Insight Series
Mar 2, 2010
Bulking Up - What Demand Data Can Reveal About Target's "The Great Save"
It's no secret that during the recession consumers have favored private label brands and discounted SKUs. Yet despite the general consumer perception that Wal-Mart is the "low-cost leader," Target outperformed Wal-Mart in the fourth quarter of 2009 with a 0.6% growth in sales, while Wal-Mart reported a 1.6% drop.
And while some recent economic numbers suggest a slight lessening of the recession, it would appear that pricing will remain front and center for some time. Gregg Steinhafel, Chief Executive at Target, notes, "Regardless of the economic environment going forward, we'll continue to address the gap between the perception and the reality of our pricing."
Which leads us to Target's 2010 first quarter initiative - "The Great Save." Historically, Target has not offered bulk deals, the likes of which can be found in Sam's or Costco. However, this promotion, run in 1,000 of its 1,740 U.S. stores from January 3 - February 21, offered consumers an assortment of national brand bulk deals in a variety of categories, such as apparel, electronics, food, health, beauty care, housewares and more. Consumers didn't have to pay membership fees usually associated with the warehouse clubs and Target even made some of the promotion items available online.
Just how successful was "The Great Save"? In order to get a good read on the promotion, it's important that category managers assess the true incrementality of the promotion and its long-term effects on the categories. Demand data can help category managers assess whether the promotion added to the total top line sales of the category. Did data show that the total sales for the bulk items grew the whole category, or did it cannibalize sales of non-bulk items? Did it simply shift category sales - did you still do the same amount in sales with a different allocation? And what effect did online bulk purchases have on sales?
Further, what happened when the promotion was over? For example, when someone purchases bulk laundry detergent or hand towels, they will use all of that detergent and have plenty of towels on hand for a long time. That means potentially less visits to Target in specific categories. What are the long-term effects of these bulk promotions on store visits and the incidental purchases made during those visits? How do you drive trips to the store when bulk purchasing may undermine the need to visit the store as frequently? A close look at Great Save SKU performance and its effect on the category and potential store visits is key to assessing the true success of the promotion.
Further, the bulk items were all placed in one Great Save location within each store - rather than integrated with specific categories. It's also important to assess whether having one Great Save location optimized the promotion. Did shoppers seek out the promotion? Was it placed somewhere within the store where consumers could easily find it? Did this store-within-a-store encourage shoppers to bypass the non-bulk items? Or did the store note an increase in purchases from endcaps that were located along the in-store "path" to the Great Save location? Would the bulk items be better placed on the endcaps of their relevant categories? If so, how would that affect incremental sales within the category?
Finally, did the Great Save help battle the perception issue that Target is more expensive? Did the Great Save bring in new customers or loyal Target shoppers? Should the promotion have been run right after shoppers were weary from holiday shopping?
The definition of promotional "success" is not always clear and is sometimes hard to determine. It is safe to say, based on the substantial media coverage, this event helped Target combat the price perception issue. However, to determine if this strategy is helpful and sustainable in the long term, category managers need to quantify the holistic impact it had on sales in the category. Was the Great Save just a quick PR win, or a truly beneficial marketing strategy that will help them succeed in the long run? A thorough analysis of the POS data will tell you the difference.
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