Marketing your strengths, knowing your customer - includes related article on BrandsMart - Special Report: Reinventing the Discount Store

Discount Store News, May 15, 1995 by Teresa Andreoli

Successful mass retailers will invest in several methods to reinvent their approach to marketing, bringing tighter focus and greater impact to their current strategies.

Experts say they should determine their strengths, identify their core businesses, make their stores more compelling, become more focused on the local market, continue cost performance and establish a high-performance culture.

Some discounters have sunk their teeth into aspects of these strategies, while others may be suffering by not investing enough time or resources in becoming better marketers.

Sears' turnaround began more than two years ago when the giant general merchandiser reinvented its entire marketing approach.

"Our first challenge was to identify our strengths, the foundation on which we would build our future," said Arthur Martinez, chairman and ceo of Sears Merchandise Group. From its research and experience, the company identified four pillars of strength: customer equity--"admittedly more dormant than active," the chairman noted. Superior real estate, meaning 700 of 800 stores in regional malls, was the second pillar. Strong brand positioning, such as successful private label names like Craftsman, Kenmore and Diehard provided a third pillar, and a heritage of "satisfaction-guaranteed" offerings on product was the fourth.

Assessing attributes is a fundamental first step, but a surprising number of discounters don't have a clear, organized picture of their strengths and weaknesses.

Service Merchandise, the Nashville, Tenn.-based specialty hard lines retailer, is an example of a company that has invested in rediscovering its marketing strengths.

"In addition to being one of the largest sellers of fine jewelry (we sell the most wedding bands and engagement rings in America, and we have the largest on-line wedding registry), we are among the top four in terms of selling kitchen goods. We intend to get the message out that we are a destination for new households," Gary Witkin, president and coo, told DSN recently.

Service plans to better vocalize facets of its humbly kept merchandise prowess as part of its bounce-back after a year of lagging earnings. The company will spread word of its re-discovered strengths via its fall catalog (with a circulation of 24 million households), fliers and trigger mailings, or similar vehicles "that target customers who have a propensity to shop our stores," Witkin said.

Although building store brand recognition to the same height as Sears' Craftsman lines (88% brand awareness, Martinez said, ranking it in the same category as Coca-Cola and Kleenex) would be both expensive and time consuming, many of the leading discounters have invested in building and expanding private label offerings.

Picking up a cue from Sears, Wal-Mart and Kmart offer lifetime guarantees on their private label tools and hardware (Popular Mechanics and Benchtop, respectively).

In two Target stores visited last month (in Dallas and Nashville), the discounter solely stocked Furio ready-to-assemble furniture. Absent were leading manufacturers like Sauder, Bush, Ameriwood and O'Sullivan. Target has enhanced POS signage in apparel for its Sostanza, Merona and Greatland brands, so much so that they appear to be national brands.

Although advertising a store brand reduces the profit-intensive nature of the concept, at times the payback is considerable. JCPenney's Arizona jeans, for example, brought in and excited the younger customer who had been missing from the store.

Determining who was missing and who was perceived to be missing was an added benefit of Sears' review of strengths and helped move the retailer to the second step, defining the core business.

"We knew what we were and what we wanted to be," Sears' Martinez said, "but the public had its own perception . . . and our target customer was surprisingly new to Sears."

To some surprise, Sears found its core customer was not the Saturday morning, 45-year-old white male, stopping in for a socket wrench or lawn mower part. "The reality was that our customer was a woman in the American family. More than likely, this family had children at home and owned its own home, making an income in the high $30,000 range," the chairman said.

In the recently issued Kmart annual report, the company has somewhat subtly redefined its core customer. Kmart's updated understanding of its principle shopper, "the middle-income homemaker who often must balance both a job and a family," replaces the 1992-born marketing mantra, "the busy budget-conscious mom."

Service Merchandise has identified its core customer as anyone from 15 to 90, with an emphasis on those forming new households. For example, college students filling a first apartment, those about to be engaged, those about to be married, those starting their first home, those starting a second home--either Empty Nesters or second-time married couples--are all prime candidates for Service's selections.

Another example of Sears' focus on core categories: Apparel provided 25% of Sears' revenue, but a whopping 60% of profit, Martinez said. Hence the justification for the women's apparel-intensive "Come See the Softer Side of Sears" campaign.