Marketing Challenges Loom for Big Retailers

Kohl's, Macy's, Others Likely to Lean on Promos to Lure Reluctant Shoppers

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NEW YORK ( -- With a poor holiday season behind them and perhaps a recession looming, the nation's largest retailers, including Kohl's, JC Penney and Macy's, are wrestling with the question of how to get consumers through the doors in the new year.

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Last year saw the launch of several splashy lifestyle campaigns and branding efforts. Macy's ran a star-studded series of commercials; JC Penney tried out webisodes; and Sears, Roebuck & Co. rolled out its new tagline, "Sears. Where it Begins." None of the chains would comment on their plans, but industry insiders said given this tough retail climate, those initiatives could be overtaken by marketing that is more promotional in nature.

"Trying to separate yourself through image is good, but when it comes to driving traffic this coming year, it's going to be about promotions," said Marshal Cohen, chief industry analyst at NPD Group. "You'll see more discounts this year than you ever have, with the exception of 2001."

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Heavy promotions will likely be a necessary evil as retailers look to clear out aging merchandise and entice reluctant consumers. "The new year is going to be cluttered with promotion for a lot of reasons," said Kary McIlwain, president and North American managing partner at Y&R, which counts Hilton, Miller Brewing and Sears among its clients. "There will be clearance to get rid of and economic indicators look bad."

With that in mind, one media-buying executive who requested anonymity said newspaper circulars, which are already big business among the likes of Wal-Mart, Target, Sears and Macy's, will continue to garner big bucks in 2008.

"Retailers, in general, need to find a way to kick the newspaper-circular habit," the executive said. "If you look at the circulars, every one of them looks the same, one discount after another. What it does is say to consumers, 'The store is on sale every day of the week.' It also says there's no difference in merchandise. Hence, it does nothing to distinguish one store brand from the other."

Still, don't look for retailers to completely abandon their tried-and-true marketing media. "TV is a great promotional medium. You put promotional messages on TV, and people come to the store," said Charlie Rutman, CEO of MPG North America, which works with McDonald's, AutoZone and Sears. "But overall you're going to see a continuation of media mixes expanding, and suffice it to say that online media and video media is still important."

Tried-and-true methods
Viral-marketing and grass-roots efforts also could gain importance as retailers struggle to connect with shoppers and tighten their purse strings. Ms. McIlwain believes that "good old-fashioned mall events" could make a comeback, as could fashion shows. "I don't think retailers are going to have money," she said. "They'll find the money to do the marketing they need to do. But, in tougher economic times, you tend to not take as many risks. It's not a time when people say, 'We'll just try it out.'"

Indeed, maintaining a mix of media and message will be the smart strategy going forward. Because, as several executives pointed out, steep discounts, 24-hour sales events and free-shipping promotions were not enough to save retailers this past holiday season.

"What the holiday season taught us is most retailers realize they are competing on price, but that doesn't mean you're going to ignore other strategies," said Scott Krugman, a VP with the National Retail Federation. "It would be foolish to advertise on price alone."
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