Page 118 - Marketing Management

COLLECTING INFORMATION AND FORECASTING DEMAND | CHAPTER 3 95

employees’ aprons and buttons. The campaign helped family savings. One commercial stated, “In today’s econ-
Walmart’s stock soar 1173 percent in the 1990s. omy, nobody’s more committed to helping family budgets
Walmart hit a few bumps in the road as it entered the go further than Walmart. Walmart saves the average family
21st century, and critics protested its entry into small about $3,100 a year, no matter where they shop.”
communities. In one study at Iowa State University, re- Walmart also used the new campaign and aggres-
searchers found that within 10 years of a new Walmart sive price cuts to attract new consumers affected by the
store opening, up to one-half of the small stores in that recession. It slashed prices on popular toys and electron-
town can disappear. Walmart also faced multiple lawsuits ics during the holidays and implemented a massive store
from employees who complained about poor work condi- remodeling effort called Project Impact. As a result,
tions, exposure to health hazards, and pay below mini- stores became cleaner, aisles less cluttered, and mer-
mum wage, which left employees with families below the chandise easier to reach—all to help improve the overall
poverty line. In some cases, employees said Walmart shopping experience and steal customers from Target.
failed to pay for overtime and prevented them from taking Walmart’s tactics worked: Same-store sales rose and
rest or lunch breaks. Another lawsuit claimed the com- its stock price improved during the recession. Analysts
pany discriminated against women in awarding pay and explained that Walmart’s product mix—45 percent
promotions. These problems led to a very high turnover consumables (food, beauty, health items)—is a better
rate in the 2000s. According to one Walmart survey, strategy in a poor economy than Target’s product mix—
70 percent of employees left the company within the first 20 percent consumables and 40 percent home and apparel
year of employment due to lack of recognition and inade- products. One analyst said, “Walmart sells what you need
quate pay. to have as opposed to what you want to have.”
From 2000 to 2005, Walmart’s stock price fell Stephen Quinn, Walmart’s CMO, stated, “We are for-
27 percent and remained low from 2005 to 2007. Negative tunate that this recession came along. It played to our po-
backlash, combined with Target’s reemergence on the sitioning really well. But our own insecurity is that all the
retail scene, contributed to the decline. Target revamped its credit would go to the external environment and none of
stores, merchandise, and marketing strategy to appeal to a the work we all did. The kinds of things we were working
more aspirational discount buyer and stole some of on anyway when this environment came along are the
Walmart’s top-tier customers. Target stores were nicely lit, same things we need to do to keep these so-called new
offering wider aisles and better-displayed merchandise. customers and I think continued to build loyalty with our
Target’s television commercials featured attractive models existing base.”
and trendy clothes from high-end designers such as Isaac Today, Walmart has stores in 16 international markets
Mizrahi and Liz Lange. One analyst stated, “Target tends to and serves more than 200 million customers a week
have more upscale customers who don’t feel the effects of through its variety of discount stores. These include
gasoline prices and other economic factors as much as Walmart Supercenters, Discount Stores, Neighborhood
Walmart’s core customers might.” From 2003 to 2007, Markets, and Sam’s Club warehouses.
Target outperformed Walmart in same-store sales growth
by 1.7 percent and profit growth by 5.7 percent. During this Questions
time, Walmart also lost the exclusive rights to use the smi-
1. Evaluate Walmart’s new marketing campaign and
ley face in its marketing campaign.
tagline. Did the company make the right decision to
For all these—and other—reasons, Walmart de-
drop “Always Low Prices. Always.” as a tagline? Why
cided it was time for a new direction and launched a
or why not?
series of new initiatives to help improve sales and its im-
age. First, it introduced a highly successful $4 generic 2. Walmart does very well when the economy turns
drug campaign, a program eventually copied by Target. sour. How can it protect itself when the economy is
Walmart also launched several environmentally friendly on the rise? Explain.
initiatives such as constructing new buildings from recy-
Sources: Dave Goldiner, “Exxon Tops Wal-Mart on 2009 Fortune 500 List,” New York Daily News,
cled materials, cutting transportation costs and energy
April 20, 2009; “Wal-Mart Seeks Smiley Face Fights,” BBC News, August 5, 2006; David Ng,
usage, and encouraging customers to buy more green “Wal-Mart vs. Target,” Forbes, December 13, 2004; Michael Barbaro, “A New Weapon for
products. Wal-Mart: A War Room,” New York Times, November 1, 2005; Kenneth E. Stone, “Impact of the
Wal-Mart Phenomenon on Rural Communities,” Increasing Understanding of Public Problems and
In 2007, Walmart introduced a new marketing cam-
Policies (Chicago: Farm Foundation, 1997), pp. 189–200; Suzanne Kapner, “Wal-mart Enters the
paign and tagline, “Save Money. Live Better.” Television Ad Age,” CNNMoney.com, August 17, 2008; Jack Neff, “Why Walmart Is Getting Serious About
commercials highlighted the company’s positive impact on Marketing,” Advertising Age, June 8, 2009; Sean Gregory, “Walmart’s Project Impact: A Move to
Crush Competition,”Time, September 9, 2009; “Store Wars: When Wal-Mart Comes to Town,” PBS,
decreased energy costs, increased 401(k) (retirement) sav-
February 24, 2007; Sean Gregory, “Wal-Mart vs. Target: No Contest in the Recession,” Time,
ings, good employee health care coverage, and increased March 14, 2009.