Target is Ready to Make a Move
Target has been keeping costs down in the first half of the year by managing
its inventory and limiting marketing expenditures. At the same time, the
chain has shifted its emphasis on value with a more concerted push on everyday
Now, with back-to-school in full swing and Halloween and Christmas approaching,
Target is spending substantially more on marketing to get consumers shopping
in its stores and on its website.
Douglas Scovanner, Target’s chief financial officer, said in a recent earnings
call, “We expect to spend more as a percent of sales in Q3 and Q4 this year
than we did last year. For the year, our marketing plan is right on. But
we have saved some money here in the front half for the expressed purpose
of being able to invest it in the back half.”
According to an AdAge.com report, Target believes that it is making
inroads in getting consumers to buy into the second part of its “Expect more.
Pay less.” tag line.
Gregg Steinhafel, president and chief executive of Target, said a price
matching test program in Denver and Orlando has been successful.
“We think this will be a terrific credibility builder and marketing umbrella
to reinforce that we have strong values both every day and on sale,” said
“We’re starting to see slight basis points improvement in our price perception
vis-a-vis where we were in prior periods,” he added. “So, we believe that
we’re on the right track. We have made the right adjustments. [We] believe
that over time we’ll continue to narrow that perception gap.”
Brian Sozzi, an equities analyst with Wall Street Strategies, is also seeing
some positives from Target. In a note to investors, he wrote, “Customer perception
regarding Target’s value in the marketplace has begun to tick higher. This
is critical as consumers consolidate store visits and focus on one-stop shopping.
The trick is to bring these customers in now, gain their loyalty through
a strong consumables offering, and then have them browse and buy discretionary
merchandise once the economic coast is clear. With a rise in the value perception,
spearheaded by the revival of a price matching program and more effective
marketing, Target’s comps should theoretically strengthen as the second half
of this year plays out.”
Discussion Questions: Are the changes Target has made beginning to pay off
for the chain? Where do you see the greatest opportunity for improvement?
Is Target better positioned than Wal-Mart to prosper as the economy recovers?
- Target Says It’s Poised to Raise Second-Half Marketing Spending – AdAge.com
Corporation Announces Second Quarter Earnings – Target Corporation