JOHN PELLEGRENE Top Class In Mass

My blood pressure rises and my heart starts beating faster when I can't find it," confessed Larry Rosenwinkel, a 39-year-old resident of Long Beach, Calif., and the frantic pace of his speech doesn't betray exaggeration. The vision his words conjure up is that of a man desperately grabbing for his nitroglycerine pills or perhaps discovering that his $30 million winning lottery ticket is missing, but the source of the anxiety attack is something else entirely. "I can't get through Sunday without my Target ad," Rosenwinkel continues, and you believe him.

OK, so maybe your average shopper doesn't take it all that seriously, but Minneapolis-based Target has managed to build a fan club whose members range from the well-heeled matron to the trailer park mom to Rosenwinkel, who falls somewhere in the middle. It's a place James Brolin and new bride Babs reportedly visit, and one where regular folks do, too. To steal another retailer's thunder, Target truly is where America--regardless of income or status--shops.

As the 850-store chain takes on 2,000-store-plus Wal-Mart and Kmart and expands nationally into new markets, it is redefining the paradigms for mass retail: 1) Inexpensive doesn't have to mean cheap. 2) Style does matter, even to those born sans silver spoons in their mouths. 3) It's just as important to give back to the community as it is to take; in fact, it may even allow you to reap more. All these messages brought to you by way of savvy marketing and advertising, the type that has the power to lure consumers in to pick up that bottle of Suave shampoo and spit them out happy some $150 later.

With Wal-Mart conquering the Western world, big box retailers are caught up in lowest-common-denominator games. While five of the top 10 mass merchants are in bankruptcy, a reorganization or about to be, Target successfully competes with Wal-Mart for bottom-line profitability and top-line sales on a year-in, year-out basis. And, many experts agree, it's doing so by having management and marketing practices that rank with the best and brightest on the branded-product side.

"They've always beaten Wal-Mart at marketing," said Don Stuart, partner at Cannondale Associates, Wilton, Conn. "Wal-Mart is a great distribution Goliath, but Target is the David of marketing, with that great positioning of image with value. It's a trump card for them to play."

"If you look at the executive group, they really rank among the seminal geniuses of marketing," said Burt Flickinger, managing director of Reach Marketing, Westport, Conn. "They've successfully sustained brand building. Even more so than Mickey Drexler at Gap or Phil Knight at Nike, who were unable to sustain the marketing attitude and brand strength [over such a long period]

Target's team is led by evp-marketing John Pellegrene, who began his career at Target parent, Dayton Hudson Corp., in 1969 as director of advertising for Hudson's, and worked his way up the corporate chain to become svp-marketing for the entire department store division in 1980. He moved over to the mass side in 1988.

"He's always managed to balance his work life and his family," said Jordan McElwain, who's worked with Pellegrene for 20 years. The relationship began when she was a junior account person at Grey Advertising's now-defunct Minneapolis office, and he was vp-marketing at Dayton's. McElwain now serves as vp-management supervisor on Dayton Hudson's business at Minneapolis-based Martin/Williams, Target's lead agency. "A lot of people feel he could easily be a chairman of a major retailer if he wanted to sacrifice the family time," she said.

Considering Target's quirky, ingenious advertising, it's not surprising that McElwain describes the environment as one where no idea is ever shot down. "With John, he encourages you not to edit yourself," she said. "There are no wrong answers, no political land mines." Even between the agencies-Target's reserve also includes Kirshenbaum Bond & Partners, Peterson Milla Hooks and HMS Partners-it's a cordial relationship, and she credits Pellegrene with setting that tone.

"I'd say we have a pretty high tolerance for different ideas," Pellegrene told Brandweek in a rare interview with the trade press. "[My team] has a desire to either go over the top or outdo the last thing they've done."

Sometimes an assignment goes out to any number of people. "Sure, it brings out competitiveness, but a positive kind," McElwain said. "He isn't swayed by politics or personality-whoever comes back with the best idea gets the assignment."

Ingrained throughout the Dayton Hudson department store dynasty is a sense of commitment to the community, one envisioned by George Draper Dayton and implemented by his son, Bruce Dayton, in the mid 1960s. As with its department stores Dayton's, Hudson's, Marshall Field's and Mervyn's, Target sets aside 5% of pre-tax profits for good works. And since it accounts for about 75% of company revenues, Target's pockets are much deeper than sister stores. "It's more powerful than anything a North American company has done," Flickinger said. "P&G's U.S. sales are comparable to Target's, but their donation to Special Olympics is capped at $2 million per year." With no ceiling on its contributions, Target matches that figure every two weeks.

Pellegrene revised the system to ensure that additional funds would be funneled to local charities chosen by managers of each store, and it's a marketing decision that has enabled Target to be seen as a member of the community, a good neighbor rather than one that moves in next door and decimates local industry. That stigma is one that competitors can't seem to shake, as suggested by a recent example set in the Washington, D.C. metro area, the site of a mass merchant turf war.

"Wal-Mart was getting its ass kicked over building a store on land that was once George Washington's farm," an industry source said. "At the same time, Target announces a $5 million campaign to restore the Washington Monument." (In keeping with Target's class-act approach, it commissioned architect Michael Graves to create a scaffold that would not obscure the monument while the work proceeded.)

Coincidence? "Perhaps not," McElwain said. "But they never sling mud at the competition, it's [perceived as] tacky. They could have made some hay about it but instead let people make their own connections."

Aligning with community-based fund-raising initiatives is seen as important, from celebrity-filled buzz events like the Artists and Writers Softball Game in East Hampton to Broadway Cares: Equity Fights Aids in Times Square. Even when there isn't a Target store within 50 miles, the reasoning is that people will come in for the event from 100 miles away. Meanwhile, competitors from class to mass have stores in the area, so Target scoops them.

Children, education and the Earth are the main focal points in cause marketing, and many programs interweave all three, said Wendy Liebmann, president of WSL Strategic Retail, New York. "Children are the entree-the message is that Target cares about the family," she said.

Perhaps because he's the father of five, Pellegrene seems especially attuned to the needs of families, as evidenced in Target's cause programs along with lifetime customer building initiatives such as its Club Lullaby loyalty program and Club Wed, now the largest bridal registry in the world.

To differentiate its store credit card, Pellegrene devised School Fundraising Made Simple, a program that directs 1% of each purchase to a school of the cardmember's choice, and recently the focus of Target's TV advertising. A brilliant move, sources said, since that percentage previously went toward merchant fees with a co-branded Target/Visa card. With the Visa deal canceled and a proprietary card program in its place, that money could now be funneled directly into each community.

"That's quintessential Pellegrene: taking a cold, parity product and finding the human connection," McElwain said. "He's great at marrying the two sides of the equation." Target now has 11 million cardholders and one the most successful proprietary cards in the country.

Other initiatives include a $10 million plan to build Target House, a temporary home for families with children in St. Jude's hospital, which is tied to pharmacy and health & beauty sales. And more than $2.5 million is awarded annually in scholarships to students and teachers under the Take Charge of Education program.

Although it has recently started getting the message across through store banners and advertising, Target has been relatively quiet about philanthropic efforts. "Maybe it's a sign of that Minnesota reservedness," McElwain suggested. "They just don't believe in bragging about themselves."

Because of its department store pedigree, Target, from the get-go, has successfully avoided the bargain basement corner that WalMart, Kmart and others have backed themselves into by giving price wars priority. The latter emphasis tends to be manifested in the chains' quality and style, or lack thereof. "Just because you have less money to spend doesn't mean you don't want good design," Liebmann said.

"More so than Dillard's or Saks, Sears or J.C. Penney, Target has been successful in creating private brands led by its Honors apparel," Reach Marketing's Flickinger said. On tip-offs from its trend scouts, the chain green lights fashion-correct designs and color palettes, a strategy that extends to housewares, accessories and other departments. While Wal-Mart's apparel sales fall between 22% and 28%, Target's accounts for 40% of topline sales, making it the only mass retailer to drive profit with softlines.

Those who aren't so financially strapped shop at Target, too, thanks to the retailer's marketing-driven image as an "upscale mass" retailer. "For them, it's 'Why should I pay more?"' said Liebmann. Her firm's 1997 Where America Shops study found that 90% of households in the $70K income bracket shop the mass channel compared with half of that five years ago.

Which store do they favor? One look at the annual household incomes of those who shop the holy trinity of mass and it's pretty easy to guess: A Target family earns $40,000 versus Kmart and Wal-Mart's $25-30,000 average.

Not surprisingly, Pellegrene points to Ikea and The Gap as brands that he admires, and the parallels with Target are readily apparent. "I think they are the kinds of brands that cross class and income lines," Pellegrene said. "They have niches that defy the normal definition of a brand-they go up and down. They attract the type of person who drives a Rolls-Royce and those who drive Fords."

His current favorite customer: actress Sarah Jessica Parker. "On the Conan O'Brien show, she talked about Target the entire time," Pellegrene said, and not just once, but on two separate appearances. When Parker raved about her Target PJs, the host suggested it must be a "Granny nightgown," and the actress shot back with a response that was music to the marketer's ears: "No it's not-it's frilly, 100% cotton and only $12.99!"

Pellegrene also got free press recently from Donny and Marie, Kirstie Alley, and Emmy winner Camryn Manheim, who, after announcing she was wearing Target earrings at the awards show, managed not to get heckled by self-appointed fashion arbiter Joan Rivers, quite a feat. "They can afford to buy wherever they want to, yet they shop at Target," Pellegrene said proudly. "It shows [the public] that taste isn't necessarily a matter of dollars."

Pulling off that reverse-chic status is something no amount of advertising could buy. "It's buzz vs. hype," McElwain said.

Advertising, though, does help, and often, it kicks in before ground for new stores is broken. To herald the opening of 15 Chicago-area stores, clever teaser ads graced commuter rail six months in advance. "The message was that Target is coming and boy will you be surprised," said Richard Halverson, a senior editor at Discount Store News. "It really captured the public's imagination."

For last year's launch of its first three New York-area stores-part of the chain's recent Northeast expansion-local agency Kirshenbaum Bond & Partners was brought in to help the Midwestern retailer speak New Yorkese with a print campaign that mixed fashion with housewares, creating whimsical images of models with lampshade skirts, beaded carseat dresses and waffle-iron crimped hair.

"It's very sophisticated and upscale, and that's exactly where they want to he," Halverson said. "They've had that fashion image from the start and they never wavered from it."

Sources also point to Pellegrene's recognition of the mobile consumer, commuters as well as the 18% of the population that relocates each year, 11% out of an area code. Thus, his emphasis on out-of-home advertising. One prominent billboard campaign featured a trio of simple icons: an item of clothing, a piece of sporting equipment, the Target bullseye. The tag: "Wear it. Play it. Hit it." The hip creative communicated a message that could be grasped within a few seconds, reaching consumers in the markets Target trades in as well as those en route.

And then there's that famously popular, trend-forward Sunday circular, perused by Rosenwinkel and 40 million other people each week and second only to the comics as the most-read section of the paper.

McElwain describes Pellegrene as one of the "cleanest" clients she's worked with. "When developing creative, there are absolutely no shades of gray," she said. "The brand image in his mind is crystal clear. He looks at something and immediately knows if it suits the brand character or not.

"When we're going through the preamble, we have to cover the [story] boards because John will read them upside down. If he likes something, its immediate-he'll slap his hand on the table, and shout, 'I love it! Go produce it!'"

JOHN PELLEGRENE

Executive vice president marketing Target Stores.

College: John Carroll University, Cleveland, 1958

Motto: "Solve problems--don't create them."

I get my best ideas from "A liberal arts background rather than an MBA."

I define my role as . . . "always bringing, something new to the party."

Book:

A sense of Place (essays by Garrison Kellar, Andrew Greeley and others). It's about St. John's University in Collegeville, Minnesota.

Job I'd want if I didn't have this one: College president.

COPYRIGHT 1998 BPI Communications, Inc.
COPYRIGHT 2000 Gale Group