Target Wins Customers With REDcard Discounts, Exclusive Designer And Glamorous Groceries

Despite a weak economic environment, Target (NYSE:TGT) has been able to hold on to its growth through innovative marketing strategies and promotions to attract customers. Target’s REDcard reward program has been a big success for the retailer as customers are increasingly signing up to take advantage of discounts and promotion.  The company has also partnered with famous designers and singers in the past to exclusively sell their clothing collections and music albums, which has drawn customers and elevated its brand image. More recently, the retailer has started to aggressively market its groceries business through ads that makes shopping for something as mundane as groceries look attractive and fun at Target.

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REDcard Reward Program For Value-Conscious Customers

Following the economic downturn, U.S. shoppers have placed greater value on promotions and discounts for shopping. Since its launch approximately two years ago, the REDcard loyalty program’s 5% saving scheme on every transaction has been effective in driving store traffic and sales.

Target’s REDcard’s is popular and the company reportedly saw about 50% higher sales from households that began using the REDcards in the third quarter of fiscal 2012. ^[1] This implies that the customers using REDcards are now buying more. In the same quarter, approximately 14% of the retailer’s sales came from REDcard purchases. ^[1] Moreover, this figure was nearly three times more than what it was two years ago. This indicates that the value-conscious customers are switching to REDcard for shopping at Target, and once they are signed up, they are buying more with their REDcard.

Exclusive Designers, Musical Artists Deals

Target is known for its innovative ideas to make its product offerings more appealing to the customers. Under one such program known as “Shops”, the retailer offers limited edition collectibles from different boutiques across the U.S. The retailer had previously partnered with Jason Wu, a Taiwan born women’s wear and accessories designer. The designer created a 50-piece exclusive collection of women’s apparel, handbags and scarves, which sold out within hours. During another such partnership program with top design house Missoni, Target’s website crashed due to heavy traffic at the launch. Target’s recent partnerships with Neiman Marcus and 24 other famous designers in the U.S. will further enhance its offerings. ^[1]

Additionally, Target had partnered with Grammy award winning singer Norah Jones, to exclusively sell her album, Little Broken Heart. The retailer also offers special selection of musician Emilio Estefan’s favorite music, movies and books titled, “Emilio Estefan’s picks”. Similarly, Target is also offering exclusive music albums of artists P!nk, No Doubt, Rod Steward and Taylor Swift. ^[1]

With exclusive product offerings like these, Target has been able to elevate its brand image and attract shoppers to its apparel offerings and music selection.

Glamorous Groceries

To promote the retailer’s expanded food assortments at many of its stores, Target launched an experimental ad campaign. In its new ads, the retailer portrays food as fashion accessories in an effort to make shopping for food seem more glamorous and fun using models and bright colors. For instance, one of the ads features a model standing besides cake mix boxes and blueberry muffins exploding in different colors. ^[2] The campaign will include eight television ads, newspaper inserts, a digital short film for online channel and three different ads for radio. ^[2]

The goal here seems two-fold. Target wants customers to know it has food items for sale that can help drive traffic similar to strategies Wal-Mart and drug retailers like Walgreen and CVS have used. In addition to this, it makes the shopping experience look more attractive and fun than your typical groceries shopping trip in a joking manner that plays on how cosmetics, personal care items and apparel are often marketed.

Our price estimate for Target stands at $60, roughly in line with the market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Target’s Q3 fiscal 2012 earnings transcript, Nov 15 2012 [↩] [↩] [↩] [↩]
2. Target Ad Campaign Puts Groceries In The Spotlight, CBS News, Jan 4 2013 [↩] [↩]