On Target

On Target
Tags: Consumer Behavior, Department Stores, Loyalty Programs, Marketing
February 22, 2012

It will be interesting to see if Target's business falls off or increases in the wake of the recent New York Times coverage of their personalized marketing initiatives. What would be even more interesting would be to see how they are responding internally to the excerpt from Charles Duhigg's forthcoming book, The Power of Habit: Why We Do What We Do in Life and Business.

The piece outlines the retailer's focus on expectant mothers, and how creating relevant offers for that segment helped boost sales from $44 billion in 2002 to $67 billion in 2010. Target's journey took them from establishing relevance, to gauging customer comfort levels, then backing off and ultimately re-engaging. Now that customers know what the game is, will they continue to play? My guess is yes, not only because we all love Target's affordable Mossimo clothing and Michael Graves teakettles, but because Target has now figured out the balance of relevancy and privacy.

It is a balance. As Target discovered, some consumers get spooked when they feel like Big Brother is watching. It turns out that not all of the expectant mothers on Target's list were being open about their delicate condition – one father stomped into his local store, demanding to know why the retailer was sending his teenaged daughter offers for baby cribs (he later learned that the daughter was, in fact, expecting).

After that, Target fell back and regrouped. The retailer learned that it was risky to send a sheaf of baby coupons to customers who its predictive modeling had identified as being pregnant. Instead, Target began mixing the baby offers in with other random coupons. "We found out that as long as a pregnant woman thinks she hasn't been spied on, she'll use the coupons," an unnamed executive at Target said.

The truth is, although consumers are clearly concerned about privacy, they respond to relevance. In a survey by LoyaltyOne, 64 percent of consumers said that they would be willing to share additional personal information if companies sent them more relevant communications ROI results quoted by companies creating personalized offers are too good to ignore – this includes Kroger, Sobeys and Safeway, grocers that are very close to, if not at, the same level as Target.

Learn from Target's example, and follow these three guidelines as you experiment with your own personalized marketing:

Set a goal. Target wanted to change behavior in a specific segment – expectant mothers. When a company has massive amounts of data to crunch, a specific goal helps focus the process.
Start a dialogue. If customers engage in a "virtuous circle" of sharing information, and then receive relevant offers based on that information, they are active participants in the process and they trust your brand enough to keep sharing. Plus they're not creeped out when they get coupons for baby diapers.
Stay relevant. Once you've started building on customer information, stay with it. If you're relevant one week and generic the next, it looks schizophrenic to customers and erodes trust. They wonder why share personal information if the company doesn't make some decent offers in return?

Thankfully, Target doesn't send me coupons for pacifiers and formula. I'm sure the retailer's predictive modeling combined with my transactional data tells them I am a foodie with a stylish teenaged daughter who is picky about decorating her room. But hey, they could just have asked.