Target's Bold Move: Analyzing the Viability of the New Target Circle 360 Membership Tam Danier
In Target news:
Target will launch unlimited rush shipping subscription to rival Amazon Prime
Target launches a $99/year subscription, Target Circle 360, offering free, unlimited delivery and rush shipping.
It debuts on April 7 with a promotional price of $49 until May 18.
The new plan upgrades and rebrands Target's delivery services.
As e-commerce and in-store retail merge, Target and Walmart use their physical stores to process online orders, while Amazon expands its fulfillment centers.
Target Circle 360, similar to Amazon Prime, aims to attract Amazon's customers.
Is this a good idea? Meaning will it work? Will Target achieve product-market fit? There’s no way to guarantee a way to know things up front. However, we can analyze the assumptions incorporated into this thinking.
The central assumption is that people want “memberships.” Although Amazon seems to be the originator of Memberships, Costco is the original. Costco employs a membership model where customers pay an annual fee ($60 for basic, $120 for executive) to access wholesale prices.
Costco's strategy is to keep prices low by earning profits through membership fees. This encourages customer loyalty as members feel obligated to shop frequently to get their money's worth. Costco creates a treasure hunt experience to increase sales per visit and is selective with its product mix to maintain high-quality products.
We can glean a lot from this:
A paid membership model can provide steady, predictable revenue and more product pricing flexibility.
Curating a limited selection of proven, fast-selling products builds customer trust.
Creating a "treasure hunt" experience drives exploration, impulse purchases, and repeat visits.
Focusing on a clear customer promise (in Costco's case, consistently low wholesale prices) builds loyalty.
Sometimes, optimizing for higher sales per visit is more profitable than just trying to drive more traffic.
Now that we’re working with a baseline assumption, “membership models work,” we can analyze the different areas of assumptions based on the following frameworks:
The DVFU framework ensures that any new product, service, or strategy is desired by the market, viable from a business standpoint, feasible with current capabilities and technology, and usable for the end-user, guaranteeing a seamless experience. The WMBT analysis, on the other hand, helps us identify the underlying assumptions that need to hold for a strategy to succeed. These tools influence informed, strategic decisions in dynamic business environments.
Here's what our deep dive revealed about Target's strategy:
Desirability: Target's membership program taps a growing demand for value-added services that enhance the shopping experience without the added cost, signaling a solid pull from budget-conscious and value-seeking consumers.
Key Assumptions:
The program's compelling value proposition attracts budget-conscious and value-seeking consumers.
Exclusive access, faster shipping, or special discounts encourage consumers to switch loyalty.
Viability: With its vast network and established customer base, Target's move could significantly disrupt the current market. Its free-to-join approach could draw users away from competitors.
Key Assumptions:
Target can grow its membership without major operational cost increases, ensuring long-term sustainability.
Its free-to-join model differentiates it from paid competitors like Amazon Prime and Walmart Plus.
Feasibility: This rollout is backed by Target's robust digital and physical infrastructure, which showcases its capacity to seamlessly deliver on this membership program's promises.
Key Assumptions:
Target's infrastructure can handle more online transactions and customer interactions without significant overhauls.
The agile supply chain and inventory systems can satisfy increased demands, ensuring smooth customer experiences.
Usability: Ease of integration into the existing Target ecosystem means consumers can effortlessly enjoy the benefits, potentially increasing usage and customer loyalty.
Key Assumptions:
The membership program's tech platform is intuitive, ensuring easy access to benefits.
Target's trained staff will help customers with the new program, fostering adoption and customer loyalty.
When viewed through the lens of 'What Must Be True' (WMBT) analysis, several critical factors emerge for Target's success:
The program must genuinely offer unparalleled value that competitors can't easily replicate.
Target's operational backbone must support the increased demand without compromising service quality.
Customer perception of Target needs to evolve beyond just affordability, becoming synonymous with an exclusive, rewarding shopping experience.
This presents leaders with an opportunity to reassess their propositions and strategies. Emulating Target's approach or learning from its pitfalls could propel your innovations forward.
Takeaway: Considering a membership program or similar value proposition? Let Target's bold move inspire your strategies. Employ the DVFU and WMBT analyses to evaluate your plans, ensuring they're designed to meet and lead the market.
T.L.Danier is a product strategist based in Miami, FL
.