Segmentation Targeting Differentiation and Positioning Decisions

Retailers must first segment and define their target markets and then decide how they will differentiate and position themselves in these markets. Should the store focus on upscale, midscale, or downscale shoppers? Do target shoppers want variety, depth of assortment, convenience, or low prices? Until they define and profile their markets, retailers cannot make consistent decisions about product assortment, services, pricing, advertising, store décor, or any of the other decisions that must support their positions.

Too many retailers, even big ones, fail to define their target markets and positions clearly. They tried to have "something for everyone" and end up satisfying no market well. For example, what market does the department store Sears target? What is its value proposition? For years now, the venerable $50 billion retailer has struggled unsuccessfully to answer these questions well, resulting in customer apathy and stagnant sales and profits. "We

#FIGURE I 13.1 Retailer Marketing Strategy

Retail strategy

Retail segmentation and targeting

Store differentiation and positioning i

Retail marketing mix

Product and service assortment

Retail prices

Promotion

Distribution (location)

Create value for targeted retail customers f

As with other types of marketers, the name of the game for retailers is to find the customer-driven marketing strategy and mix that will let them create value for customers and capture value in return.

have a lot of lapsed customers/' says Sears's new chief marketing officer. "Sears is a great brand in people's minds. We've become just a little less top of mind." The answer? "We have to make sure that the overall customer experience—merchandise, in-store [environment], service, and marketing—are the best that they can be and working together to create a differentiated proposition that makes someone come to Sears versus going somewhere else."11

In contrast, successful retailers define their target markets well and position themselves strongly. For example, Wal-Mart positions itself strongly on low prices. For decades, it consistently promised "Always low prices. Always." Recently, it successfully extended this positioning to include what those always low prices mean to its customers. It now promises that customers will "Save money. Live better."

If Wal-Mart owns the low-price position, how can other discounters hope to compete? Again, the answer is good targeting and positioning. For example, rather than facing Wal-Mart head-on, Target—or Tar-zhay as many fans call it—thrives by aiming at a seemingly oxymoronic "upscale discount" niche. It has thrived by offering low prices but rising above the discount fray with upmarket style and design and higher-grade service. Target's "Expect more, pay less" positioning sets it apart and helps insulate it from Wal-Mart.

Similarly, A Whole Foods Market has only 275 stores and less than $7 billion in sales versus Wal-Mart's more than 6,800 stores worldwide and sales of $379 billion. How does this small grocery chain complete with giant Wal-Mart? It doesn't—at least not directly. Whole Foods Market thrives by carefully positioning itself away from Wal-Mart. It targets a select group of upscale customers and offers them "organic, natural, and gourmet foods, all swaddled in Earth Day politics." In fact, a devoted Whole Foods customer is more likely to boycott the local Wal-Mart than to shop at it. One analyst sums up the Whole Foods shopping

Counters groan with creamy hunks of artisanal cheese. Medjool dates beckon amid rows of exotic fruit. Savory breads rest near fruit-drenched pastries, and prepared dishes like sesame-encrusted tuna rival what's sold in fine restaurants. In keeping with the company's positioning, most of the store's goods carry labels proclaiming "organic," "100% natural, and "contains no additives." Staff people smile, happy to suggest wines that go with a particular cheese, or pause to debate the virtues of peanut butter maltballs. And it's all done against a backdrop of eye-pleasing earth-toned hues and soft lighting. This is grocery shopping? Well, not as most people know it. Whole Foods Market has cultivated its mystique with shoppers ... by being anything but a regular supermarket chain. Whole Foods is, well, special.

Whole Foods can't match Wal-Mart's massive economies of scale, incredible volume purchasing power, ultraefficient logistics, wide selection, and hard-to-beat prices. But then again, it doesn't even try. By positioning itself strongly away from Wal-Mart and other discounters, Whole Foods Market has made itself one of the fastest-growing and most profitable food retailers.

Product Assortment and Services Decision

Retailers must decide on three major product variables: product assortment, services mix, and store atmosphere.

A Retail targeting and positioning: By positioning itself strongly away from Wal-Mart and other discounters, Whole Foods Market has made itself a fast-growing and profitable food retailer.

The retailer's product assortment should differentiate the retailer while matching target shoppers' expectations. One strategy is to offer merchandise that no other competitor carries, such as store brands or national brands on which it holds exclusives. For example, Saks gets exclusive rights to carry a well-known designer's labels. It also offers its own private-label lines—the Saks Fifth Avenue Signature, Classic, and Sport collections. At JCPenney, private-label brands account for 45 percent of sales.13

Another strategy is to feature blockbuster merchandising events—Bloomingdale's is known for running spectacular shows featuring goods from a certain country, such as India or China. Or the retailer can offer surprise merchandise, as when Costco offers surprise assortments of seconds, overstocks, and closeouts. Finally, the retailer can differentiate itself by offering a highly targeted product assortment—Lane Bryant carries plus-size clothing; Brookstone offers an unusual assortment of gadgets in what amounts to an adult toy store.

The services mix can also help set one retailer apart from another. For example, some retailers invite customers to ask questions or consult service representatives in person or via phone or keyboard. Home Depot offers a diverse mix of services to do-it-yourselfers, from "how-to" classes to a proprietary credit card. Nordstrom promises to "take care of the customer, no matter what it takes."

The store's atmosphere is another important element in the reseller's product arsenal. The retailer wants to create a unique store experience, one that suits the target market and moves customers to buy. AFor example, Apple's retail stores are very seductive places. The store design is clean, simple, and just oozing with style—much like an Apple iPod or iPhone. The stores invite shoppers to stay a while, use the equipment, and soak up all of the exciting new technology:14

It was 2 o'clock in the morning but in the subterranean retailing mecca in Midtown Manhattan [New York City], otherwise known as the Apple store, it might as well have been midafternoon. Late one night shortly before Christmas, parents pushed strollers and tourists straight off the plane mingled with nocturnal New Yorkers, clicking through iPod playlists, cruising the Internet on MacBooks, and touch-padding their way around iPhones. And through the night, cheerful sales staff stayed busy, ringing up customers at the main checkout counter and on hand-held devices in an uninterrupted stream of brick-and-mortar commerce. Not only has the company made many of its stores feel like gathering places, but the bright lights and equally bright acoustics create a buzz that makes customers feel more like they are at an event than a retail store. Apple stores encourage a lot of purchasing, to be sure. But they also encourage lingering, with dozens of fully functioning computers, iPods and iPhones for visitors to try—for hours on end. The policy has given some stores, especially those in urban neighborhoods, the feel of a community center. "Whenever we ask consumers to cite a great retail experience, the Apple store is the first store they mention," says a retail research consultant. "Basically, everything about it works.

Apple stores are going gangbusters. They attract, on average, 13,800 visitors per week, per store and average an incredible $4,000 in sales per square foot a year. By comparison, Saks generates $362 per square foot; Best Buy stores turn $930—tops for electronics retailers.15

Today's successful retailers carefully orchestrate virtually every aspect of the consumer store experience,

Store atmosphere: Apple's retail stores are very seductive places—real consumer meccas. The bright lights and equally bright acoustics create a buzz that makes customers feel more like they are at an event than a retail store.

down to the music, lighting, and even the smells (see Real Marketing 13.2). Such "experiential retailing" confirms that retail stores are much more than simply assortments of goods. They are environments to be experienced by the people who shop in them. Store atmospheres offer a powerful tool by which retailers can differentiate their stores from those of competitors.

Continue reading here: Promotion Decision

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