Target: Effective Marketing through a Data-Driven Approach

We’ve all heard the (true) story: a father calls his local Target® store irate over the fact that his high school daughter received a flyer in the mail congratulating her on being pregnant, and offering her a discount on baby products. The manager at the local Target® store, of course, had no idea why the man’s daughter would receive such a coupon, but nonetheless apologized profusely. Two days later, the manager calls the man to apologize again, and instead of encountering an angry father, he hears the following: ‘It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.’

The story, while entertaining, begs the question why, and more importantly, how did Target® know a shopper was pregnant before her father did? The answer, now widely known, is simple: to reap the benefits of data-driven marketing. 

THE WHY:
It turns out that most consumers are not swayed by marketers’ ploys and tricks to purchase a certain product, or convert to a specific brand. In the 1980s, a team of UCLA researchers began a study of peoples’ most mundane purchases: toothpaste, shampoo, toilet paper, etc. They learned that most consumers paid little to no attention to these products; rather the purchases were habitual, without any complex decision-making. Fortunately for marketers there was a glimmer of hope: the researchers found that consumers going through a major life change were an exception to this rule and, in fact, were very susceptible to marketing tactics.

Major life changes included getting married, purchasing a house, getting divorced, or having a baby, to name a few. During these times, consumers were more likely to start purchasing a new type of cereal (getting married), a new flavor of coffee (purchasing a house), or even a new brand of beer (going through a divorce).  However, most compelling to the researchers were consumers with a baby on the way: the anticipation of a newborn compelled parent-to-be to purchase a myriad of new brands and new products in a completely unfamiliar territory. That’s what made new parents most susceptible to marketing and advertising of new products. In other words, the study discovered that sending a well-timed advertisement could alter a consumer’s shopping pattern for years to come.

 

THE HOW:
The Target® marketing team understood that being able to identify pregnant consumers could earn them millions, so they knew they had discovered the Holy Grail of marketing. The challenge was identifying them. Unsurprisingly, as one of the largest businesses in the world, Target® had a lot of data at its disposal, collected from various sources including email activity, preference center profiles, in-store purchases, online orders, and in this specific scenario: baby registries.

The Target® analytics team pored through their baby registries and began to identify distinct shopping habits that started developing as a woman approached each trimester. For example, the data showed that women approaching their second trimester began buying a lot of unscented lotions. Alternatively, women who were very close to their due date started buying a lot of scent-free soap, extra-large bags of cotton balls, hand sanitizer, and wash cloths.

As the analytics team sieved through the data, they began identifying a ‘library’ of products which were high indicators of pregnancy. If several of these products were purchased within a given time frame, a ‘pregnancy prediction’ score was attributed to a consumer, as well as an estimated due date. Informed by this data, Target® began sending coupons timed to very specific pregnancy stages, thus ensuring that the pregnant consumer would be purchasing items at Target© throughout her pregnancy. 

To avoid the risk of being ‘creepy’, ‘stalker-ish’, or downright alarming (much like the story at the beginning of this post), Target® had to deploy their marketing strategy inconspicuously to ensure consumers did not realize their reproductive status was being studied. So in their advertisements, Target© started mixing in products that a pregnant woman would never use – a lawn mower, a cocktail mixer – next to products that a pregnant woman would use – diapers, bottles. This ‘inadvertent’ marketing tactic worked; the year this campaign was deployed, Target® made $23 billion more in annual revenue, due to their ‘focus on items and categories that appeal to specific guest segments such as mom and baby’. So despite some controversy, this marketing effort constituted pure, unadulterated success.

THE BOTTOM LINE:
Data-driven marketing can be extremely powerful and effective. But in order to wield its power, it’s important to understand a few key points:

  1. Many consumers will not switch to a new brand, or be open to your marketing efforts, unless they are going through a major life change
  2. It is valuable to understand the shopping habits and trends of customers before, during, and after major life changes
  3. It is imperative to avoid scaring your customer: consumers spend more when they don’t realize they’re being specifically targeted

These tips, while short and sweet, can make a significant impact on your business. Used wisely, they’ll enable you to send communications about products your customer needs, before they even know they need them! And isn’t that every marketer’s dream?

Resources:

http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=1&_r=2&hp

http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/#2ae3c55434c6

http://simplymeasured.com/blog/target-on-social-media-how-the-retail-giant-markets-to-a-social-audience-of-138-million/#sm.0001sjnls3atvdqlzl513gu63ur8f

http://www.forbes.com/companies/target/

Author Bio

Marie Galo

Marie is the Account Manager for Lands' End, and manages all of the Lands' End accounts, including US, Japan, UK, and Europe. She is dedicated to making sure Lands' End is functioning smoothly across all platforms, and works diligently to implement new programs, processes, and data-driven strategies to ensure Lands' End is the best they can be. Marie is extremely competitive, and with her strong background in digital marketing, she'll be sure her clients are always winning. Based in Portland, OR, she loves hiking, cooking vegan, gluten free food, and perusing farmers markets for organically grown kale and tomatoes.