Industry Q&A: Brian Cornell, chairman and CEO, Target Corp.
Target Corp. is running a Q&A with its new chairman and CEO, Brian Cornell, on its in-house, behind-the-scenes blog, A Bullseye View. The interview was conducted by the Bullseye View team.
You are the first CEO who has been hired from outside of Target. What are the benefits of coming in from the outside? What will be some of the challenges?
I have had the benefit of looking at the retail industry from two vantage points. From a consumer product standpoint, I’ve worked with so many great retailers around the world and understand the current retail landscape and the changes that are taking place. I have also been in this seat before at Safeway, with Michael’s and also at Sam’s Club. I have a deep appreciation and respect for the challenging retail environment and for the important functions within retail, like store operations, merchandising, marketing, finance. But even more importantly, I understand the importance of building great teams. I think all of this gives me a unique perspective that will help fuel our success going forward.
You are arriving at Target with a strong background in grocery. Is that your passion and will that be an emphasis as you begin your new role?
My passion is building loyalty and delighting consumers … something that Target does extremely well. This brand’s promise of ‘Expect More. Pay Less.’ is as relevant today as it has ever been, and my emphasis will be ensuring we deliver it in all aspects of our product, experience and communications.
It’s been widely reported that Target needs to transform digitally. Do you think you bring the right background and experience to truly advance Target’s omnichannel efforts?
Advancing Target’s omnichannel presence is critically important and it’s at the top of my list of priorities. I have been close to the changes business and consumers have experienced over the last few years, and I have an acute understanding of how important it is to connect stores, online and mobile.
For us to create the Target of tomorrow, all three of those elements have to work in tandem.
My experience in this area is fairly broad. At Safeway, I ran the Safeway.com business, which was a joint venture with Tesco.com. And at Sam’s Club, we developed the “Click and Collect” program. More recently, at PepsiCo, I have spent a lot of time interfacing with virtually every retail customer as they tackle this challenge.
I understand what omnichannel means for Target’s future and I am committed to making it happen.
Why did you decide to take on this role at Target? Are you a fan of the brand?
I have certainly admired Target throughout my entire career and recognize the iconic nature of this brand. Target has an extraordinary history and many, many guests who absolutely love the brand. That said, taking on this role was not an easy decision. I have a lot of respect for PepsiCo — it is a tremendous company with a spectacular portfolio of food and beverage brands and a rock solid team. It’s never easy to leave something like that behind.
When I told my daughter I was leaving PepsiCo, her reaction really solidified things for me. She’s 28 and has grown up in a household that loves Pepsi. She was so disappointed to hear I was leaving until she asked where I was going. When I shared the answer, she simply said, “Dad, I love Target!”
I know that’s the reaction I will get again and again when people hear about my new role. I am really excited about the future of this company and being a part of the team that will develop the Target of tomorrow.
As someone who has worked in retail, what’s been your impression of Target?
I would start with the people. Across the industry Target has been viewed as an academy company with some of the best and brightest in retail. I have always looked at this company with admiration for the team, its capabilities and the strength of the brand – I’d say the connection Target has forged with its guests is enviable.
What will your first day on the job look like (i.e. what will be your top priorities)?
I will start by stepping back and really listening and learning. I want to spend time with the leadership team to understand the business from their vantage point and work collaboratively with them to build upon the work done during the last 90 days. I am impressed with what I’ve seen and look forward to setting priorities for the future and partnering with them to accelerate traffic and sales and build out our omnichannel experience.
What’s your favorite thing about shopping at Target?
I always enjoy watching other shoppers while I am inside a Target store. I love seeing how young families, especially moms with kids, connect with the brand. It’s amazing to see the appreciation and excitement that can be created.
Oscar Mayer introduces bacon jerky
If you’ve ever wished you could have bacon on the go, then the Oscar Mayer Institute for the Advancement of Bacon (OMIFAB) has some good news for you.
Oscar Mayer has unveiled Bacon Jerky, available in two flavors — Bourbon Barbecue and Teriyaki Ginger — and packaged in an on-the-go bacon jerky pouch.
"It’s obvious that people love bacon," said Sarah Jones, senior brand manager for Oscar Mayer Bacon. "But we know not everyone has time to whip out their skillet to make some throughout the day. With bacon jerky, Oscar Mayer is providing bacon enthusiasts with an easy and satisfying way to snack on bacon while on the move."
Oscar Mayer Bacon Jerky is available in 3-ounce ready-to-eat packages. It can be found alongside the full line of Oscar Mayer Bacon in the refrigerated meat case in most grocery stores nationwide, but is also shelf-stable.
Integrating Loyalty Promos Without Rocking the Margin Boat
Sandra Gudat, President & CEO, Customer Communications Group
Retailers often have trouble balancing their overall promotions plan with offers and discounts for their loyalty program. In fact, it may be enough of an issue that they keep loyalty as an independent P&L entity, or even steer clear of loyalty altogether to avoid the problem. After all, every retail business is about profit, and adding another layer of promotional discounts into the mix could be seen as a threat to the bottom line.
But loyalty promotions can be integrated with regular promotions in such a way that they can actually help retailers manage their margins. How? The key lies in getting corporate and merchant stakeholders to agree to adjust the total promotion markdown (PMD) budget to make room for loyalty.
Smooth Sailing … at First
During the initial launch phase, executives typically aren’t worried about the loyalty program’s impact on margin, as the incremental promotions are balanced by the incremental lift in sales they produce. To encourage program enrollment without reducing traditional markdowns and potentially impacting sales, the c-suite is willing to allow loyalty to function independently. As the program matures, however, pressure to merge the promotional efforts and manage margin becomes more intense.
Testing the Waters
The first step in creating a tighter, coordinated PMD budget is to aggressively test targeted program-currency loyalty offers against traditional markdowns — or even combine them based on the overall champions. Rather than focusing on response rates, look at incremental margin. Are reward redeemers more likely to respond to a loyalty double points offer on top of the regular PMD of $25 off? Is the best margin rate achieved by targeting recent redeemers with double points only, while the top five deciles receive a combination offer?
The key to successful testing is finding a merchant who is willing to work with you to determine that sweet spot. Typically, merchants will react in one of three ways:
1. Early adopters will aggressively begin planning bonus offers leveraging loyalty currency. They understand that bonus points can provide a competitive edge; particularly in commodity categories or for big-brand products.
2. Test and learn advocates will not be totally sold, but will be willing to try offers — nothing too aggressive in case response over-performs projections.
3. Rejecters will decide to take a wait-and-see approach: They will schedule one test offer, wait for reporting, get feedback from other merchants that are trying it and learn from their experience.
Fine-tuning the Sails
You’ll also want to look into the “earn versus burn rate” to understand where members are earning and redeeming the most points. What merchants are taking a margin hit on redeeming rewards that were earned in a different category? For example, one retailer reported that customers earned a large volume of points — 20% of sales — on the purchase of a washer and dryer combo. But the burn rate on home appliances was only 1%. Instead, customers redeemed the majority of their points in other categories such as apparel and footwear.
Work with the merchants on creative ways to drive customer redemption by using analytics, such as a market-basket analysis, to help equalize the hit on margin. This makes your merchant partners more likely to become loyalty advocates. Or find vendor or manufacturer funding to help offset costs and manage margin. The quality and depth of loyalty purchase data often leads to new co-op opportunities.
All Hands on Deck
Once you have some results under your belt, take your findings to a senior advocate to help you negotiate with merchants. Often times this is the chief financial officer (CFO), who acts as guardian of the PMD budget. Your advocate should use your results to revise the PMD budget and also communicate the new goals to the operating unit and merchandising team.
Lifting the Anchor
The takeaway is that loyalty promotions don’t have to replace traditional markdowns, nor do the two programs need to run parallel to each other, which can make managing margin a nightmare. Instead, the two types of promotions are integrated in an evolving process that takes shape over time. Gradually, you’ll be shifting your overall promotion budget to focus more on customer-driven incentives, which can result in higher sales — and a healthier margin.
Sandra Gudat is president and CEO of Customer Communications Group, the full-service loyalty and marketing agency with a consultancy approach and a dedication to providing measurable, sustainable results. She can be reached at [email protected].