Target Corporation Rewards Program, June 2010

Abstract

It was May 2010, and the results were in. For Doug Scovanner, CFO of Target Corporation, there was good news, and there was bad news. The recent trials of a new REDcard Rewards Program in Kansas City, Missouri, and San Antonio, Texas, had yielded mixed results. In San Antonio, the new rewards program offered customers a 3% discount on Target purchases when using a REDcard, but it had not produced a meaningful increase in sales in that market. On the other hand, the trial in Kansas City, with a 5% discount on Target REDcard purchases, resulted in a significant sales increase. In fact, if the results were applicable to the rest of the chain, this program would add 1% in comparable-store sales in the fourth quarter of 2010 and provide an even bigger boost in 2011. There were risks involved in the decision—without incremental sales, the 5% discount would hurt the company's bottom line. Opting for more testing would raise its own set of questions: Would the company learn a lot more? And what about the opportunity costs of waiting to roll out the program nationwide? Scovanner needed to decide then if the program should be in place for the fall and holiday seasons. Excerpt UVA-F-1632 Nov. 15, 2011 Target Corporation Rewards Program, June 2010 Our mission is to make Target the preferred shopping destination for our guests by delivering outstanding value, continuous innovation and an exceptional guest experience by consistently fulfilling our Expect More. Pay Less.® brand promise. —Target Corporation's mission statement It was May 2010, and the results were in. For Doug Scovanner, CFO of Target Corporation, there was good news, and there was bad news. The recent trials of a new REDcard Rewards Program in Kansas City, Missouri, and San Antonio, Texas, had yielded mixed results. In San Antonio, the new rewards program offered customers a 3% discount on Target purchases when using a REDcard, but it had not produced a meaningful increase in sales in that market. On the other hand, the trial in Kansas City, with a 5% discount on Target REDcard purchases, resulted in a significant sales increase. In fact, if the results were applicable to the rest of the chain, this program would add 1% in comparable-store sales in the fourth quarter of 2010 and provide an even bigger boost in 2011. There were risks involved in the decision—without incremental sales, the 5% discount would hurt the company's bottom line. Opting for more testing would raise its own set of questions: Would the company learn a lot more? And what about the opportunity costs of waiting to roll out the program nationwide? Scovanner needed to decide then if the program should be in place for the fall and holiday seasons. . . .