatsoever. If we all stick together we can do this! Come on America! Give me an ‘A’…
Oh, for crying out loud. Companies get in trouble when they take well-sculpted plans and change them every five minutes based on the wind direction and the goat entrails at Delphi.
I agree. Target should stay the course. At the moment, with the value proposition they promote, they appeal to a broader audience than their competitors. There is no one that I’m aware of, or have heard or read about — regardless of demographics — who does not view Target as a “cool” place to shop. Combine that with their attractive pricing, and you have a place that has effectively distinguished itself, appeals to a broader audience than the other MM outlets, and even offers a feeling of being “with it” to those who shop there. Target, hang tough. This too shall pass.
I agree with Mr. Deeb above. Target needs to stay the course. If a company starts shooting its mouth off about being price competitive with Wal-Mart, then Wal-Mart will bury them. Wal-Mart has released its 850 “Will Not Be Beat” list of items so consumers know they will always be the lowest price at Wal-Mart. Consumers expect Target to be higher and I doubt pricing is the primary reason for anyone who shops there. So I see no reason for Target to be concerned. Target still needs to find a way to help consumers understand that they do sell groceries at SuperTarget. That side of the store is still a ghost town at many SuperTargets.
I doubt Target does price checks at every single one of its competitors within a 5 mile radius. If they do, they have a very limited definition of the word “competitor.” No company is going to waste time and resources checking prices at Kmart and other low volume “also rans.”
Target newspaper ads already shout price. Furthermore, customers aren’t easily fooled for very long. Target has millions of customers who already know the prices very well compared to the competition. Many Target items are frequently purchased — health and beauty aids, foods, batteries, etc. — so customers learn many prices without trying, through repetition.
Target doesn’t need to fix what ain’t broken.
Target has substantial growth plans over the next several years. The number of stores they plan to build and open is staggering for anyone else besides Wal-Mart. My concern is far less on the perception of their price image but for their ability to sustain growth with consistency.
Price won’t be a consideration if their experience and environment is diluted. That’s their position in the market. It’s not about price. Those who shop Target and will consider shopping there will make that decision on the basis of the value of the entire shopping experience. Their greater risk is maintaining consistency throughout the aggressive growth phase. What I have seen so far in my own area does not leave me optimistic.
Let’s do the math. Target has 1351 stores which includes: MS-3; AR-4; WV-4; AL-11; LA-11
Target’s not making the investment in Wal-Mart strongholds because these states don’t fall into their prime demographic. They’ve invested in the Northeast heavily and purchased all the advertising recently in the New Yorker magazine in anticipation of their Staten Island store opening in March of ’06. Remember, Target came out to California and made a name for itself long before Wal-Mart was there.
I think of New York and L.A. for fashion before I think of small town cheap chic…
Why change when it isn’t broken? What is working, leave alone!
Target is micro marketing to the neighborhood financial gurus. Marketing brought Target to its point of difference, and
continues to reinforce its strong niche position. Hmmmmmmmmm
There are “Wal-Mart People” and “Target People.” By and large, I think that shoppers have already sorted themselves into these categories, and assigned value to the intangibles of each.
Target’s image is not low price. Target’s image is “fashion,” “cool,” “fun,” “trendy” and “higher quality than typical discount stores.” Positioning itself on price in promotions is not consistent with that image. Target should not raise prices. Emphasizing “value” or “company contributions to the hurricane relief efforts” would be consistent.
I am a marketing student and, for my own personal interest, I price compare on several hundred items from Target and Wal-Mart – regularly. What I have found in my local area might astonish you. Upon selecting about 150 items in health and beauty aids, cleaning supplies, food, cosmetics, and pets, I discovered that Target and Wal-Mart had prices within several cents of each other on almost every item, with several items significantly lower at Target. Our trade area serves a metro area of slightly over 200,000 people, including well over 50,000 college students living within 3.2 miles of the Target/Wal-Mart power strip on Archer Road. The Target does quite well, and we all feel as though a second Target should be built in our area.
This pricing regime leads one to conclude the “Expect More. Pay Less” slogan holds true. Better value for the consumers exists at Target. (Less waiting at the checkouts; great guest service; efficient logistical flow; and price competitiveness.)
Target should remember: Do not scream out your low prices, or else the dirty mass of the commons shall come, and ruin the clean, organized stores the company has worked so hard to keep great.