Circuit City unwraps a holiday marketing shift

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High above Times Square, on a screen many times larger than life, Santa Claus is breakdancing to the 1980s tune "Just what I needed."

But it's the executives at Circuit City Stores-the sponsors of the Santa Claus ad-who are looking forward to getting just what they need this holiday season. After years of sliding sales, the electronics retailer hopes to turn its fortunes around this holiday, thanks in part to changes that include a new chief marketing officer and advertising agency. Merchandising has changed too, concentrating more on TV and sound equipment categories where Circuit City can compete more effectively against rivals Best Buy and Wal-Mart Stores, which take up the No. 1 and No. 2 spots in consumer electronics sales.

make it new

"Every holiday is make-or-break time. This holiday has the added incentive that we have a new campaign, new agency and new CMO," said Justin Lewis, VP-marketing, Circuit City.

The retailer began to revamp its marketing efforts in January, hiring Publicis Groupe's Bromley Communications as its first Hispanic agency and independent Sharpe Advertising, New York, to handle its online advertising. And in April, midway through a search for a new agency, former Toys `R' Us marketing executive Ernest V. Speranza joined as its new chief marketing officer. It capped the changes in June, when it hired independent Doner, Southfield, Mich., to handle creative, strategic development and media planning, replacing Interpublic Group of Cos.' Foote Cone & Belding. The "Just what I needed" campaign broke in October, in time for the holidays. The company earlier this month hired Interpublic's Draft as its first promotions agency.

Doner created the Dancing Santa as the centerpiece of a promotion starting Dec. 6 at Regal Cinemas. The promotion, created in-house, will give away a million Circuit City coupons for discounts on DVD movies, games and movies at the box-office, as well several million more on popcorn bags; large soda lids will also include a CD with the Dancing Santa spot, movie previews and a computer game. More than 20 million people are expected to see the ad on 6,300 screens, Mr. Lewis said.

The promotions are part of Circuit City's refocusing of its marketing plans. The company has reallocated some its media mix to focus on new efforts such as increased promotions, more print and cable advertising and a better use of the Internet. The company added a mid-week circular through the holiday season to its usual Sunday circular program in order to drive weekend traffic, and it relaunched its Web site, It also launched its first theater advertising-by translating one of Bromley's Hispanic ads.

"You will see additional voices," Mr. Lewis said. Circuit City spent $214 million on media last year, according to TNS Media Intelligence/CMR.

strength in service

Circuit City has launched several promotions in recent months, such as a tie-in with Coca-Cola Co. and Regal for the release of the "Seinfeld" DVD, which offered $5-off coupons to moviegoers.

"That's a new part of our strategy, we're trying to find new and engaging promotions," Mr. Lewis said.

The "Just What I Needed" campaign is meant to highlight Circuit City's strength in service, he said. Circuit City owns the positioning of service and help to consumers, so "this was a heritage we could build on," he said.

To exploit the positioning, Circuit City also has zeroed in on segments such as Hispanic consumers and women, with bilingual signage in stores and "dialing up efforts to recruit women," as well as training sales staff on how to deal with women shoppers more effectively, Mr. Lewis said.

`Wal-Mart can't play'

"Women are moving on to `I'm going to buy my own consumer electronics,"' he said. "We have women walking in, saying `I'm going to buy a big screen."'

As high-end products such as flat-screen TVs become more popular, retailers such as Best Buy and Circuit City are benefiting at the expense of regional specialists, said Smith Barney retail analyst Bill Simms. He noted the explosion of $2,000-plus TVs also shuts out the Wal-Mart behemoth, whose price advantage diminishes in this segment. Circuit City is aware of that, and it has used its advertising to educate consumers about digital TV, Mr. Simms said.

"Twenty-nine dollar DVDs are disposable. But when you're saying `I'm spending $2,000 on a TV'...Wal-Mart can't play there," Mr. Lewis said.

While still struggling to catch up to its rival, Best Buy, Circuit City has shown improved results this year. It posted a 2.9% increase in comparable-store sales for the fiscal quarter ending Aug. 31, the third consecutive increase. While it paled next to Best Buy's 4.3% increase, it was a healthy improvement over a drop of 5% a year ago.

Analysts are very guardedly optimistic for Circuit City's prospects. Earlier this month, Standard & Poor's rated the stock a "Buy," noting it was making gains on store execution and traffic. While noting the improvement, most analysts are still lukewarm on the stock, waiting for signs that the turnaround is "gaining traction," in Wall Street parlance.

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