Marketing 361

Phase 2
Target Corporation, Group 12

Hoffman, Celeste M.
Kovacs, Matthew V.
Seeber, Nicholas G.
Shockley, Grant P.
Vlahos, Matthew P.
Target Corporation is a Department Store Industry leader. However, there are still challenges and
opportunities in marketing for the company. This document will further develop and cover the retail
industry operations, further detail the company’s top three targeted markets, and include problems Target
faces with reaching these markets. This will provide a basis for further discussion on solutions Target can
incorporate.

Target Corporation & The Department Store Industry

Target is currently in a transition between industries. While Target began its initial operations in the
Department Store Industry, NAICS code 45211, the company is expanding its operations to include
grocery products (Hiner, 2020). This would shift the company into the Warehouse Clubs & Supercenters
Industry, NAICS code 45291. However, as noted in Target’s latest annual report, the main streams of
revenue are derived from the departments of beauty and household essentials, and its apparel and
accessories (Financial Highlights, 2018). The departments respectfully represent 24 percent and 20
percent of the company’s revenue. These departments belong to the Department Store Industry and
provides the distinction for Target to be classified fully under the NAICS code 45211.

Description of the Industry

The Department Store Industry in the U.S. is in the declining life cycle phase (Hiner, 2020). The
industries' overall economy contribution is forecasted to decline at a rate of 5.4 percent in the next four
years. This decline along with the anticipation of U.S. GDP to rise by 2.1 percent over the following four
years describes the industry's current life cycle. Much of the revenue in this declining industry is being
directed towards one-stop-shop companies, and Target is currently becoming one of those companies.

While Target's current revenue streams are derived from the Department Store Industry, the industry
overall is noticing a decrease in the number of establishments (Hiner, 2020). The number of companies
has declined at an annual rate of 1.9 percent in 2019. Large industry companies such as Sears Holdings,
JCPenney and Macy’s have been forced to close 150, 138, and 68 brick and mortar stores respectively
(Report says, 2017). This decline in stores and the number of companies show that much of the
competition is concentrated among a few major companies.

The companies that can offer consumers a large number of products allow for control of the industries'
market share. As of February 2020, Target controls 41.8 percent of the industry's market share (Hiner,
2020). This can be derived from the large number of products the company offers, and the many channels
Target offers its products. However, competition is not only on the offerings a company provides
consumers. E-retailers such as Amazon, and warehouse companies such as Walmart are pressuring
department stores to stay innovative to compete. From this outside industry competition, Target is
innovating on offering “small-format stores in urban areas” (Target to Bring, 2019) and also offering store
pick-up to remain competitive. Target and the industry’s competition not only utilize their products and
innovation techniques, but also the industry trends.

Industry Trends
The Department Store Industry becomes highly competitive in the annual fourth quarter. As stated in
Target’s 10-K 2018 report, much of the sales revenues occur in this quarter due to “the November and
December holiday sales period” (Target 10-K, 2018). Target is a leading company in the industry by
offering many of the seasonal products consumers are looking for. November and Black Friday have seen
Target and comparable company’s sales continue to increase. Comparing 2019 and 2018, sales grew 1.4
percent in the November and December holiday season (Target Posts, 2020). While industry sales are
concentrated around the fourth quarter, offering products that consumers demand brought Target into a
leading position within the industry.

As stated, much of Target’s sales derive from the company’s beauty and apparel departments. These
departments incorporate many of Target’s unique brands. Offering consumers its own in-house brands of
Sonia Kashuk and Smartly in cosmetics, while offering apparel brands such as Wild Fable and A New
Day (owned brands, 2020). In total, Target offers 42 unique private brands that are targeted towards its
main consumers. The company also offers products through partnerships with brands such as Quip and
Native in cosmetics, and Vineyard Vines in its apparel departments (Brand Portfolio, 2019). These unique
products and brands at Target are selling points for its targeted markets, women between the ages of 20
and 40, and children ages 6 to 13. Target's brands and its slogan of “Expect more. Pay less,” have given
the company a unique selling point for its targeted markets. Using its brands during the holiday season,
offering innovative and pickup options for consumers allow Target to stay a leader in the Department
Store Industry.

While Target improves its competitive abilities, the company’s competition is not idle. Walmart
announced three new apparel brands in 2019 (Walmart’s private brands, 2019). Walmart also has private
labels in sporting goods and hardware, and the company’s vice president is committed to work “on
consistency of quality” (Walmart’s private brands, 2019). Competition on private labels are also being
seen by e-commerce giant, Amazon. The company announced a new private label, Belei, a new range of
skincare products (Amazon unveils, 2019). These competitors private labels are also targeting Target’s
main consumer markets in the departments of cosmetics and apparel.

Possible Solutions to Marketing Challenges

Target faces 3 main challenges in the application of their marketing strategy:

1. Target needs to keep its customers in their stores as long as possible. Store appeal is Target’s
ticket to longer shopping trips from their customers. The cleanliness of the store and its layout are
factors that contribute to consumers spending more time shopping.

Remodel stores for cleanliness and newness: In order for Target to keep its customers in their stores for as
long as possible, remodeling stores for cleanliness and newness is a potential solution. As previously
stated in Phase 1, Target is remodeling over 1,000 of its 1868 stores by 2020 in hopes of keeping
customers in their stores (Wahba, 2019, p. 128). Cleanliness and newness relates directly to this
remodeling, as well as the layout, floor plan and many other factors that go into remodeling a store.
Making items easier to find in the store by putting them on eye level could be a potential part of the
solution of remodeling stores because it tailors to their guest’s psychological needs. Overall, this is just
one solution to address this main challenge.

Create more guest-friendly layouts: Creating layouts in their stores that their guests find pleasing is a way
for Target to increase the likelihood of their customers making an impulse purchase while shopping. A
retail store’s layout positively influences consumers’ positive emotional responses which leads to them
being more likely to exhibit impulse buying behaviors (Barros, 2019). As stated in our Phase 1
deliverable, customers spending a longer time in store makes them more likely to make an impulse buy,
and as evidenced here, impulse buy behaviors are enhanced further by having a pleasing layout.

Emphasize customer app use in-store: Emphasizing customer use of the Target Circle app will increase
customer access to deals, which can be targeted using collected data, on luxury items that would usually
be impulse buys can push customers to purchasing those products more regularly. The Target Circle app
currently offers “hundreds of deals” with some of them being advertised as targeted deals, along with
percentage back rewards that only 27 million Target customers are making use of (Target Circle, 2020).
Encouraging Target customers to use the app on every shopping trip will increase the value those
customers get at Target while also increasing the likelihood of those customers making impulse buys.

2. Data mining has been an invaluable tool for marketing to consumers and Target has taken
advantage of their access to their customers’ data in the ways they market. The everpresent
challenge with using customer data in marketing is that companies must collect and use that data
without offending their customers. Now, more than ever, it is imperative for companies that
collect and use customer data in their marketing to remain transparent with their customers.

Push customers to where they will have already agreed to Target’s Privacy Policy: Earlier in this
document, the importance of encouraging customers to use the Target Circle app has been discussed.
Another boon for Target that comes from their customers using the app when making their purchases,
both in-store and online, is that a customer must agree to the full terms and conditions of the Target
Privacy Policy which includes an agreement on how Target can collect and use customer data (Target
Privacy Policy, 2020). Target can more easily direct their customers to the terms of Privacy Policy when
their customers have agreed to it and continue to use the app.

Communicate how customer data is being used to provide benefits to customers: Helping customers
clearly see the benefits they receive from sharing their data with Target will make customers more willing
to share their information with Target. Data-mining is an effective approach for companies to collect
customer data, but companies do not develop the more personal customer knowledge management aspect
of data collection (Zhang et al., 2019, 6335). When showing a targeted ad, including text on screen
indicating that the product was shown to the customer due to collected data on their shopping preferences
would help Target develop their customers’ knowledge of the benefits of Target’s data collection.

Allow customers to opt out of specific types of data being collected: If customers could select what types
of data they are willing to share with Target while denying access to any other data, customers would
perceive Target’s data collection policy as more transparent. Target has their data collection segmented
into 14 different data points in their Privacy Policy (Target Privacy Policy, 2020). Implementing an option
like this might look like selecting “Privacy options” under the Target Circle app’s Privacy Settings, and
then seeing a newly created option like “Choose What I Share”that would travel to a page with different
selectable checkboxes for each of the 14 types of data that guests can share allowing them to only share
what they want to share with Target.

3. For retail companies like Target, the low pricing strategy continues to be critical in attracting
consumers. It is a constant marketing struggle for Target to keep up with its competitors, like
Walmart and Amazon, in the low price retail market.

Increase prominence of the already existing Price Match Guarantee: Since low pricing strategies continue
to be critical in attracting consumers, one solution that could combat this issue would be to increase the
prominence of the already existing Price Match Guarantee. For example, Target could make the website
for their Price Match Policy more readable to the consumer. The Price Match Guarantee page on Target’s
website is full of legal jargon and a list of details of what it entails. Making an easier to read version,
while keeping the old document, could prove beneficial to the company by minimizing the time that a
consumer searches for the right price. Also, Target could implement signs in their stores that detail their
Price Match Guarantee policy. With over 30 million visitors in store and online, displaying more
information on our Price Match Guarantee could work as a possible solution to competing with the low
pricing strategy of other companies.

Emphasize ways that customers can shop at Target with the lowest cost to Target possible: In order to
compete with other companies on their low pricing strategies, such as Walmart and Amazon, Target could
emphasize ways that customers can shop at Target for the lowest cost. For instance, whether it be online,
through the application, or pick up in the store, Target should let its customers know how they can get the
best price when shopping with Target. As spoken about in USA Today, by Paul Davidson, speaks that
generally prices between online and in-store pricing are similar however cater to different products
(Davidson, 2019). So, in order for Target to emphasize ways that customers can receive the lowest price,
Target should differentiate the benefits of buying an online or by going in-store to make a purchase by
publishing details of which items are best for each purchase avenue.

Emphasize commitment to the US as Target stores are not worldwide: As stated before in Phase 1, Target
is not a global organization in terms of store locations. Target has all of its 1,868 stores here in the United
States. Unlike Amazon who ships to place all over the world, as well as Walmart who has stores in
several other countries, Target can use this fact as an opportunity to illustrate its commitment to the US.
Competing for low pricing strategies can be difficult in the retail business, however, if a company clearly
advocates that they have loyalty to its customers, the customers are more likely to be loyal to them. So,
Target could adopt a version of a nationalistic approach to their marketing in order to show its
committment to its loyal American consumers. Without branching out globally, Target has an opportunity
to capitalize on their sole focus being their stores in the USA. This is a potential solution into combating
the main issue of attracting consumers in the midst of low pricing competition.

Target Market Segmentation

Using the NAICS code 45211, we gathered data on IBISworld to identify our top-3 target markets in our
previous deliverable as women between the ages of 20-40, young men and women in their 20’s-30’s, and
children between the ages of 6-13 within family units. Those target markets are also our primary,
secondary and tertiary markets, respectively. According to Business Insider, the average shopper at Target
is a white female who makes approximately $69,000 annually (Pederson, 2016). The same study also
concluded that Target attracts the highest number of millennial shoppers than any of its competition.
Using data from the US Census bureau, we were able to quantify each target market and divide those
target markets into segments in order to effectively market Target’s brand (US Census Bureau).

The next step was to segment each of the target markets. Income made the most sense as our first segment
since that tends to be the biggest deciding factor when choosing which store to shop at. We chose an
average household income of more than $50,000 because Target has a consumer perception of being a
more premium shopping experience than Wal-mart or Kmart. The same Business Insider article also
states that as median household income increases, shoppers are more likely to turn to Target or Kohls than
Walmart, Aldi, and Kmart (Pederson, 2016). The needs and characteristics of this segment reflect a
consumer base that is considered middle to upper-class. These consumers want a shopping experience that
feels premium, but has competitive prices. Consumers are not looking to purchase luxury items at a
Target, but rather necessities and commodities under $1,000. For our primary target market, the median
household income segment is approximately 27.8 million consumers. For the secondary target market of
males and females in their 20’s - 30’s, the median household income segment is approximately 54
million. For the tertiary target market, median household income is roughly 29.9 million consumers.
Please see figure 1 on the attachment page for more information. We recommend a differentiated
marketing strategy for this segment because median household income does not define consumer patterns.
Due to the diversity throughout the United States with various cultures and backgrounds, targeting
specific groups within our segmented income bracket will help reach the most customers effectively.

The next segment we chose was Ethnicity, which we decided should be Hispanic consumers. Target holds
15% of the market share for Hispanic consumers making it the most popular choice of store for Hispanics
in the United States. Additionally, Hispanics are the single largest consumer in terms of spending in the
US, so it makes sense to tap into the potential. The consumers in this segment are also looking for
necessities and commodities under $1,000. However, Hispanics are more likely to do their shopping in
one place, which would include groceries, laundry detergent, household amenities and toys (Olguin,
2013). Target can market as a company that has “one-stop-shop” stores where consumers can walk in and
get all of their weekly shopping done at once. For the primary target market of females ages 20-40, the
ethnicity segment of Hispanic is approximately 5.1 million. For the secondary target market, the
approximate number of consumers in this segment is 9.9 million. For our tertiary target market, the
number of Hispanic consumers as children within a family unit is 5.5 million. Please see figure 1 on the
attachment page for more information. We recommend a concentrated marketing strategy for our
Hispanic ethnicity segment because Hispanic consumers are a well-defined and well-understood market.
We can extrapolate that due to the importance of culture and tradition, most Hispanic consumers within
the respective target markets will respond similarly. A marketing mix can be used to target Hispanic
consumers as a whole and does not need to be further segmented.

Our third segment we selected was geographic location. Though Target is attempting to expand its online
presence to compete with other online retailers, the vast majority of its revenue comes from in-store sales.
Therefore, targeting a region of the US with the largest number of Target store locations makes the most
sense. According to Scrapehero, the Northeast has the most stores, and is the most concentrated, out of
any other region in the US (Scrapehero, 2020). The Northeast is a very diverse location in terms of
ethnicity and socioeconomic standing. However, the region is very seasonal which means it will be hot in
the summers, and cold in the winters. Target has an opportunity to implement a seasonal marketing
strategy that changes depending on the time of year. Due to the population density of the area, consumers
have a lot of choices in terms of which store they will shop at. Differentiating Target from its competition
will be very important in this region. For our primary target market, the number of consumers in the
geographic location of the Northeast is 893,000. For our secondary target market, the approximate
number of consumers in the northeast between the ages of 20 and 40 are 1.73 million. For our tertiary
target market, the number of consumers in the Northeast is approximately 963,000. Please see figure 1 on
the attachment page for more information. We recommend a differentiated marketing strategy because
geographic location does not define race, ethnicity or socioeconomic standing. Due to the vast diversity of
people within a geographic location, specific segments must be targeted in their own specific ways.
Target cannot market to the Northeast as a whole, but must rather further segment this group by
implementing specific marketing mixes.
Attachments

Primary Target Mkt Secondary Target Mkt Tertiary Target Mkt

Target Description Women between the Young men and Children between the
ages of 20-40 women in their ages of 6-13 within
20s-30s family units

Initial (N) 46.3Million 89.8Million 33.1Million

Segment Basis 1 27.8Million 54Million 29.9Million

(income >$50k/yr)

Segment Basis 2 5.1Million 9.9Million 5.5Million

Ethnicity (Hispanic)

Segment Basis 3 893,000 1.73Million 963,000

Location
(Northeast)

Final N (True <900,000 <1.75Million <970,000

Target Market Size)
Figure 1

SWOTT Analysis

Figure 2
 Strengths Weaknesses

Target Corporation is an Industry leader with
nearly 2,000 stores across the US, as well as an
online platform. It retains many loyal customers
and appeals to the younger, hip generations with
chic offerings within their owned brands.
Perceived quality is higher than competing stores.
Target has higher prices than competing stores
like Walmart and Amazon. It has gone through a
few scandals, including a data breach in 2013 that
exposed many customers’ personal data. It has
one center in India, but otherwise lacks in national
presence after failure of store openings in Canada.

Opportunities Threats

E-commerce has a large opportunity for growth,
especially with the Target mobile app and online
site. Grocery services, delivery and in-store
pickup options continue to bring Target to the top
of the competition, bringing high-quality service
to people of all backgrounds with an everyday
low price. Greater spread of stores is iminent for
growth.
The department store industry is turning away
from physical stores, bringing a focus to online
shopping more than ever before. Constant changes
to the internet and product availability and
services are necessary to keep up with the
advances in the market. Online shoppers use
prices as a driving factor for purchases, so pricing
has become key for retail stores like Target.

Trends

Online shopping has become a bigger and bigger trend in recent years; the convenience of a service is
highly in demand. People want to simplify their day by simply picking up an order rather than spending
the time in-store to shop, making impulse buys less common since people are just directly searching for
their needs, not walking by enticing displays as much. Data collection by big stores is a major help in
identifying and targeting ads to different types of consumers, a trend on the business side of things. One
of the biggest current trends is customization of products and processes in order to tailor experiences
to very specific customer needs.
Figure 3

Suggested Problem Solutions

Problems: Solution 1 Solution 2 Solution 3

1. Time Spent Remodel Stores to improve Create more guest-friendly Promote use of Target
in Stores Cleanliness and Novelty layouts in stores App in stores

2. Sensitive Normalize use of Target App Use transparent Create easy ways to
Data and therefore, agreements to communication to inform opt out of different
Collection Terms & Conditions guests of data usages by data collections if
allowing data collection Target unwanted

3. Maintain Promote awareness of Price Emphasize shopping habits Advertise commitment

Lowest Prices Match Guarantee to guests with the least cost to Target to the US
Figure 4
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