From “Expect more” to “Pay Less”
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Q.1: What microenvironmental factors have affected Target’s performance over the past few years?
Over the past few years, following are the factors that have affected Target’s performance:
Competitors: Walmart’s distinct strategy of providing products at a very low price, resonated with consumers in the economic crisis of 2008. This led to Target’s decline in market share as Wal-Mart had a huge microenvironment affect as a competitor as the low cost store.
Customers: As the recession hit, unemployment rose and people started becoming more responsible with money, the consumer priority changed from fashionable to budgeted purchase. Since Target was known for style, fashionable in slightly higher price, in the end, they hurt themselves. Target should have done a lot better of a job in providing customer value and satisfaction than Walmart. Customers would have stayed loyal if valued and satisfied.
Publics: Target had a falling out among its various stakeholders, with the activist shareholder William Ackman, whose company lost 85% of the $2 billion invested in Target. Ackman not only chided target for
being ineffectual in dealing with the abrupt economic downturn but also accused the Target’s board of directors to be inexperienced and so, went on to ask to control 5 of the board’s seats.
Operations: Target made two significant operational changes. Firstly it brought up “mini grocery stories” which carried a narrow selection of 90% of the food categories found in full-size grocery stores, including fresh produce. This led to customer convenience, saving their time and effort. Second, they surprised everyone by discarding
the bulls-eye, replacing it with big, colorful, upward pointing arrows on a white background, with the new brand name, “up and up”. The intention was to attract new customer and therefore get more of market price, with their priced at 30% lower than the comparable name brands.
Q.2: What macroenvironmental factors have affected Target’s performance during that period?
Economic factor was the macroeconomical factor that affected Target’s performance during that period. The economical condition over the last few years since 2008 was rough as the economy was in recession and inflation was on rise. With rise in Unemployment, people started to have a newfound sense of frugality and monetary responsibility. This led Target to formulate its “Pay Less” strategy and stress aggressively on it.
Q.3: By focusing on the “Pay Less” part of its slogan, has Target pursued the best strategy? Why or why not?
Target has been doing things right since the beginning. They were the first to build
themselves on a very diversified and unique strategy and way of business. They set themselves apart and succeeded as their slogan “Expect More. Pay Less.” took off
and had customers in love with their chic in products. As they reached a peak they made one small mistake and that was stressing too much on “Expect More” only.
When the Recession hit, customers were low on funds and thought that shopping at Target would be too much of a treat or fancy, and/or “More” expensive then what they can afford. They chose the right strategy to use, but definitely the wrong time to enforce it.
Q 4: What alternative strategy might Target might have followed in responding to the first signs of declining revenues and profits?
As Target’s CEO Steinhafel conceded that the retail giant’s Value Proposition was
not as strong as that of its rival – Target could have made much effort in changing the customer perception. Their motto “Expect More” “Pay Less” could be used with the current strategy to let customers know that they deserve better and/or
higher quality clothes, appliances, and other products, which other stores do not provide. Like adding, “You Deserve it” at the end of the current motto will have people thinking and saying “Do I?” (Most people with a decent salary will always
believe they do and spend the money) This might make it possible to tap into a completely new market segment.
Q 5: Given Target’s current situation, what recommendations would you make to Steinhafel for his company’s future?
Most of the customers in a retail store’s target market love to save money no matter what economic stage, I recommend that Target would give more coupons out in newspapers and/or offer more discounts in store like a store membership card. With the card, the customers apply for and are able to save money and receive offers that non-cardholders are not able to receive. With these benefits, the customers will feel more self-valued, greater worth, and satisfied. This in the end will create loyal customers and will go on to bring in new customers. Moreover, keeping in mind the fashionable concept with which the customers make Target distinct than others, Steinhafel should keep up the designer products perhaps with more sustainable pricing.