The reverse Groupon strategy
I have never seen a Groupon offer from Target. I suspect the closest I'll ever see is being able to buy a Groupon gift card at Target.
Groupon seeks to attract mostly new customers for a business through deeply discounted offers. This fledgling and often fleeting relationship is brokered by and benefits the third party, Groupon.
Target neither wants nor needs help from Groupon to gain new customers. They have their own methods for shepherding existing customers.
Retention is the new acquision, declared "Flip the Funnel" author Jospeh Jaffe. And few businesses are as good as Target at enticing exisiting customers to stay, return and buy more.
A recent article in the New York Times shed some light on Target's somewhat controversial tactics to gather information on customers to keep them coming back, especially for new parents. In many cases they know what the customer wants before the customer knows.
One key step in this process is to transition a customer from buying a few staples from Target to buying more and more of their houshold goods, from diapers to clothes to orange juice. Retention becomes expansion.
Reading this article was like unearthing the archeology of my own evolution as a Target shopper and father of an almost 2-year-old. It was startlingly accurate. It also explains why Target doesn't need to be at the mercy of Groupon to get them new customers.
To dig a little deeper into Target's methodology -- and because I could use more paper towels -- I downloaded their app. I created my account and handed over my location, email, phone number, "home store," and other personal info.
Even before I could get my first text message offer, I checked out their daily deals. The app featured heavily discounted four or five items with a count-down when the deal ended. Sound familiar?
The daily deals worked very similar to Groupon's daily offers, except Target didn't have to pay a sizable cut to a third party.
The other difference is Target seemed to know exactly what I wanted, maybe based on my previous purchasing history, location or some combination of information. The top daily deal item was exactly what my wife and I are in the market for -- a 5/5-star rated children's toy organizer for 33% off.
It's as if Target saw me picking up my daughter's toys all night and putting them in haphazard, poorly organized and overflowing containers with no real home. Maybe they were.
The other deals were spot on, too. This was in contrast to the general restaurant and massage offers from Groupon that litter my inbox, and have become boring and undifferentiated.
So what are these methods of customer retention worth to Target? I'm going to guess about $23 billion dollars - give or take a billion - which is how much their revenues have increased since they started using the tactics outlined in the article on existing customers.
This time, I managed to avoid Target's siren song and didn't buy the toy organizer. But just knowing they had great deals on items that are exactly what I want will keep me coming back.
Well played, Target. Well played.
