Red Hot

The inside story of how smart marketing and innovative design transformed Target into an icon of cheap chic

It’s easy to forget that less than a decade ago, America was frumpy. The French owned fashion, and the Italians had stylish cars and sleek sofas all locked up. Personal computers, arguably our greatest contribution to the modern world, came in just three hues: gray, beige, or black. (The bright blue iMac finally arrived on the scene in 1998—the same year the redesigned Volkswagen Beetle debuted.) Potato peelers with egg-shaped ergonomic handles? Toothbrushes resembling Brancusi birds? Teenagers carrying shiny iPods and shapely Nalgene-style water bottles? A decade ago, none existed. Today, all those things and other stylish products can be found at your local Target.

Few other companies, in fact, have navigated the recent “mass class” trend as deftly as Target Corporation. The Minneapolis-based retailer has managed to turn creative product design, eye-catching advertisements, and savvy marketing into sales that topped $59 billion last year—and the dividends include a reputation that even competitors envy: An internal Wal-Mart memo leaked to the media last May acknowledged, “Target has been incredibly successful at resetting the bar of what people expect from a discount store. Their fundamental premise is democratizing great design…. They feel like the ‘new and improved’ while Wal-Mart often feels like the ‘old and outdated.’”

Target has burned red-hot in the past decade. Sales have more than doubled, the stock price has climbed fourfold, and the company’s stores have spread across the country like chickenpox at a birthday party. Not bad for a business that struggled to find its niche after it debuted in 1962 as a discount offshoot of Dayton’s department stores. (Kmart and Wal-Mart, incidentally, were founded the same year.) In hindsight, Target simply proved a slow starter. In 1979, nearly two decades after its birth, the company had just 80 stores. Today, it has 1,537.

So how did a small regional retailer outpace the pack, its bull’s-eye brand increasingly bright in comparison to Wal-Mart’s sullied smiley face? The story begins in the 1990s, the dawn of Target’s Golden Age as it were, when a new creative strategy—one that still animates the company today—began to take shape.
 

the IDEA

In 1984, Bob Ulrich, a longtime executive with Dayton Hudson Corporation, was named president of Target. Four years later, he hired John Pellegrene, Dayton’s marketing chief and a former executive with J. L. Hudson’s department stores in Detroit, to overhaul Target’s marketing department. With Ulrich’s blessing, Pellegrene, a dynamic, no-nonsense personality, quickly set about transforming not just the company’s marketing vehicles but the entire corporate culture.

John Pellegrene, former executive vice president, marketing, Target: Target comes out of a different birth process than Wal-Mart or Kmart. If you look at the Ivy League of retail from 25 years ago, you’ll find Dayton’s, Bloomingdale’s, Marshall Field’s. The families who owned those companies ran them based on their taste levels—which kept quality high. They wanted to be first with the latest, newest merchandise.

Target was born out of that philosophy by one of the Dayton brothers. Even though it was a discount store, there were certain things that never strayed far from the department-store mentality. And because it was associated with Dayton’s and Minneapolis, people here gave it its own moniker. Target became Tar-zhay.

I think at that point [in the late 1980s] there were still two ways for Target to go: You could be Tarzhay, or you could be Wal-Mart. In my opinion, you couldn’t possibly be Wal-Mart, because they’d eat you alive or buy you. You couldn’t compete with Sam Walton. Even though you might match him on health and beauty aids, for example, that couldn’t be your niche. We had to be Blooming­dale’s—at a price.

Ann Aronson, former director, community-relations marketing, Target: John looked at Target as less of a commodities business and more of a place for design and fashion. He believed that a garden hoe didn’t have to be boring. You could apply design to everyday items—and, hey, it might appeal to people.

Pellegrene: One of the first marketing campaigns we did went like this: We took a $500 Adrienne Vittadini blouse and said, “What would you wear with this?” The answer: You’d wear black stirrup pants from Target for $12.99. To me, that said it all.

There were a series of these campaigns and, in my opinion, they were as valuable in shaping the internal organization as they were to outside sales. People inside the company had to be convinced that differentiation, fashion, and great design could work in a discount format. Beyond them, we had to convince movers and shakers in the entertainment world and in the design world that they not only could endorse Target, but they also could sell product at Target.

We wanted to get as many people as we could who were top guns in the entertainment and design industries to be associated with Target. I tried Cher, other celebrities. But nobody wanted to work with a discounter. There was a stigma.

The first breakthrough I had was Aretha Franklin. Aretha is a star’s star. If Aretha said it was okay, it’s okay, right? I think one of the reasons she did it is because she wouldn’t travel by air, and we were willing to come to her. So we flew to Detroit, where we owned J. L. Hudson, and asked if she would take this terrible piece of music we’d written and do something with it. She agreed. She sat down at the piano with a packet of cigarettes and belted out a fabulous song that became the theme for Target’s first Christmas campaign.

Aronson: Pellegrene was infusing the company with a marketing focus, looking at every area. He had the resources and a green light from the CEO to try things. We saw the results, in sales, in accolades, in great PR. I don’t think anyone had an exact vision of what this would become, but all the signs indicated that it was working.

Pellegrene: After we had Aretha, it was easy to go to a host of stars. And if all these cool people were doing marketing for Target, how far behind could the New York press and designers be? Well, not far, it turns out. We began talking with name brands that had never sold to discounters. Now Target has a lot of brand-name designers, but it didn’t then.
 

the BUZZ

Target’s first forays outside of Minnesota were into Colorado and Missouri, aiming to attract shoppers with low prices. But as the company grew, reaching 399 stores in 31 states in 1989, and began opening stores in cities where other discounters were entrenched and price competition was fierce, it needed a point of differentiation. How could it distinguish itself from Kmart and Wal-Mart? Could it replicate its Tarzhay reputation outside of Minnesota? What if, say, prices were low but the experience didn’t feel cheap? Could shopping at Target be made to feel cool?

Again, Pellegrene turned to celebrities, perhaps intuiting that the quickest path to coolness is often by association. As the company moved into suburban Chicago in 1993 and the outer boroughs of New York City in 1998, it sought out famous athletes (Michael Jordan) and actors (Joey Lawrence), sure that the shine of stardom would rub off on Target. But it would take more than celebrity endorsements to get the attention of overstimulated urbanites: Target’s marketing and advertising had to be equally captivating.

Pellegrene: In Chicago, we did what I believe was the first radio roadblock in history: Every radio station ran the same commercial at the same exact time every day for a week, so everywhere you turned on the dial, you got it.

Radio spot played at 7:10 a.m.: “For the next 60 seconds we’re taking control of every radio station in the Chicago area, so there’s no need to turn the dial…[static]…. See we’re on this station, too… and this one…. I thought we told you not to do that…. Yep, we’re still here…. Hi…. We’ve taken this drastic step so no one misses this moment…. All here? Ready…three, two, one. It’s Target Time!”

Pellegrene: It was a hit. And we had a teaser campaign telling people not to buy things before the date of our opening—“Don’t buy an iron ’til March 14!” or “Don’t buy deodorant ’til March 14!” There were celebrities we brought in, and people lined up to meet them.

Karen Gershman, senior vice president, marketing, Target: A month or so before opening in New York, we ran an ad in the New York Times. All it was was a bull’s-eye with some small type that said, If you’re familiar with this logo, call this number for an invite to our grand-opening party. The ad ran on a Sunday, and by noon that day, the message machine was full. So we knew that there were plenty of people who were familiar with Target.

Pellegrene: The idea was to go into Manhattan and knock everything over. Why? All the publishing industry is located there. We needed New York to become a household word. But we didn’t have any stores in New York City. The closest thing we had was a store way out in New Jersey somewhere.

Well, one of the celebrities we tapped when we decided to donate [$25,000] to Broadway Cares [an AIDS fundraising organization] was Sarah Jessica Parker. [She was in a stage show called Once Upon a Mattress.] So one day we took Sarah Jessica and some other stars out to the Target store in New Jersey, and they went shopping. In fact, they went absolutely bonkers over Target, and later Sarah Jessica went on Conan O’Brien and all she could do was talk about Target—the household goods, the lingerie….

Sarah Jessica Parker, appearing on Late Night with Conan O’Brien in 1997: So we went out to Target, and it was fantastic. Target, what a store! They have everything…. We don’t have those large stores in Manhattan…. Wow! I bought a box of 90 tall kitchen garbage bags! You can’t find that in Manhattan, right?

Conan O’Brien: Did somebody put a chip in your head?

Parker: I was just grabbing boxes…. It was just fantastic…. The whole experience was really a revelation…. I had no intention of coming on your show and shamelessly plugging Target. But truly, when you discover something good, why not share? I’m not selfish. I also found some nightgowns for $12—all cotton. Let me tell you about this nightgown….

Pellegrene: I couldn’t buy that kind of publicity if I tried.

the BLUEPRINT

By the late 1990s, Target’s relentless promotion, creative marketing, and clever advertising had burnished its brand image to a high gloss. But the products on the shelves weren’t necessarily remarkable. The house brand of apparel, Honors, was sturdy but hardly stylish. Even the sportier Cherokee line, added in 1995, was a far cry from couture. Collaborations with designers like Isaac Mizrahi were still unthinkable.

The company first took the plunge into high design in 1998, partnering with the architect Michael Graves. His resumé included hotels for Disney and high-end kitchen wares for Alessi, but Graves was not well-known outside the design community. Still, Target commissioned 200 items. Modestly priced and packaged in slate-blue boxes, they proved a hit with consumers. “We created the whole trend of designers making products for discounters, starting with architect Michael Graves in 1999,” Target CEO Bob Ulrich recalled in an interview with the Wall Street Journal earlier this year. “[He] took his $135 teapot and re-created it for us for $35.” The success of the relationship—not to mention the favorable media attention it generated—opened the door to work with other designers. It began with an architectural commission.

Aronson: We had heard that the [National Park Service’s] restoration of the Washington Monument was in need of funding, so we decided to take it on with the aid of some partners. But at the time, we also were moving into the East Coast, where Target wasn’t a well-known name. We wanted something that would get us a lot of media attention and put us on the map. So our involvement in the project had philanthropic as well as branding objectives. It was supposed to underscore that Target was an innovative, forward-thinking citizen—and, by the way, we just happened to have new stores opening in the Washington, D.C., area!

Donald Strum, principal, Michael Graves Design Group: The restoration was going to take several years, so Target asked architects to come up with ways to make the scaffolding into a statement, to make it look better. Michael has always looked to history to engage him, and this wasn’t just about American history, it also involved an obelisk, an ancient Egyptian form.

Pellegrene: He wasn’t a household name, but the opinion setters knew Michael Graves. He was a designer of great hotels and great buildings, and there was a halo effect from that that benefited Target.

Robert Thacker, former vice president, marketing, Target: One day I was meeting with Graves at his office, and the people from the park service had missed their flight, so everything was delayed. Michael and I were chatting, and he said, “Over the years, I’ve designed a lot of products, as well as buildings. A few of them have been produced, but many have not. Do you think that Target would have any interest in looking at them?” He handed me a book of designs that was about the thickness of a New York City telephone book. I looked at them and my jaw dropped. They were amazing things. I asked if I could bring them back to Minneapolis.

Strum: So we were invited to a meeting in Minnesota [in the fall of 1997] with people from both Dayton’s and Target. They were on opposite sides of the table, talking about possibilities, and we were showing our work to them. The way I remember it, it was sort of up for grabs. The department store wanted to handle things in a boutique way—a small kiosk with just a couple of our high-end products, the items we do for Alessi, on a series of shelves. But Ron Johnson [then a vice president and divisional manager for home décor at Target] thought about it a little differently. He said, “How about making a bigger statement?”

We were dealt the task of designing 200 products [150 made the cut] that would be on the shelves within 12 months. Overnight, we went from three designers to seven to accommodate the workload.

Linda Kinsey, principal, Michael Graves Design Group: Target told Michael, “You make the best design possible with the best possible materials, and we’ll work with you to figure out how to produce it.” But it is a price-point-driven business. Inevitably, some things that were conceived in chrome needed to become chrome-plated, and things that were chrome-plated needed to be changed to plastic with chrome paint. We had to meet the price points they were trying to achieve.

Strum: We didn’t do any focus groups. But Target was very vocal. If they didn’t like something, it was addressed. Six months into the planning, for example, we had to change the color of all the handles in the collection. We had a particular blue-green that was somewhat ambiguous. They decided ambiguity wasn’t good. It had to be clearly one color or another, not wishy-washy. They chose a particular blue from our color palette and said, This needs to be the signature color. And they were absolutely right. They knew that their customers didn’t want to stand there in the aisle wondering if the piece was going to work in a particular room at home.

the PRODUCT

Isaac Mizrahi, Liz Lange, Thomas O’Brien, Mossimo Giannulli, Sonia Kashuk, and Amy Coe now design bridal gowns, household furnishings, sunglasses, cosmetics, and baby toys for Target. But the company isn’t worried if those names mean little to you: Its collaboration with Graves cemented its reputation as a place where the work of good designers can be found—and that’s enough for most consumers. Target’s brand halo and marketing machine now have the ability to confer coolness on even the most obscure designers.

Target is banking on design as a competitive advantage even in areas like pharmacy sales. In 2005, the company replaced traditional amber prescription bottles with ClearRx, a proprietary line of ruby-red pharmacy containers with easy-to-read labels and color-coded identification rings. The pharmacy system, conceived by an art-school student and refined by New York designer Klaus Rosburg, has been lauded by critics and even featured in an exhibit at the Museum of Modern Art in Manhattan. But it’s not just a good design, experts say, it’s also good business.Minda Gralnek, creative director, Target: One day a woman I knew professionally called me and said, “Minda, I really want you to meet this young designer. She has a really great idea for a prescription pill bottle, something she did for her graduate thesis.” She was working for Milton Glaser, a famous New York graphic designer, which also sparked my interest.

Deborah Adler, senior designer, Milton Glaser: At the time I was trying to come up with my thesis project, my grandmother accidentally took some medication meant for my grandfather. They were both prescribed the same drug, just different dosage strengths. When I looked inside their medicine cabinet, I wasn’t surprised that the error had occurred. They have similar names—she’s Helen, he’s Herman. The medication was the same, and the labels looked almost identical except for the dosage.

I did some research and realized that my grandparents were not alone. In fact, at least 50 percent of Americans don’t take their medication properly. Aside from the label, the bottle itself is part of the problem. The standard bottle is small and cylindrical, so you have to turn it to get all the information. Often, the words are covered up by warning labels. I designed a new bottle. The front was round and the back was completely flat, but you could see all the information at once.

Gralnek: The next time I was in New York, I looked up Deborah. The minute I saw her bottle and label, I thought, God, we should do this. She had reorganized the information so you could read it. There was boldface, uppercase, lowercase—from a graphic-design perspective, it was gorgeous.

I took it back to Target and put together a business case of why it would be worth doing this. To me, it was a no-brainer—but then you have to figure out if the cost of retooling and changing systems is worth it. Could we get it done fast enough—before someone else came up with a similar idea?

Adler: Minda arranged a meeting at Target [in May 2004]. There were probably 12 to 15 people in the room. I put one of the old amber pharmacy bottles in front of each person in the room and had everyone close their eyes and try to remember where on the bottle the name of the drug was. Nobody had any idea. Who would think that the name of the drug would be tucked away at the bottom, almost invisible? By July, we were working on a new bottle.

Gralnek: At one point, there was a team of more than 100 people helping develop it—designers, creatives, pharmacists, technology experts. We had to figure out how the computers would print out the labels. There was plastics research: The bottles needed to be a certain density, because some medications can’t be exposed to sunlight. We switched the color from clear to Target red. We weren’t just making it look pretty. It was going to help people. It could save people’s lives. It was a solution to a problem that most of us didn’t even know we had.

Jeff Klinefelter, senior research analyst, Piper Jaffray: The key for Target is to have as many touch points as possible with the average consumer. That means having the circular in the Sunday newspaper, TV advertising, Target-branded Visas, and that pharmacy packaging that you see every day in your medicine cabinet. It’s a convenience, but it’s about branding, too.

It’s also what we call a sticky customer initiative. Pharmacies are a destination. Once you have a pharmacy customer, that’s a loyal customer. Once you get them, you keep them, and they buy other things while they’re at your store.

the PAYOFF

It’s difficult to quantify the full effect of design on Target’s bottom line. (Multiple factors have contributed to the company’s overall revenue growth in recent years, including expanded grocery sales and a lucrative credit-card business.) But it’s perhaps notable that sales of home furnishings and soft goods—traditional design categories—now account for a larger proportion of overall sales, according to Klinefelter. And it’s equally telling that in 2000, Dayton Hudson Corporation changed its name to Target Corporation, acknowledging the bull’s-eye’s primary position in the company’s profitability. (The department-store divisions were subsequently sold—proof, perhaps, of how much retail has changed since 1962.)

For now, Target’s decision to focus on design has given it the edge. Its collaborations with elites like Graves and Mizrahi have caught the public’s attention in a way that Kmart’s partnerships with popular figures like Jaclyn Smith and Martha Stewart, who launched product lines in 1985 and 1997, respectively, have not. Meanwhile, Wal-Mart has stepped up its efforts to show its interest in design: It recently sponsored a fashion show in New York City and, in 2006, signed Colin Cowie, an event and wedding planner, to develop a line of holiday home décor. As competitors mimic its strategy, can Target stay ahead of the pack? And will America’s appetite for good design remain?
Virginia Postrel, author of The Substance of Style: In the 1990s, a lot of people assumed that the interest in design was part of the boom, the froth. But the demand for good design persisted during the recession. It wasn’t about luxuries. It was about people looking to get more for their money. As price competition becomes intense, whether you’re talking about gadgets or trash cans or restaurants, people look for something more. People look for distinctions.

Klinefelter: Target sees design as a key competitive advantage in differentiation. And it is, without a doubt, one of the primary drivers of their sales growth and profit growth over the past few years. It is their number-one point of differentiation…and it’s been evidenced by their sales performance versus Wal-Mart in recent years.

Postrel: The whole idea is that you end up buying things you didn’t intend to buy. They’re not things you don’t need, but they’re things you might otherwise pick up at the grocery store or a convenience store. You want a new toaster, but you also need to buy Tide and then you see that Coke is on sale….

Klinefelter: That’s the whole strategy for Target: Drive traffic with necessities, and drive margins with discretionary products.

Postrel: I think Target was at the top of the curve in the design trend. Maybe a little ahead of it. But what was really interesting and important about the Michael Graves collaboration was that Target aimed at people who had never heard of him. This was very different from, say, Kmart’s partnership with Martha Stewart. It wasn’t about selling a celebrity. It was about selling a design—the look and feel of a product.

Pellegrene: The underlying thesis is this: There’s a shock value of finding something at Target that you thought you could only find at a department store or a specialty store. The customers do the marketing for you. They came up with Tarzhay. All we had to do was fill it out.

Joel Hoekstra is managing editor of Minnesota Monthly.
 

 

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