What will you do with your 5%?

Another week and another full page ad in Target’s circular touting the REDcard Rewards program launched last fall. Nothing unusual about that right? The 5% savings program has been promoted heavily since its arrival last October to the point where it is impossible to look anywhere in a store and not seen 5% Rewards signs.

What’s different about the most recent ad is it enters some new territory in that Target is touting not only that its prices are low, but that they are in fact the lowest because shoppers are able to take advantage of a low-price promise and then save an additional 5%. The concept and messaging is similar to the situation in the home channel where Home Depot and Lowe’s have nearly identical low-price guarantees. However, they go a step further and promise to beat the competitor’s price by 10%, offering shoppers considerable savings on large-ticket purchases.

Target is essentially doing the same thing, and although its message is communicated in a tactful manner with the headline “Our low price promise just got 5% better,” it might just as well have said, “Our prices are lower than Walmart’s.”

Of course, Walmart has its “unbeatable” prices and will match the prices offered at Target as long as a customer is able to produce a printed ad showing an identical item at a local store. However, Walmart doesn’t honor the prices paid by those who receive loyalty program incentives and most organizations who conduct pricing studies don’t factor in loyalty program related savings.

That’s not how people shop though, is it? People do participate in loyalty program and they take those savings into consideration when determining which retailer has the lowest price. And price isn’t always just about the price of the item, because shoppers calculate price in more of a total cost of ownership framework that also incorporates such variables as convenience, service and the overall store experience from the time they arrive in the parking lot until they have paid for their merchandise and are on their way home.

That said, now that Target has rather gently raised the prospect that it has the lowest prices courtesy of the REDcard, the comings months will reveal just how aggressively the company wants to communicate its new-and-improved low-price promise.


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