Target Case Study: Riding the Digital Wave

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Target Case Study: Riding the Digital Wave

ND SIBC Marketing Division Lawrence Buckley, Christine Mackin Bannon, Caitlin Bobber, D’Alessandro, Sarah Eide, Ly, Sean Hope Dubuque, Amanda Timothy Moots, Alexander Fitzgerald, Meredith Houska, Ben Schoemann McGowan, John Mundaden, Kari Powell, and Rob Wahl 4.20.2012 04.29.2011


Table of Contents

Overview............................................................................................................................... 3 Report Format ....................................................................................................................... 4 SWOT: Beforehand ................................................................................................................ 5 What’s Wrong?........................................................................................................................8 Guests...................................................................................................................................11 New Product..........................................................................................................................12 Proposed Services..................................................................................................................15 Presentation..........................................................................................................................18 Promotion.............................................................................................................................20 SWOT: Afterwards.................................................................................................................22

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Overview The case study asks us to “develop an innovative growth strategy that will make Target a leader among brick-and-mortar retailers in the digital media landscape.”

Target is constantly reviving its mobile application and a result has a strong out-of-store digital media presence. However, the company lacks an in-store digital media experience, and in order for Target to become a leader in the technological landscape, it must solve this problem. Our solution is to create a kiosk that features the same features as Target’s mobile application. Our overlying purpose in developing the Target app and kiosk is to enhance the customer’s experience by giving them access to a greater array of Target services digitally. Both the app and the kiosk will appeal to “the next generation of mothers”, primarily women in their late twenties and early thirties. Consequently, by implementing the app and Kiosk, Target will open itself to a new market of customers who will now have greater reason to choose Target over its competitors.

Target’s app is an ever-evolving program, and in our presentation we propose a few expansions on its current services. Since the app includes services such as digital shopping lists, why not allow users to save and edit lists via REDcard program account information? © Student International Business Council (SIBC)

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The purpose of the kiosk, on the other hand, is to prevent Target from alienating its nonsmartphone users. The kiosk will provide the same services available on the app, in addition to new features like a Genius product recommendation and an interactive store map. By implementing these two services, Target will not only increase its market base but will also increase the satisfaction of its current customers, which ultimately increases Target’s profit.

Our hope is that, as college students, we can deliver you fresh ideas to expand your market base and attract a younger clientele to Target. As a result, Target could serve not only its current guest (mothers), but also consumers a decade younger, who will soon become parents themselves. By adopting our ideas, Target can confirm its place as a leader in the digital media landscape among brick-and-mortar retailers.

Report Format

We first conduct a SWOT analysis of Target’s current position in the digital media market. Then, we spend the remainder of our report offering our suggestions on how to increase Target’s presence within the market. To begin, we spell out details of Target’s existing mobile app and introduce our in-store version: the kiosk. We describe the kiosk’s services and how it would be presented. We profile the average Target consumer and offer suggestions on how to decrease the age of this consumer. We then lay out a promotion plan in order to ensure a © Student International Business Council (SIBC)

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successful sync of the existing app and new kiosk. We close our report with a SWOT analysis of Target after the company adapts our suggestions.

SWOT: Beforehand The most comprehensive way to analyze Target’s current position in the digital media market is through a SWOT analysis.

Strengths Target’s strength in the digital media world is manifested in its mobile application. The app is free to download and offers users a wide variety of activities, including browsing products, creating lists, finding stores and viewing weekly advertisements. The app can be downloaded not just for the iPhone but also for the Android, two of the most popular smartphones.1 The app is also consistently updated to include new and useful features; one of the most recent additions includes a barcode scanner feature that works with the phone’s camera to retrieve product information. Target’s general mobile web has received praise for how it creates “around the clock mobile convenience” for consumers, winning the 2011

Figure 1: The application's homepage displays a number of its features.

Mobile Retailer of the Year award by Mobile Commerce Daily.2 Clearly, Target’s mobile

1

"Most Popular SmartPhones." Best Cell Phones. TechTarget. Web. 16 Apr. 2012. <http://www.brighthand.com/best_pdas/default.asp>.

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presence continues company tradition of creativity and innovation and is undoubtedly Target’s greatest strength in the realm.

Weaknesses Although Target’s application is a great idea, sometimes things are lost in execution. The app does not have flawless reviews on the Android and Apple stores. In fact, Android users gave the app a 3.8 rating out of 5, and Apple users gave it 3 out of 53. Within the past few days, Target has released a new version of its application, but future consumer complaints are inevitable, as technology can always produce mishaps. Additionally, we will later discuss how Target has room for improvement in its pre-existing Facebook and Twitter pages.

Opportunities The smartphone and tablet industry is growing rapidly—in fact, experts predict 65% of Americans will use the technology within the next three years4. Facing the cusp of this technological wave, Target should continue to revise its mobile app, as to not lose users. However, Target’s greatest opportunity lies not in satisfying its current users, but in trying to appeal to a younger generation of consumers. Widening the average age range of Target customers would increase immediate sales and would bring more young people into the store today—developing brand loyalty before they become parents of their own and fit the more

2

"Target." Ubermind. Target, 2011. Web. 16 Apr. 2012. <http://www.ubermind.com/work/target/>.

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"App Review: Target." Today's IPhone. Web. 15 Apr. 2012. <http://www.todaysiphone.com/2010/03/app-reviewtarget/>. 4 Reisinger, Don. "In-Stat: Majority in U.S. to Have Smartphones, Tablets by 2015." CNET News. CBS Interactive, 23 Aug. 2011. Web. 16 Apr. 2012. <http://news.cnet.com/8301-13506_3-20095949-17/in-stat-majority-in-u.s-tohave-smartphones-tablets-by-2015/>.

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common Target guest profile. Lastly, although Target has 1600 stores that service thousands of guests each day5, the application only has 250,000 downloads.6 A large company priority should be to increase the percentage of its consumers that use the application.

Threats Target is not the first supercenter retailer to come out with a mobile application. Wal-Mart, Target’s primary competition, also has an app that suits very similar needs. Its application also allows consumers to view weekly specials (Rollbacks), locate stores and create a shopping list.7 Consumers that may not feel a passionate loyalty to either Target or Wal-Mart would not necessarily be drawn to Target based solely off the mobile application.

Strengths

Weaknesses

 Mobile application- updates, features

User complaints

Twitter and Facebook updates

 Recognition- Mobile Retailer of the Year Opportunities

Threats

Continue updating app

Attract younger, smartphone-using clientele

Increase app downloads

Wal-Mart’s mobile application

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"Annual Report." Brand Promise. Target, 2011. Web. 16 Apr. 2012. <http://sites.target.com/site/en/corporate/page.jsp?contentId=PRD03-005497>. 6 "Target." Top Android Apps and Games in the Android Market. AppBrain, 2011. Web. 16 Apr. 2012. <http://www.appbrain.com/app/target/com.target.ui>. 7 "Mobile App for Apple IPhone, Google Android and IPad - Walmart.com." Walmart.com. Wal-Mart, 2012. Web. 16 Apr. 2012. <http://www.walmart.com/cp/Walmart-Mobile-App/1087865>.

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What’s Wrong?

Our task for Target was to enhance the existing digital marketing strategy in order to increase the popularity of their mobile app and website. In order to achieve these ends we chose to examine Target’s overall digital presence, including the app, the Target Facebook page, and the Target Twitter account. Upon closer examination we have come up with some digital ideas that could help Target increase their guests’ basket size.

The first thing we examined was Target’s 5.2 version mobile application.8

Please note that after the project was completed, Target produced version 5.3, which satisfies many of our suggestions. Therefore, we have kept many of the same information within our project, as to confirm that Target has made wise decisions in updating the app, and to spark discussion of room for future improvement. New information revolves around updates for the company’s future app and other ways to increase Target’s digital media presence.

First worthy of addressing is the app’s reputation on the Android Market and Apple App Store. In the past, users have only rated the app mediocre, and often complain about how the app’s 8

"Target." Target by Target. Apple. Web. 16 Apr. 2012. <http://itunes.apple.com/us/app/target/id297430070?mt=8>.

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many bugs and glitches make it difficult to use. There were also numerous complaints about the lack of certain functions and the difficulty of the interface. Many of these claims were substantiated when we actually took a look at the app. The option to make shopping lists, for example, is absent from the Android version of the app, and many options are hidden in menus that the basic smartphone user might not find. Furthermore, the app takes a long time to load, and consequently it is not consistent with Target’s brand image of an easy and convenient shopping experience. Another negative aspect of the app is that some of the most exciting features such as the lists, and scannable coupons are difficult to use and may not work. This could frustrate many consumers and discourage them from using the app.

Though many of these claims were obvious upon use of the app, it is also quite possible that these reviews are being proliferated by Wal-Mart9. These strategies are tough to prove, but regardless it is important for Target to focus on its image on forums it can control like Facebook, Twitter, and YouTube.

When looking at Target’s online presence, we noticed a few things. First, Target’s Twitter account is full of customer service complaints and responses. While it is good that Target is willing to respond to complaints in this way, a separate customer service Twitter should be established to leave room on the regular Twitter feed for other things, such as discounts and general Target news (for example, the opening of a new store). A customer wondering about

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"Competitor Reviews Ruining Your Business | Web Reputation Management." Web Reputation Management. Web. 15 Apr. 2012. <http://webreputationmanagement.net/blog/brand/481/competitors-using-online-reviews-toruin-your-business.html>.

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Target might see the current Twitter page and be turned off because it is all complaints. On Facebook, Target has a visually appealing design to their page and provides links to the company website and information about current promotions. However, anyone can tag Target in a picture and the picture will show up on Target’s page. As a result, there are numerous occurrences of inappropriate pictures being shared by Target, which might make customers reconsider shopping there. All that needs to be done is edit the privacy settings to make the Target page more wholesome and appealing to customers.

Another potential issue is that when one searches for reviews of Target’s digital experience many of the articles on the first pages of the resulting search are negative. Some of these articles are a few years old, but they are still the first things the consumer sees. Target should aim to address all of the issues raised in these articles and encourage employees and other bloggers to write about their good experiences with the Target App.

The bottom line is that many issues with Target’s current stance in the digital landscape revolve around consumer perception, and may have no real merit to them. However, given the fastpaced atmosphere of today’s world, these initial online appearances are essential, and have the potential to increase or decrease Target’s customer base. Target should look to remedy these problems and add new services that will make shopping at Target easier and more fun, which contributes to the brand identity Target consumers know and love.

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Guests A large majority of Target’s guests are female, and since women shop with higher basket values than men, we do not propose changing the company’s target gender.10 The graph to the right demonstrates that even though men do shop, women spend more, and are therefore the ideal customer. However, we do propose aiming for a younger age bracket. Instead of directing campaigns at the 40-yearold mother, Target should focus on consumers just a decade younger.

Figure 2: A graph from The Nielsen Company shows that women spend more than men. Above, green denotes male purchases, and blue denotes female purchases.

Our digital media proposal will revamp Target in terms of the technological landscape. A large percentage of its current customers will not know how to use smartphones or the in-store kiosk, and Target must allocate more resources throughout the transition. However, the new digital media focus will attract consumers that already know how to use our mediums, meaning that we gain a larger customer base with little comparative cost.

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Hale, Todd. "In U.S. Men Are Shopping More Than Ever, While Women Are Watching More TV | Nielsen Wire." Nielsen Wire. The Nielsen Company, 11 Mar. 2011. Web. 16 Apr. 2012. <http://blog.nielsen.com/nielsenwire/consumer/in-u-s-men-are-shopping-more-than-ever-while-women-arewatching-more-tv/>.

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A practice that Target has already capitalized on is loyalty purchasing. Consumers will continue to support a brand not only out of habit, but because they trust and have built a relationship with that brand. If mothers are Target’s primary purchasers, why not begin a relationship with women at a younger age? If Target decreased its average age bracket, women in particular could get hooked onto Target before they begin to settle down and have kids of their own. Once they do, they will turn to Target for their supercenter needs as opposed to the competition.

New Product

We propose that Target can best serve its current clientele by adding another product to its digital media lineup: a kiosk.

Kiosk The base design of the kiosk would be similar to that of barcode scanners featured in many department stores. It would feature a 10-12 inch touch screen with a tablet-style menu and a barcode scanner below. There would be simple icons on the menu correlating to different accessible features, many of which will also be featured on the smartphone app. These features would include but not be limited to a product search, store map, link to the weekly flyer and barcode scanner.

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Figure 3: A digital kiosk would strengthen Target's in-store digital media presence.

In addition to these features, there would be an icon for each department of the store. These menus would include basic information about each department, as well as department-specific features. For example, the Electronics menu would include a feature similar to Apple Genius that allows customers to enter a musician, movie, or video game that they like and receive a list of similar products. Additionally, the electronics menu would include a feature that allows customers to combine Target products to form a home entertainment system that fits the customer’s needs. Other departments would be involved as well. The grocery menu would include a recipe finder; the clothing menu would feature an outfit builder; the housewares menu would include a room designer; and the toys menu would have a feature similar to the electronics menu, but for toys instead of music, movies and video games.

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Up to this point, all of the features described would be available to anyone. However, to encourage customers to create a customer account or purchase a RedCard, customers would be able to scan their RedCard with the barcode scanner to access additional features. These features would be just like the list builder available on the mobile app.

The primary reason for including the kiosk in addition to the smartphone app is to target the large population of consumers without smartphones. Currently 41% of cell phone users in the United States own a feature phone, so they would not have access to the app. 11 The kiosk would primarily service these customers, giving them the same opportunities that owners of the Target app possess. In addition, the simplicity and functionality of the kiosk will cater to those who are uncomfortable with new technology and help them to adapt, bringing them into the new technological age.

While the in-store kiosk may seem like just a cool toy for customers to play with, evidence shows that it will help drive sales. Research shows that shoppers make more than 70% of purchase decisions in-store12. The kiosk will continue and further this trend of impulse buying, as customers will be introduced to new products they might not have known about. Additionally, the department-specific features will encourage customers to buy groups of 11

"Mobile Phones- US- February 2012." Mintel- Oxygen. Mintel Group Ltd. Web. 16 Apr. 2012. <http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic//display/&id=590223>. 12 Babej, Marc E., and Tim Pollak. "In-Store Advertising: Coming of Age?" Forbes. Forbes Magazine, 30 Oct. 2007. Web. 16 Apr. 2012. <http://www.forbes.com/2007/10/29/unsolicited-advice-supermarketsoped_meb_1030advice.html>.

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products even if they may have only been looking for one specific item. For example, customers looking for a television could be convinced to buy an entire entertainment system; grocery shoppers might find a recipe they like and buy all the ingredients; and women looking to buy a blouse could use the outfit generator and buy pants and shoes as well.

Proposed Services

Target App The launch of Target’s 5.3 app includes REDcard management, a store locator and simplified editing of store list items. All these ideas are consistent with what we had proposed Target change about its previous application versions. However, early reviews complain that users can’t use filters and metrics with the new lists, making it difficult to sort through items. Therefore, an updated app version should create an easier way to sort through items.

We also propose that Target’s app is missing one major revenue driver that has almost become a necessity in the digital world: an algorithm that can suggest products to a customer based on recent searches or previous purchases. Both Amazon and iTunes by Apple have taken advantage of this key feature to great success. These types of algorithms encourage impulse purchases and can turn the sale of one product into a basket full of sold goods. These types of © Student International Business Council (SIBC)

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features often remind consumers of products they might have forgotten they wanted, or never even thought they needed. Studies have shown they have increased sales for both companies, and we believe if Target’s new app incorporated this algorithm, it could get a step in the discount retailer market.

Another chance Target should take with an updated version of the application is a customerprofiling feature. MyTarget may be able to function as a simple customer profile for Target to view consumer activity through a determined set of criteria. This would allow the company to categorize and classify its large demographic into smaller, more manageable and marketable groups. In this case, not only would the application benefit Target consumers, but also Target itself, because through it the company could develop a better understanding of who the Target guest really is.

Target could also further develop its app by connecting it with the REDcard. Of course, the application is free and would continue to be usable if a consumer did not have a REDcard, but users could do more with the application if they had one. Login information could be through the card number and a set user password. Every time a consumer uses his or her REDcard to purchase items online or in-store, a customer profile could be updated, so that when users log on to the app, items most like their past purchases would pop up. In a sense, this is an extension of the algorithm system mentioned earlier. Since Target may need to start using ads to continue to offer its app free of charge, it can use customer information via the REDcard to pick which ads would be most effective to show each specific app user. Eventually, REDcard Š Student International Business Council (SIBC)

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management would expand to include bill baying. The app should make each consumer’s interaction with Target as easy and convenient as possible, and since the new app would feature a password protected account, bill paying is a logical feature to pursue.

Of course, in today’s technological age, something rarely exists for too long without being obsolete. We applaud you on your newest application version and agree with you on your updates. We hope that these suggestions help you brainstorm how you would like to update the application in the future.

Target In-Store Kiosk As stated earlier, the goal of the in-store kiosk is to provide the many of the same features as the app to customers that do not own smartphones. Some of the features of the app would be less useful in-store, but the algorithm-based suggestions could be expanded exponentially (liked the department-specific features). The algorithm feature would help drive sales by expanding each customer’s creativity and familiarizing them with the products Target offers.

Another feature the kiosk could provide would be a product lookup and directory. All the items could be entered in the kiosk by their name and given a store-specific location. This would help a customer locate items they wish to purchase; additionally, it could even draw them in to using the algorithm feature and exploring new products. By providing the digital in-store experience, Target would capitalize on a whole new audience that may feel excluded without smartphones. Customer satisfaction and sales would increase as a result. © Student International Business Council (SIBC)

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Presentation

Presentation is essential in digital media because the look or feel of an app or website can often be a deciding factor in whether or not someone continues use. Studies have shown that aesthetics often trump content in visual displays, and websites are no different. That is not to say that Target should not focus on its content, but a more updated Facebook page, Twitter, and a revamped website would attract guests and would help realize how many great features Target’s digital media has to offer.

Target should model its current digital media off of its website, which does an excellent job of marketing current sales, trendy products, and new updates. Twitter and Facebook are excellent platforms for Target to show off new promotions, sales, and even new in-store services. These digital media services are also an excellent way to share photos, highlight regional stores that are excelling, and provide a chance to share key news updates with customers.

Unfortunately customer posts have infiltrated the Target Facebook page, and the lack of privacy settings has allowed customers to post their own pictures. While no one takes these posts or pictures very seriously, their presence does erode on Target’s credibility and prevents these sites from providing customers with all of the relevant information they are seeking. It is

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absolutely necessary for Target to update these pages consistently to keep customers interested, and to help drive further web traffic.

Target should look to keep the design of the app the same, as customers have found this design to be quite efficient. However, there have been reports that customers have found certain features hard to find. These features include the ability to pay bills on a smartphone, and the shopping list features. This is extremely unfortunate because these two features have the potential to be great sales drivers. If the algorithm feature were added, it too would need to be presented in an obvious location to help drive sales. Outside of those technical issues, the app itself is well designed and very easy to navigate.

The kiosk would need to be quite similar to the app to create a similar experience for the nonsmartphone user. The in-store digital kiosk would need to have a sleek attractive design to draw the customers in and possess an easy to navigate touch screen that would be quite similar to the app. Initially the kiosk might require a little extra dressing up to show the customers that it does far more than the barcode scanners they are used to. It might also help to have a trained employee nearby to help the customers navigate the most interesting features.

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Promotion

Media Mix One of the most important aspects of promotion for Target is the media mix, or the assortment of which types of media to use. With the goal of providing digital solutions to increase the popularity of the Target website and app, it is important to utilize the correct types of media. Mediums such as newspapers and magazines may soon be too outdated for Target’s purposes, and billboards will be too costly. Therefore, the media mix should consist of the most technologically advanced mediums: Facebook, Twitter, email, blogs and website advertisements. All of the promotion should be accessible from a smart phone to ensure that the targeted guests are being reached (those most likely to use the app or website). A notable feature about these methods of advertisement is that they are extremely low-cost. Facebook and Twitter pages are created free of cost, and are free to maintain. Email is fast and efficient, and blogs are low-cost. While website advertisements can be costly, there is always an opportunity to do the bulk of advertising for free on Facebook.

Channel Mix The channel mix will also play an important role. Vital to the success of the promotion plan is a word-of-mouth campaign. The steps to promoting Target’s website and app through word-ofmouth include obtaining email lists of those associated with Target.com or cardholders; sending promotional emails biweekly; establishing Twitter and Facebook pages which encourage users Š Student International Business Council (SIBC)

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to “share with friends”; and creating a YouTube video tutorial on the usage of the Target app. One creative and exciting video can go viral within hours, increasing awareness exponentially.

Another important aspect of the channel mix is publicity. One extremely bold and memorable proposal for publicity of Target technology is a “New Wave Launch Party.” These release parties will showcase new technology, most notably the app and kiosk. Each region will host such a party and advertise it through promotional emails, catalog ads, and social media. Hosting the same event across various Targets across the country will establish an element of uniformity and togetherness for the image of Target. The party will be available to the general public through free entry. Two teams of employees will be especially trained – one for the app and one for the kiosk. Team members will be stationed around the store accordingly to help incoming customers download, register and navigate the new technology. As incentive, virtually redeemable coupons will be offered especially for those customers who download the app at the launch party. This event will build enthusiasm among customers and enforce Target’s fun and exciting brand image.

Promotional Characteristics The promotional advertisements should attempt to zero in on common characteristics of the Target guest. The typical Target shopper has a $55,000 household income, is female, has children at home, and has either attended or completed college.13 Notably, Target shoppers are looking for a more upscale type of discount shopping experience. Taking this information into 13

"Releases, Backgrounders and Statements." Target's Unique Guests. Target Corp. Web. 16 Apr. 2012. <http://pressroom.target.com/pr/news/target-guests.aspx>.

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account, the advertisements should be colorful, eye-catching, and ostentatious. It is imperative to emphasize the newness of technology and convenience of the app. As always, the advertisements should reflect the sophisticated and engaging shopping experience offered in Target stores.

SWOT: Afterwards With the implementation of these marketing strategy recommendations, Target will maximize its strengths and opportunities in the technological landscape to make itself a leader in the industry. Target customers can continue to expect more and pay less with these innovative technological solutions.

Strengths After Target implements these strategies it will be able to alter some of its present weaknesses into strengths. A cohesive digital marketing strategy will provide all sorts of consumers with valuable information that will help them make purchasing decisions. These extra features will increase the amount of impulse buys made on Target’s website and app and increase overall digital sales. The kiosk will do the same in store. Implementing better organization in digital media will also draw in a younger market of Target customer. Š Student International Business Council (SIBC)

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Weaknesses One of the weaknesses of implementing these strategies is that the further development of the app and the research required to complete the kiosk would be extremely expensive, and in the current economic climate, quite risky. We believe that features such as these will provide Target’s consumers with the added information they need both in and out of store to make even more purchases. It must be heeded, however, that there may be a slight learning curve for customers before they start to take advantage of the new features, and the algorithm will need a critical mass of data to make worthwhile suggestions to customers.

Opportunities Target will be able to attract more customers to their specials and discounts with the proliferation of information coming from their social media pages. If the site is well designed, many shoppers will also share certain deals with their friends and this will drive social profit. Target will be able to measure the amount of engagement that the customers perform with the Target sites. Moreover, site usage may increase, now that Facebook and Twitter pages could be divided into product help and product promotion pages. Consumers who were previously frustrated with the site’s mixed activity may now feel more comfortable browsing pages, and as a result buying more product.

Threats Just as Target is currently threatened by Wal-Mart’s mobile application, it will continue to be threatened by companies that will attempt to implement similar strategies. Target should also © Student International Business Council (SIBC)

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avoid the dangerous game of only driving up the amount of people who have followed or liked their page and should instead opt for strategies that will drive “retweets”, reposts, and shares. If users like a Facebook page, they will receive notifications on their own time line; however, if they share a Target post, all of their friends will see it as well. The key is to expand Target’s reach to virtually every Facebook user.

Strengths

Weaknesses

 All of Target’s digital media will be on the same page.

Kiosk and algorithm would be expensive internal projects.

 The focus of all digital media will be on providing the consumer information.

There would be somewhat of a learning curve for both customers and the algorithm itself.

 Extra features will encourage impulse buys, and increase basket sizes.  Attract younger market of Target customer Opportunities •

Threats

Ability to separate customer-service from consumer information in social media.

Opportunity to attract more customers from the sharing of Target deals and sales, and further word of mouth advertising.

Utilize Facebook and other social media as a shopping channel for customers.

Copy-cat tactics may be implemented by competitors.

Must avoid counting likes, and views on Facebook. Must instead consider social “profit” engagement from customers, such as shares, and comments.

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