K mart joins Prodigy Service; looks to gain upscale market - computer marketing service

Discount Store News, August 22, 1988 by Arthur Markowitz

K mart Joins Prodigy Service; Looks to Gain Upscale Market

TROY, Mich.--In a major thrust into electronic retailing, K mart plans to start advertising on Prodigy, the interactive computer shopping and information service, early next year.

K mart is the first discounter to join Prodigy. Its move has major ramifications for the retailer, the electronic retailing business and Prodigy.

The linkup with Prodigy is part of K mart's marketing effort to reach "leading-edge," upscale, technology-oriented shoppers who currently aren't part of its core base of customers, but who are seen as electronic retailing shoppers.

K mart's signing with Prodigy is a big boost--providing greater credibility--for both the electronic retailing field and for the computer shopping service. Prodigy, a $400 million-plus joint venture between IBM and Sears, Roebuck & Co., launched its service in three markets June 1 (DSN, May 23, page 7).

Available for a fee of $9.95 per month, Prodigy is a videotex service that allows personal computer users to access a broad range of goods and services.

Next year Prodigy plans to launch an electronic data interchange service for retailers as part of its plans to augment its consumer orientation with services specifically geared for businesses.

By adding K mart to its list of over 100 retailers, direct marketers and service providers, Prodigy's clients now include three of the nation's leading four merchants--Sears, K mart and JCPenney--along with such other retailers as Nieman Marcus, ComputerLand, Florsheim, The Broadway and Spiegel.

K mart has set Feb. 1. 1989, as the target date for its debut on Prodigy, "but if we can get our ads up sooner, we will start sooner," said Russell Jones, K mart's director of planning and research, who is heading up the discounter's move into electronic retailing.

The discounter's ads will run in all current Prodigy markets--Atlanta, San Francisco and Hartford, Conn., as well as White Plains, N.Y., where the service is headquartered--along with 16 new cities such as New York that are due to get the service in 1989.

While K mart believes "it has a lot to offer Prodigy users," the key reason for its move is reaching "shoppers we aren't particularly effective at selling a broad range of goods," Jones said.

He identified this group as "more upscale shoppers, leading-edge, two-income families who are catalog shoppers." They visit K mart for staple merchandise and now the discounter "wants to make them familiar with the rest of the store" and "see if we can sell them jewelry, sporting goods, cameras."

K mart will use Prodigy to promote selected hard goods: jewelry, consumer electronics, sporting goods, cameras and home fashions like the Kitchen Korner.

Prodigy ads won't be tied into K mart's roto program as "we will want to run some Prodigy promos for longer than a week," he said.

K mart hasn't ruled out using Prodigy to take orders for merchandise as some other retailers on the systems are doing. This step could also result in the discounter developing its own mailing list of upscale consumers for direct marketing purposes.

K mart's flexibility in changing ads is limited by the videotex technology and the discounter's interest in reaching as wide an audience as possible. Text of ads can be quickly changed, even weekly, but revamping the computer graphics takes longer.

K mart signed a one-year agreement with Prodigy, for an undisclosed amount, and will use about 200 frames--individual computer screen presentations--for its promos. The sequence of screens includes K mart's institution presentation like store locations and product ads.

Prodigy's fees range from $25,000 to $85,000, depending on the number of frames used, the number of viewers seeing the ads and production costs.

The agreement includes the use of "leader" or teaser promotions, short ads that appear on the bottom of screens containing news briefs or sports or weather reports. Only one client's ad appears at one time as a leader on a screen, acting as a draw to the client's full promo.

Jones said Prodigy's editorial content was a selling point. "It's like a magazine, with the leaders [serving as] the hook to capture consumers who use system for information, rather than to shop. It's like advertising in Women's Day or sport."

Prodigy can provide K mart, and other clients, with a demographic profile on who views its ads, the frequency and other information. They won't relate the names of the actual viewers, which are confidential.

PHOTO : Hardware Buyers Wired to Cordless Cordless power tools and products geared to women shoppers are among the new products, merchandising programs and packaging innovations expected to drive discounters' hard lines business in the coming year. See DSN coverage of the National Hardware Show, beginning on page 33.

PHOTO : K mart Unwraps Office Square Frank Denny, chairman of K mart's Builders Square subsidiary, took the wraps off the discounter's latest specialty store concept: Office Square. The new 25,000-square-foot office rpoducts megastore opened its doors on Aug 3 in Palatine, III., about one hour from downtown Chicago. The store offers 9,000 sku's.