Home highlights Target value strategy

Target this week featured the combination of sharp pricing on assorted towels, sheets and pillows on the cover of its circular to communicate a message of value and generate customer traffic. Offered at a single $5 price point, customers could choose from a twin-size fitted or flat sheet, a 3-in.-by-56-in. Waverly brand towel or a queen-size pillow.

“To boldly and accurately convey our value message, we have redesigned our circular to reduce the number of sub-featured items, allowing us to enlarge photos of featured items and present bold straightforward value headlines,” Target’s EVP merchandising Kathee Tesija told investors when the company released fourth-quarter results last month. There also has been a shift away from themed endcap displays to more key item features offered at a single price point, and such displays now account for 75% of all endcaps.

“We’re merchandising great value much more aggressively with fewer, bigger items and new signing that presents a much stronger value statement.”

The promotion is the latest example of Target’s effort to better demonstrate the “pay less” aspect of its “expect more, pay less” brand promise. The company has more aggressively promoted such traffic-generating categories as food and consumables, and also has adjusted its in-store promotional strategy.

Target is attempting to walk a fine line by demonstrating a different aspect of its value equation that isn’t recognized by most customers. The company has long asserted — and independent studies confirm — that its pricing on recognizable brands is within a few percentage points of Wal-Mart.

Even so, there is a lingering perception that a wider gap exists, and, to combat it, Target has resorted to Wal-Mart-style merchandising strategies as it competes for sales from consumers made increasingly price-sensitive by challenging economic conditions.

Consumers want to “pay less,” and Target is giving it to them, as it needs to generate sales. However, when circumstances improve, the company faces the delicate process of transitioning back to the “expect more” philosophy that effectively differentiated it from Wal-Mart.