Why the Bad Economy Has Been Good for Target

Downturn Pushes Retailer Into Shifting Agency Structure, Marketing, Media and Renewing Its Focus on Innovation

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NEW YORK (AdAge.com) -- The recession has given retail a swift kick in the butt -- but in the case of Target , it's done so in a good way.

Using the recession as a catalyst, Target has made fairly radical shifts to its agency structure, marketing and media approach and overall business operations.

Target CMO Michael Francis
Within the last 18 months, the cheap-chic retailer has named Wieden & Kennedy its first lead agency, shifted its marketing approach from "shiny, happy people" to something more closely resembling reality and opened its doors to the media. It's also rolled out the P-Fresh grocery concept, tweaked in-store merchandising, unveiled a smaller urban-store format and introduced the 5% Rewards loyalty program.

"There was more innovation happening within Target during this recession than in any time in my 25 years with the corporation," said Michael Francis, exec VP-chief marketing officer, during an interview with Ad Age in New York. "The recession caused us to challenge every assumption. It was a catalyst for a lot of more overarching changes."

One major change was the naming of a lead agency, a departure for Target , which had relied on a roster of primarily boutique agencies. Wieden had been on Target 's roster for years, but it was granted the lead-agency distinction without a review just over a year ago.

It was time to bring in a "more thoughtful quarterback," Mr. Francis said of the move. Given a number of new initiatives and the changing media and marketing landscape, Target felt it needed a partner to help align its messaging and approach across channels. Wieden does not directly manage Target 's other agency relationships, which include shops with Minneapolis ties, such as Haworth, Olson and Peterson Milla Hooks, as well as AKQA, Huge and Mother, among others. But it does work in tandem with the other agencies to execute campaigns. Often Wieden will craft the broad architecture of a campaign, even if another agency takes the lead on the project, Mr. Francis explained.

With Wieden in place, Target went about fine-tuning its marketing message and evaluating the resonance of its tagline "Expect More. Pay Less." It aimed to more closely reflect reality, as well as convince consumers that it was just as cheap as rival Walmart. "We let too much space drift between 'Expect More and Pay Less.' It's a period, not a paragraph," said Mr. Francis. "Consumers didn't really see their lives reflected in the execution, the post-modern homes and shiny, happy people that populated a lot of the Target brand were out of step."

It took a few tries to get the tone right. The short-lived "Collections" campaign featuring actor Alan Cox was not distinguishing. And some of the work from Wieden for last holiday season lacked joy and warmth. One spot seemed to cast doubt on the existence of Santa Claus, while another put a damper on Christmas morning with talk of the recession. "I have no regrets," Mr. Francis says of those campaigns. "It was a shift we needed to make. ... The construct now is crystal clear."

Indeed, the retailer's latest campaign, "Life's A Moving Target " seems to have hit the right note. It entails upward of 70 15-second spots, each highlighting a specific product, ranging from flu shots to pants to cheese. Some spots are humorous, some are not, but they all revolve around the idea that "the pace of life is complex," said Mr. Francis.

The campaign, which does use co-op dollars, has proven popular with vendors and consumers alike. Mr. Francis says vendors are now approaching Target and asking to participate. And the length of the spots has allowed the retailer to be more creative in how it buys ad time. "The fifteens for me are a wonderfully creative way to stitch together messaging to ensure the campaign stays fresh," Mr. Francis said. "The likelihood of any consumer seeing all 70 spots is pretty low. And I don't have any of the seasonal constraints that I might otherwise have had."

Heading into 2011, Mr. Francis is optimistic the retailer will be able to win, even as consumers continue to feel the pinch of a tough economy. Sales at stores open at least a year have been positive for eight of the last nine months, rising 1.8% in August. Walmart's same-store sales, by contrast, fell 1.8% in the second quarter and 1.4% in the first quarter. Walmart no longer reports sales on a monthly basis.

"We believe we've negated the price perception issues," he said. "We have some of the highest growth we've had in our measured history. More importantly, we've drawn greater frequency of visits, and we've been able to grow our share of visits."

The key for 2011, Mr. Francis says will be ensuring Target offers customers ample rewards for visiting. One way it plans to do that is with 5% Rewards. The program will offer consumers 5% off items bought with a Target Visa, Target credit card or Target debit card. It will launch nationwide in October, with a robust multimedia marketing effort, handled by agency Little & Co., Minneapolis.

Another way is through improved stores. By the end of next year, the retailer expects it will have spent more than $2 billion over a two-year period to renovate 740, or roughly 40% of its stores. The updated stores include an expanded fresh grocery assortment, dubbed PFresh, which features fresh fruit and vegetables, meat and dairy products.

Throughout the store, new, shorter displays enable shoppers to more easily view products, while updated signage and trendy lighting give the space a more modern feel. The beauty, electronics and jewelry sections have also been overhauled, allowing customers to more easily browse merchandise. And there are smaller updates as well. The space between clothing racks has been widened, for example, to better accommodate shopping carts.

Target executives showed off a renovated store during its first Media Day in Minneapolis. The event itself signaled a sea change for the historically press-shy retailer. "We, as an organization, believe that a more transparent and authentic relationship with media is going to be important to how we manage the brand for the next decade," Mr. Francis said.

To that end, Mr. Francis was candid in not only addressing marketing shifts but also the recent controversy surrounding Target 's donation to MN Forward, a political action committee that is backing GOP gubernatorial candidate Tom Emmer, who opposes gay marriage. Mr. Francis says protests and boycotts appear to have had a "negligible impact," given sales for July and August were in line with expectations. But the retailer is still taking the situation seriously.

"We are reviewing our decision-making process for future contributions in the public policy arena, and engaging a variety of team members, leaders and our own GLBT Business Council members in that approach," Mr. Francis said. "The bottom line is we're using the benefit of time, our recent experience and team member insight to ensure our political activities fully reflect our values, interests and priorities."

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