1. MGMT 3033W— SECTION 20—SALLY LEDERER
REDcards, Groceries, and Students
Three avenues to achieve sustainable growth at Target
JRSW Consultants—Jonathon, Jaqueline, Alan, Zach
4/29/2013
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JRSW Consultants
321 19th
Avenue South
Minneapolis, MN 55455
612-455-5444
April 29, 2013
Target Case Study Judges
1000 Nicollet Mall
Minneapolis, MN 55403
Dear Target Judges:
We at JRSW Consultants are thrilled about the opportunity to work alongside Target. Our goal is
to make Target the preferred shopping destination for current and future guests. The focus of this
proposal is to increase the frequency of visits and build guest loyalty through all channels that
you serve. We believe that our proposal can enhance the shopping experience for guests by:
Creating a more engaging REDcard loyalty program
Making Target a “One-Stop-Shop” by expanding the grocery section
Building brand awareness in a younger demographic
We look forward to meeting with you to discuss this proposal in greater detail. Please contact us
if you have any questions, comments, or concerns prior to our meeting on May 10th
. We can be
best reached at 612-455-5444 or via e-mail at jrswconsulting@gmail.com. Thank you for your
time and consideration.
Regards,
JRSW Consulting Team
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Anne is a typical Target guest. She is 43. She has 2 children. She works full-time. She is also a health nut. Like the
average consumer in today’s society, she needs to pick up groceries an average of 2 times per week. But as busy as
she is, Anne prefers her local grocery store a few blocks from her house because of the convenience and the wide
selection of grocery offerings. Anne’s trips to Target are much more infrequent—only about once per month to
stock up on home essentials or fill her prescription in the pharmacy.
The challenge facing Target is how to get guests like Anne shopping at Target more frequently and increasing the
size of her basket so that she becomes a loyal guest across all multi-channel platforms. (In-store, .com, mobile)
Executive Summary
Our multi-dimensional solution is designed to achieve the goal of increasing guest shopping
frequency and basket size at Target while aligning with the overall strategy and mission of the
company by providing value, continuous innovation, and an exceptional shopping experience to
the guests in all channels. Our solution focuses first and foremost on the REDcard loyalty
program but as a supplement—we are recommending improvements to Target grocery and a
shift in thinking of the marketing campaign of the target guest.
Improve Guest Experience through a more engaging REDcard Loyalty Program
Currently, the REDcard program focuses primarily on providing value to the guests through the
5% discount, free on-line shipping, and an extended item return period. However, Target guests
are looking for more than just saving a few dollars on their basket or on shipping costs. The
REDcard loyalty program is lacking innovation and the component that improves the guest
experience. Our dynamic re-design of the REDcard loyalty program will feature exclusive
product and service offerings for cardholders, tuition reimbursement for students, VIP access to
Target sponsored events, additional benefits during the holiday season and Black Friday, and
more. These incremental incentives to the REDcard will increase the number of cardholders
nationwide, and ultimately improve profit margins and guest’s satisfaction long term.
Make Target a One-Stop-Shop to Increase Guest’s Frequency and Basket Size
In an effort to make Target the preferred shopping destination for all guest needs, Target has
the opportunity to capture more revenue by expanding its grocery and fresh produce offerings.
Our solution will continue to emphasize converting the rest of the stores into PFresh and re-
allocating floor space in each store to make more room for grocery and fresh produce as a way
to attract more guests into the store on a more regular basis. Although Target will be sacrificing
floor space that yields higher margins, the re-allocation of floor space to higher inventory turn
grocery items will attract more guests in the store more frequently.
Build Brand Awareness in a Young Educated Demographic for Long-Term Growth
Although the primary audience for Target is a guest like Anne, Anne’s children who will be in
college soon make up a secondary audience that deserves a lot of attention. College students
are the future guests and also the guests that yield the highest margins for a long term strategy.
A student’s first year in college is a great opportunity for Target to impress this younger
demographic and start building the Target brand. Our strategy invests in this market segment in
a variety of angles, all of which focuses on Target’s long term growth strategy.
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Contents
Executive Summary....................................................................................................................................3
Improve Guest Experience through a more engaging REDcard Loyalty Program.......................................................................... 3
Make Target a One-Stop-Shop to Increase Guest’s Frequency and Basket Size .......................................................................... 3
Build Brand Awareness in a Young Educated Demographic for Long-Term Growth...................................................................... 3
JSRW Research Approach Methodology .................................................................................................5
Pre-SWOT Analysis.....................................................................................................................................6
Strengths ...................................................................................................................................................................................... 6
Weaknesses................................................................................................................................................................................. 6
Opportunities ................................................................................................................................................................................ 6
Threats ......................................................................................................................................................................................... 7
Pre-SWOT.................................................................................................................................................................................... 7
Recommendation: REDcard.......................................................................................................................8
A more engaging REDcard Loyalty Program................................................................................................................................. 8
Expect even more; pay even less with Target REDcard................................................................................................................ 8
Current Benefits............................................................................................................................................................................ 8
Added Benefits ............................................................................................................................................................................. 8
Structure Rewards Program around what Target guest’s Value .................................................................................................... 9
The Gold Membership.................................................................................................................................................................................9
The Platinum Membership..........................................................................................................................................................................9
The Diamond Membership...........................................................................................................................................................................10
The Student Membership .........................................................................................................................................................................10
Recommendation: Target Grocery..........................................................................................................11
Make Target a One-Stop-Shop to Increase Guest’s Shopping Frequency and Basket Size ........................................................ 11
Profitability.................................................................................................................................................................................. 11
Maximized Merchandising........................................................................................................................................................... 11
Recommendation: The College Demographic .......................................................................................12
Build Brand Awareness in a Young Educated Demographic for Sustainable Long-Term Growth ................................................ 12
Finding long-term value in College students................................................................................................................................ 12
College Students shopping list.................................................................................................................................................... 13
Give them VIP Status during back to school shopping ................................................................................................................ 13
Rewards program for using online shopping ............................................................................................................................... 13
Feasibility Analysis...................................................................................................................................14
Organization and Staffing............................................................................................................................................................ 14
Schedule .................................................................................................................................................................................... 14
Financial Projections:.................................................................................................................................................................. 15
Findings and Recommendations................................................................................................................................................. 17
Organizational:...........................................................................................................................................................................................17
Financial:.....................................................................................................................................................................................................17
Technology:................................................................................................................................................................................................17
Marketing: ...................................................................................................................................................................................................17
Conclusion...............................................................................................................................................188
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JSRW Research Approach Methodology
Through JSRW Consultants 20 years of retail experience and through observing trends within
the retail industry on everything from everyday to luxury goods, the Target REDcard and guest
loyalty encapsulated the natural selection for our strategy. The use of credit and loyalty
programs are increasingly popular in the industry, and in tough economic times and increasing
competition-engaging consumers in more than monetary rewards are key. According to the
2011 Colloquy Customer Loyalty Census, of the $48 billion worth of perceived value in reward
points and miles distributed by American businesses annually, one-third goes unredeemed by
consumers. Companies lose money on time and effort, and customers get no more value from
the businesses to which they are "loyal."
So how do you keep Target out of that one-third segment? How do you convey enough
additional value in your REDcard programs to keep your guests coming back? It’s time for us to
look beyond convoluted rewards systems and offer actual value to customers using our loyalty
program. This proposal will get you started; these are some ideas for customer loyalty
programs that will work for your business.
-The JSRW Consulting Team
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Pre-SWOT Analysis
The pre-SWOT analysis depicts the current state of Target in relation to our proposal. By
examining Targets internal strengths and weaknesses and external opportunities and threats
we have identified strategies for taking advantage of opportunities and reducing external
threats that can impact the organization.
Strengths
Target is known as one of the largest and most competitive retail companies in the U.S. The
Target brand, the color red, and the bull’s-eye logo are recognized by more than 97% of the
United States population. In addition, Target stores maintain a positive image for its store
cleanliness, fashion, and design-forward thinking.
Target also has also leveraged its ability to use social media as a way to interact with guests and
enhance their shopping experience. Facebook and Twitter have allowed Target to gain valuable
feedback from guests which has been used to improve decision making across the organization.
As society has become increasingly hyper-connected online and on-the-go, Target’s IT
department has introduced to its guests a state-of-the-art mobile app and an improved
Target.com platform which have lead to increased sales in the multi-channel space.
Weaknesses
A weakness at Target is seen in their high employee turnover at the store level. The team
members are the image of the store and can make or break a guest’s shopping experience.
Another weakness is that not all Target stores carry a full grocery selection like the ones found
at Super Targets or PFresh. Also, Target has had issues keeping prices consistent across all of
their platforms and their prices tend to be slightly higher than other large retailers.
Opportunities
Target has the opportunity to create a stronger guest community through the REDcard program
by providing guest with rewards and benefits unlike any other competitor in the retail industry.
Team members need to inform Target guests of the additional benefits of the Red Card beyond
the 5% off every purchase; Free shipping at Target.com, ability to manage account online and
on a mobile device, donating to your child’s school, and their ability to track account for
suspicious activity.
Guest should see Target as their one-stop-shop for all of their shopping needs. Target can get
one step closer to that goal by providing a larger food and grocery assortment. Either
converting into the PFresh concept or re-allocating floor space to allow for more groceries and
fresh produce is a great opportunity to grow revenues and achieve Target’s goal of becoming a
$100 Billion company.
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Another opportunity is to look beyond the typical target guest and into secondary markets to
promote their brand. Specifically, Target should take advantage of the young educated
demographic of college students.
Threats
Multi-channel retailing is rapidly evolving and Target must keep pace with changing guest
expectations and new developments of the competition. Target needs to constantly be
innovative with the multi-channel platforms and stay ahead of the competition in each channel.
Another threat is failure to anticipate and respond quickly to changing consumer preferences,
such as the newest style of clothing, or large scale macro trends affecting consumers.
From a sheer competition standpoint, on-line retailing is becoming more accessible and the
market has become extremely saturated. Not only is Target competing with the likes of Amazon
and Wal-Mart but thousands of others across the globe. It is important to understand the
threat of this competition and have strategies in place to hedge against this increasing risk.
Another large scale threat is the overall health of the US economy. The majority of the stores
are located in the United States, making the success of the company dependent on United
States economy.
Pre-SWOT
Strengths
•Superior service
•Excellent brand image and reputation-loyalty 97
% Americans recongize the Bulls eye.
•Social media as a two way communication to
hear customer’s opinions
•Providing the mobile app and Target.com has
catered to those customer needs
Weaknesses
•Different stores have different layouts
•High employee turnover at store level
•Not all Targets carry a full Food selection
Opportunities
•One-stop-shop by providing a larger food
assortment
•Building a community through Target REDcard
•REDcard is a great way to ensure that guests use
the multiple channels
•Increase Private Label Products- higher profit
margin
Threats
•Economic status of the nation
•Technology changes so fast that something new
can overtake.
•Failure to anticipate and respond quickly to
changing consumer preferences
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Recommendation: REDcard
A more engaging REDcard Loyalty Program
Most can agree that everybody loves free stuff, which is why the average household participates
with an average of 18 consumer rewards programs. These loyalty programs have taken over our
wallet, but how do we make the REDcard loyalty program’s guests loyal to Target?
Expect even more; pay even less with Target REDcard
The new platform of the Target REDcard will not change its current purpose or user
characteristics, but it will aim to further engage the current REDcard holders and additionally
acquire new REDcard holders. The new Target REDcard will engage guests in more than just
monetary rewards, but with experiences that will be exclusive to the Target store, website,
mobile application, and the Target brand.
The essential idea is creating experiences for our Target REDcard guests. Many of Target’s
competitors provide money back for purchases throughout the year (Wal-Mart, Amazon) but
some of the most successful loyalty programs, Nordstrom and Saks, provide their customers
with experiences. The ideas listed below provide some very unique opportunities for Target to
differentiate from their immediate competition in a way that will be very appealing to their
primary customer and secondary markets.
Current Benefits
The Target REDcard currently gives guests a 5% in-store discount off every purchase they make
with their REDcard, free shipping on Target.com, the ability to manage the REDcard account
online or on a mobile phone, suspicious activity is tracked and reported, 30 day extended
return eligibility, and the ability to donate to local schools.
Added Benefits
The new card will be a tiered loyalty card of silver, gold, platinum, and diamond; based off the
amount of points earned by transactions and purchases throughout the year.
The point system will be simple:
$1 spent = 1 point earned
$1 spent on Target owned brands = 2 points earned
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Membership Points/Year Additional Reward/Benefits
Silver < 2,000 All current REDcard benefits
Gold 2,000 - 4,999 Exclusive product and service offerings on-line
Select 5K, 10K, Marathon, and triathlon discounts
Platinum 5,000 - 9,999 Select charity matches
VIP access on Black Friday and Holiday Season
$10 In-store store credit for birthdays
Diamond > 10,000 VIP access on Black Friday and Holiday Season
Trunk Show access for designer collection releases
Reserved Seating for Target sponsored events (Holidazzle)
Exclusive Test Panel members to review private label merchandise
Gift baskets with new product samples sent via mail
Limited edition gift with purchases for select merchandise
Student Card All college
student
cardholders
Tuition reimbursement (similar to UPromise)
Access to Target Back to School events
Contests and Prize bags during “Target Run” events
Structure Rewards Program around what Target guest’s Value
The Silver Membership
The Silver Membership is the entry level tier that all card holders will start at. It will include all
of the current perks and benefits that are offered to a REDcard holder.
The Gold Membership
The Gold Membership is the 2nd
tier in the loyalty program which card holders move into once
they accumulate 2,000 points. In addition to every benefit offered to Silver cardholders, the
Gold cardholders will be entitled to exclusive product and service offerings on-line. Gold level
guests will receive discounts on select 5K, 10K, Marathon, and other triathlons. Target will pay a
percentage of the entry fee for races. This initiative is to promote healthy living and fits in
neatly with Target’s corporate responsibility of encouraging guests to live a healthy lifestyle.
The Platinum Membership
The Platinum Membership is the 3rd
tier in the loyalty program which card holders move into
once they accumulate 5,000 points. This level will include the benefits rewarded to both the
Gold and Silver members. In addition, Target will offer Platinum guests VIP access to events on
Black Friday and other Holiday season events. For example, card holders will have access to go
into Target stores an hour earlier on Black Friday and exclusive holiday deals on-line and in-
store. Also, Target will match guest donations up to $100 over the course of the year to select
charities of choice by the guest. This strategy aligns with Target’s corporate responsibility of
giving back to the community for charities that are of interests of the guests.
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The Diamond Membership
The Diamond Membership is the highest tier in the loyalty program which card holders can
attain. Guests will achieve this level once they accumulate 10,000 points. As this is the highest
level Target guests can reach, our solution wants to make guests feel important and exclusive.
Diamond Level guests will be invited to exclusive Trunk Shows that feature the newest Target
Designer collections, like Kate Young, Neiman Marcus, Jason Wu and more. These guests will
have the opportunity to preview and purchase merchandise prior to it being available to the
general public. For Target sponsored events such as the Holidazzle, Diamond guests will enjoy
special reserved seating in the best available locations to watch the parade. Furthermore,
Target will surprise these guests with special gift baskets that include the newest owned
branded samples. Gift with purchases will be given on certain items as well. For example, if a
Diamond level guests purchases $100 dollars merchandise from the Kate Young collection, the
guest will receive a limited edition scarf that is not available for purchase.
The Student Membership
The student membership will be available for current college students. It will be paired with the
levels listed above. Details about separate student benefits can be found on page 10.
Turning your loyalty program into a game is a fun way to encourage repeat customers and help
solidify your brand's image. The following are 2 examples of incentives to run during Back to
School and 4th of July. Players would choose one of four checklists and have a 25% chance of
winning a free Target gift card, Target REDcard credit, or other Target Merchandise.
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Recommendation: Target Grocery
Make Target a One-Stop-Shop to Increase Guest’s Shopping
Frequency and Basket Size
Although Americans spend about 10% of their annual income on food, supermarkets and
grocery stores do not make much off of each customer's bill. However, some items in a
supermarket can have a huge margin. Increasing the amount of floor space for grocery in Target
locations will increase the inventory turn for grocery items, the frequencies of guest’s shopping,
and therefore increase traffic in other more profitable areas of the store. These factors
combined will increase revenues at Target and Super Target stores and further propel the idea
of Target as a ‘one stop shop.’
Profitability
The average supermarket has a profit margin of about 1 percent, according to Stacey Vanek-
Smith of National Public Radio. Some experts suggest this figure might be as high as 3 percent.
Either way, supermarkets are a volume business: selling mass amounts of low margin necessity
products. Target will make up for its low margin by selling large quantities of product and
drawing customer into other more profitable areas of the store through store layout and
merchandising tactics.
Maximized Merchandising
Anne has been converted into a Target grocery shopper. She runs to Target after work on her
way home to her family to pick up some essentials for dinner. While she is in the store she buys
ground turkey, Archer Farms pasta and pasta sauce, milk, Chobani yogurt, and eggs. While she
is walking to the checkout she sees an advertisement for new Essie summer nail polish colors,
she picks up 2. Aveeno lotion is on sale, and when you buy 4 you get a $5 gift card. She grabs 4,
one for each member of her family. Nature Made multivitamins are also on sale, Anne selects
the Men’s Health for her husband, Women’s Health for herself, and VitaGummies for her sons.
While in the actual checkout line she grabs 2 packs of Energizer batteries and 3 magazines. Her
purchase has been converted from under $50 to over $100.
Target has about a 70% markup on batteries and other impulse buys like magazines because it
wants to take advantage of the rash decision to purchase these items. Target has mastered the
art of merchandising and it continues proves to be effective with huge differences in mark-up
sometimes occur within the store.
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Recommendation: The College Demographic
Build Brand Awareness in a Young Educated Demographic for
Sustainable Long-Term Growth
The primary target audience is a guest like Anne—who we met earlier. Currently Target is
emphasizing providing value and convenience to her. However, her children will both be in
college soon and Anne would love nothing more if she knew could depend on Target to be a go-
to place to shop for her children when they leave for college. Her children, and other college
students are the future guests and our recommendation is to invest and market towards this
segment through a variety of angles which will help to build brand loyalty and drive growth for
Target long term.
Finding long-term value in College Students
Once a student opens up a REDcard they will have the opportunity to sign up for a student
account online through their university that will give them exclusive savings and access to
events that only they can receive with their student REDcard account online. Students will still
keep all of the other REDcard benefits such as free shipping, 5% in store discount and extra 30
day return. We hope by offering this account we will be able to hook students by making their
everyday college essentials more affordable. By doing so we hope that once they find Target to
be there one-stop-shop in college they will continue that habit for years to come.
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College Students Shopping Lists
For the average student, college is the first time they are on their own and have to shop for
themselves. We hope to make the transition of shopping independently a seamless experience.
Students’ value convenience and affordability as many are on a tight budget. Through their
student account they will be able to create their shopping list online before they enter the
store. The student will have access to his or her account through the mobile app or target.com.
The mobile app and target.com will know that they are a college student and push deals geared
to that demographic while promoting owned brand items such as Up and Up. Once students
make their shopping list it will be automatically updated to their smart phone app so they can
take it to the store with them when they shop. There will also be the option to have items that
can be delivered for free to their home as one of the benefits to the REDcard.
Give them VIP Status during back to School Shopping
We want to make Target the preferred location for students as they shop for back to school
supplies and living essentials. During the months of August and September students will receive
5% on all items related back to school and an additional 5% back toward funding their tuition.
The 5% back on tuition will be sent back to a college savings account linked through their
REDcard. There will also be incentives to order earlier on-line through Target.com as savings
will start out high during August and decline closer to the start of school. There will be student
nights advertised at certain Targets close to campus where students can receive double the
savings on items with their REDcard. So instead of 5% saving they will receive 10% on
designated items.
Rewards program for using online shopping
We know not all college students have a car or have time to go to the store. On top of that,
generally, the younger college generation is tech savvy. For this reason, we recommend to
pushing mobile app and .com usage for college students and incentivizing them to use it
beyond the above stated benefits.
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Feasibility Analysis
Organization and Staffing
The new REDcard campaign is not anticipated to significantly affect the organizational structure
of the company. There are, however, additional training costs required to successfully educate
team members how to better promote the REDcard.
The re-design of floor space to add more groceries and produce will result in increased costs. It
will not require any restructuring of the organization from a strategic standpoint, but it will
require resources to make that design happen.
Schedule
The revamping of the REDcard campaign is expected to take six months from project approval
to launching and implementing the new REDcard loyalty program. The base of this project
already exists, as there are many REDcard users already. Once this project is approved, project
teams both in the business and IT will meet to gather requirements, define specifications, and
create the point and tier system. There will also be design requirements necessary from an
internal CRM and to the guest facing mobile app and .com platforms.
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Additional training for store level team members will be required for the new REDcard
campaign to be a success. This initiative is expected to take six months to implement as well
because it is intertwined with the new REDcard program. Additional training will not be hard to
implement; as Target team members already have to go through training. It will be necessary to
add this training into the regular training protocol for new team members, alongside taking
some time to train current employees.
The following schedule highlights significant milestones for the two programs:
June 1, 2013
Develop a project charter and start to gain support and buy-in from senior leadership
July 1, 2013
Project kickoff meeting, continue to gain support and buy-in from senior leadership
August 1, 2013
Start gathering requirements, creating rewards program, building design specs, analyzing
business process and IT infrastructure changes
September 1, 2013
Finalize edits made to REDcard system processes and begin re-training of current team
members, begin a marketing campaign to advertise the new REDcard
October 1, 2013
Pilot program in select stores and gain feedback from test groups. Make additional changes
November 1, 2013
Launch program nationwide
Financial Projections
The financial projections for the new REDcard loyalty program and team member training
intertwined with it are highlighted in the table below. These figures account for online and in
store sales projections, promotional costs, increase of multichannel use, additional training
costs, increase to REDcard, increase of grocery sales, increase of store visits by a younger
demographic and REDcard users.
The assumptions for these projections are as follows:
• All milestones are performed in the first year and in accordance with the schedule
• All transactions are closed yearly with no carry-over to subsequent years
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Measure Year 1 Year 2 Year 3 Year 4
Online Sales Projections
(millions of $)
250 300 350 400
In Store Sales Projections
(millions of $)
70,000 80,000 100,000 120,000
Promotional/Advertising
(millions of $(
10 8 4 2
Increase of Multi Channel Use
(%)
5 12 15 22
Additional Training Costs
(millions of $)
10 6 3 2
Increase of REDcard users
(%)
10 20 25 30
Increase of Grocery Sales
(%)
10 25 30 35
Increase of Store Visits by
younger demographic (18-24)
(%)
8 12 20 20
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Findings and Recommendations
Based on the information presented in this feasibility study, it is recommended that Target
improves their REDcard loyalty program, diversify their grocery section, and target a younger
demographic. The findings of this feasibility study show that this initiative will be highly
beneficial to the organization and has a high probability of success. Key findings are as follows:
Organizational
Minimal increase to staffing required with no changes to organizational structure
No new facilities, only additional training
Financial
Target will be in position to capture greater market share by maintaining and improving
both their in-store and online presence
Benefits of long term growth outweigh the upfront costs
Technology
Will utilize existing technology which lowers project risk
Will make updates to current app and .com to support new initiatives and functionality
around the REDcard and enhanced features geared toward college students
Marketing
This initiative to train employees in order to further promote the REDcard will allow
Target to effectively retain current consumers
Target will be able to differentiate itself from competitors with its more reputable
loyalty program; this will build brand awareness and result in new consumers
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With the proper expansion and marketing of the grocery section, Target will become
more of a “One Stop Shop”; luring in consumers with its wide array of groceries and
increasing sales in other areas of the store as well
Promoting to the college aged demographic is beneficial in the long term
Conclusion
Our solution to re-design the REDcard loyalty program paired with our supplemental solutions
to improve the grocery segment and promote the Target brand in a younger demographic will
help Target achieve sustainable growth for years to come. In such a competitive retail
landscape, these solutions will give Target a competitive advantage over its competitors.
Tailoring the REDcard loyalty program so that guests get more than just cost savings will be the
key to making this program successful creating loyal guests. Adding a wider grocery segment
will increase store visits and increase the size of guest’s baskets. Marketing to a younger
demographic of college students will help build brand loyalty long term. Together, these three
solutions will make Target the preferred shopping destination for all guest needs and keep
Target a leader in the retail industry.