Target Explores AI Solutions Along With New Subscription Model

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The Gist

  • Membership upgrade. A revised Target Circle membership program, featuring a new tier Target Circle 360, puts Target in closer competition with Walmart.

  • Customer insights. Subscription models open the door for understanding your customers.

  • Profitable integration. Combining AI and analytics with subscription data makes profitability opportunities possible. 

Retail marketers have shown those in other industries the value of data analytics in boosting profitability. Retailers, influenced by Walmart’s extensive use of analytics, are mining their data to enhance operations and profit margins. Let’s take a closer look at how subscription models work.

The latest trend among retailers, subscription membership programs, illustrates how subscriptions are transforming business models. Target’s introduction of a new membership program offers marketing lessons on effectively aligning with customer experiences.

Front view of the Target Times Square Store in New York in piece about membership marketing and the Target Circle 360 program.
Target’s introduction of a new membership program offers marketing lessons on effectively aligning with customer experiences.Tada Images on Adobe Stock Photos

Related Article: 3 Customer Experience Lessons Brands Can Learn From Amazon

Subscription Models: Target the Earnings 

Target reported a loss for its fourth-quarter financial results. Despite beating Wall Street analysts’ profit estimates, Target experienced its first annual loss in nearly seven years. Cautious shoppers were less inclined to buy discretionary items, such as apparel and home goods.

To boost sales, Target unveiled a new membership marketing strategy introducing subscription pricing for enhanced services. The new program, Target Circle 360, ranks above two other tiers, each offering varying personalized offers and specialty deals for members. Target Circle 360 is launching with an introductory annual subscription price of $49.

The Target membership marketing program arrives as various retailers introduce subscription models to manage customer demand and offer more services to preferred customers. Subscriptions play a role in calculating churn rate — the number of customers who cancel a subscription. Having subscription metrics assists marketers in identifying the ideal customer. Customers who do not fit the ideal customer profile or behave differently from it should be allowed to churn. Churn analysis is about determining which customers to serve best.

Effective subscription tier models require precision in supporting analytics. Marketers need to segment user engagement by frequency or depth of usage based on available data to distinguish core customers from casual ones.

A woman sits on a a couch and chooses from a tiered streaming program in piece about membership marketing and the Target Circle 360 program.
Effective subscription tier models require precision in supporting analytics. DragonImages on Adobe Stock Photos

Related Article: The Most Powerful Model for Any Business: Subscription

Keeping the Right Products In Stock

Target’s membership marketing strategy is an implied nod to the master of inventory management, Walmart. One benefit of membership programs is that they provide opportunities for better inventory management. Few retailers have become as proficient at inventory management as Walmart has. 

Although Walmart was known for its aggressively low prices on consumer products during the 1990s and early 2000s, its true success grew from using analytics to streamline its supply chain to maintain a real-time inventory. The result was a profitable sales mix that fueled its expansion. 

Other retailers, like Target, are working to catch up on Walmart’s model.

Target currently stocks more non-essential merchandise. It has stocked more groceries at its stores to adjust its reliance on discretionary goods. The change has better positioned Target against Walmart, yet Walmart remains the sales leader among grocers through its lowest-price strategy and intensive usage of analytics.

Related Article: Analyzing the Growth of the Ecommerce Subscription Model

Analytics and Subscription Models = Profitability

Analytics is well-suited for subscription models because real-time data is generated from subscription-related activities. This data can do more than inform dashboard metrics; it forms the basis for various downstream operations that ultimately offer more effective business model guidance. It can also serve as a springboard for elevating an inventory system to compete with Walmart’s standards.

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