Kmart turns to Blue Light to boost image - revives the 'Blue Light special' - Brief Article

DSN Retailing Today, April 16, 2001 by Mike Duff

NEW YORK -- Now that the Blue Light is back at Kmart, the mystery of the company's "big marketing plan" has been solved. Now, the only question is just exactly how the revival of this "retail icon" will illuminate Kmart's future.

With the Blue Light Special's reintroduction, Kmart is doing more than simply retooling its marketing and merchandising. It's setting out on a major repositioning designed to focus operations on a key customer base and finally develop a niche that doesn't reference either Target or Wal-Mart but gives Kmart an identity of its own.

"We are no longer going to be rearview-mirror driven in terms of our strategy," said Brent Willis, executive vp and chief marketing officer.

A $25 million media advertising campaign will support the reintroduction of the Blue Light Special. Even though Kmart has been looking for ways to reduce marketing costs, to the tune of $200 million, Willis noted that the television advertising buy would be up for the campaign.

The Blue Light Special is an in-store marketing program that Kmart actually abandoned in the early 1990s in which a bargain price on a given item is announced as an unadvertising sale. The sale item can be found under a flashing blue light.

In Kmart stores, an announcement and an updated in-store signal consisting of a lamp illuminating a collar of blue cloth suspended from the ceiling will signal Blue Light Specials. Employees will place the special purchase out on the floor below the signaling device for the duration of the event, between 25 and 40 minutes, and remove the goods afterward. Willis said one sku would act as the Blue Light Special each day, at least at the stores.

Blue Light Specials is also available at BlueLight.com.

Rather than closeouts, Kmart will rely on new products and off-assortment items to drive its Blue Light Specials. Private and proprietary merchandise will be included, but just how they are to be integrated into the effort has yet to be determined, Willis told DSN Retailing Today at a New York press conference on April 2. The process of determining how they will be represented is still "dynamic," he said, and potentially could include new, seasonal and off-assortment product.

Chuck Conaway, chairman and ceo, said the revival of the Blue Light Special had its roots in determinations made during a business review early in his tenure as Kmart's chairman.

"We were consistently missing the customer from an experience and execution standpoint," Conaway said "The company continually spent more and more on advertising. In fact, over the last five years our average cost to acquire a customer increased by some 70%. To meet the earnings commitment, payroll is dramatically cut. What happened is we got in a kind of failure cycle; we cut more and more payroll without doing thoughtful re-engineering, and the actual customer experience continued to deteriorate. That's where we were."

The Blue Light Special's revival is a way of establishing a more emotional and less costly bond with the core customer. Additionally, Kmart intends to stake out a customer service position with a special emphasis on women with children.

This mom-focused approach is similar to that pursued by Zellers, but they pronounce it "mum" in Canada. As Zellers has done, Kmart is boosting two critical departments in its efforts to better address the needs of women with kids, children's goods and home.

Ultimately, the Blue Light Special is designed to reward the core customer for her visit to the store. Willis said one of the advantages of the Blue Light initiative is that it doesn't require that Kmart win consumers from its competitors to enjoy significant gains.

"If we just take our existing consumer base, 66 million households, and convince them to take one more trip per year based on their existing shopping basket that equates to $2.8 billion in return. So this vehicle is designed to reward our loyal consumers," he said.

However, in going back to the Blue Light Special, Kmart is taking a chance. Willis pointed out that the Blue Light Special has been accepted into the American lexicon, but he largely avoided the fact that Kmart's history has had its less-than-glorious moments and reference to something as a Blue Light Special isn't necessarily positive.

Still, observers have been awaiting signs of boldness from the retailer, and the new marketing and merchandising effort, considering the. risks accepted, certainly is bold.

Conaway asserted that Kmart was making progress in improving stores and in bolstering its stock price, which has risen 77% during his tenure, vs. 12% for Target and a negative number for Wal-Mart, even if it was off a considerably lower base. So far, Conaway has been benefiting from his Kmart efforts, at least financially. U.S. Securities and Exchange Commission filings record that Conaway, who became chairman and ceo last June, enjoyed a pro-rated salary of $944,000 and bonuses of $8.1 million. Additionally, he was granted four million stock options with a potential value of $15.2 million and restricted stock worth $4.7 million.