Driving loyalty and redefining value

Unprecedented and compelling are words Bernstein Research analyst Colin McGranahan used to describe enhancements to Target’s credit card program designed to reward loyalty and increase sales. The game-changing development is Target’s plan to offer a 5% discount to customers who use one of its REDcard credit products. The program applies to every purchase, every day and goes into effect this fall.

“We believe guest will appreciate the simplicity and compelling value of this program, which will lead them to choose to shop more often at Target,” said chairman, president and CEO Gregg Steinhafel. “As a result, we expect this new program to drive profitable incremental sales, which will more than offset the cost of providing this everyday discount to our cardholders.”

Announcement of the nationwide rollout follows a test last fall in Kansas City where the company said customer response was overwhelming favorable. Target’s previous rewards program involved the use of coupons that recipients could use for 10%off future purchases.

“As this program rolls out nationwide, we would expect Target to market the program more broadly and we think the program will generate substantial media attention,” according to McGranahan. “As such we believe there is real potential for Target to acquire new customers based on this offer alone. Given Target’s already everyday low prices, a 5 percent discount on every purchase, every day is, in our opinion, a very compelling offer and we think is likely to attract new customers that are not shopping at Target today.”