Target’s announcement earlier this month that it was launching a paid membership plan almost felt like a foregone conclusion. Amazon’s Prime membership has been paying dividends for the company for decades, and after Walmart followed suit with Walmart+ in 2020, it was only a matter of time before Target entered the mix.
With the addition of Target Circle 360, eight of the top 10 retailers in the U.S. now offer a paid membership, with the only two outliers being The Home Depot and Lowe’s. So the big question is — what happens next?
Fighting Subscription Fatigue as Consumers Shed Memberships
As Prime has proven for years, getting customers into a paid membership program can pay off in spades for retailers. Not only do paying members tend to choose that retailer first, but they also typically shop at the retailer more often and have bigger basket sizes when they do. The economics for retailers are clear — but what’s less clear is how consumers will respond now that they have so many options to choose from.
One thing is for sure – it’s unlikely that the same consumer will pay for memberships at all three of the big general merch retailers: Amazon, Walmart and Target. In fact, just as more retailers are adding subscription offerings, consumers are shedding them. A recent study from Capterra found 76% of consumers feel financial strain from their subscriptions and that 42% of consumers have cancelled one of their subscriptions in the last 90 days. The leading reasons for those cancellations were that the value of the subscription wasn’t worth the cost and that it was too expensive.
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This trend is currently playing out primarily across the streaming TV services, which also have proliferated in recent years. But when choosing which subscriptions to keep and which to cancel, consumers don’t see a vertical — they see a price tag: Whether it’s a streaming content service, software, a fitness plan, delivery service or a meal kit, ultimately it’s about the bottom line.
So how does Target plan to beat these odds, especially as a latecomer in its sector? The company’s EVP and Chief Marketing Officer Lisa Roath laid out the game plan in a session at Shoptalk this week.
Focusing on the Customer Relationship
Even if Target is late to the game, Roath said the retailer is “starting from a position of strength,” pointing to the 100 million members in Target’s existing loyalty program. The members of that free program already shop 5X more with Target than non-members, said Roath, so the goal with the paid tier is to “maintain and deepen” that relationship.
It all “ladders back to Target’s roadmap for growth,” she said, adding that “that roadmap in this increasingly technical age is anchored in relationships.” As it developed its new three-tier offering — the first tier is the existing free loyalty program, second is the Target Circle credit card and third is the new paid tier — Roath said that listening to consumers was key.
“We want millions of shoppers to come into Target any day and any way and feel like they have an experience that was made for them,” she said. “When we talked to them, they said they wanted more ease and more value.” Enter Target Circle 360, which for $99 a year will provide free, same-day delivery for orders over $35 and free two-day shipping, among other benefits.
Roath emphasized that the listening won’t stop even though the program has launched: “Just like we listened when we were designing the program, we’ve set ourselves up to continue that listening journey as we actually roll it out,” said Roath. “We need to hear what we get right and where need to adjust. The landscape is going to continue to evolve, so we have set ourselves up to be nimble.”
Leveraging (and Raising the Profile of) Shipt
As with its competitive predecessors, fast, free shipping is a cornerstone of Target Circle 360. Enabling this is Shipt, which Target acquired in 2017. As Roath pointed out, part of the halo effect of the new membership program is being able to better promote Shipt’s existence: “A lot of guests didn’t even know that we offered same-day delivery, so by bringing this [offering] under a name that they already recognize with Circle, we’re going to be able to increase awareness of that, which was an important objective of the program.”
In fact, as part of their membership, Circle 360 members will have access to the Shipt Marketplace, which offers same-day delivery from not just Target but more than 100 other retailers nationwide, including Walgreens, Big Lots, PetSmart and GNC.
Sweetening the Pot with Partners such as Ulta and Apple
As Walmart+ SVP Chris Cracciolo pointed out, the things that bring a member into a program aren’t always the things that make them stay, especially with the current financial pressure on consumers. As a result, the most successful membership plans offer a broad array of benefits that appeal to a wide range of consumers and keep them coming back. Amazon has its Kindle and Prime Video offerings; Walmart+ membership now includes access to Paramount+ and fuel discounts.
Target has promised that “exclusive partnerships and experiences, product offers and more will be added to Target Circle over time,” and some of the retailer’s current partnerships already have been incorporated. For example, Target Circle members have access to free trials of a range of services from Apple, including its Fitness, TV, Arcade, Music and iCloud offerings. Target Circle members can also link to their Ulta Beauty Rewards account to earn rewards even when they buy from Ulta at Target.
“Partnerships are incredibly important at Target; that’s a core part of our DNA,” said Roath. “We have an exclusive partnership [with Diane Von Furstenberg] that’s launching on March 23, and we had a lookbook event last week that garnered over 1 billion impressions, so we’ve just seen how much consumers respond to that exclusivity at Target. So partnerships will be an important part of the Target Circle program. As we continue to build the program, that’s a place where we will be working and listening to add more and more guest-relevant partnerships.”
Visual Hints that ‘Something is Happening’
While not related specifically to the Target Circle updates, Roath hinted at an upcoming refresh of the overall Target brand set to launch next week.
“This is going to be a year of a refresh in terms of how our brand shows up for consumers,” she said. “That’s going to mean us showing up in more culturally relevant ways, as well as bringing forward a concept that we’ve been talking about as ‘micro-joy.’ As we’ve been out doing research and talking to consumers, we’re finding that more and more consumers are experiencing joy in these really brief moments. We want to tap into that feeling and bring that forward in terms of a feeling that only shopping at Target can bring. So you’ll see Target Circle kick off a year of really refreshed creative that I think is going to feel new and fresh and different, and tap into that feeling of micro-joy.”
And there is one other benefit the Target Circle update is bringing to the brand — the chance to expand its color palette: “When you walk into our stores today you see a lot of red,” she said. “But with the branding that we’ve been working on for the new program, the teal in particular for Target Circle adds a great pop and it’s going to be a visual cue to our guests that something is happening.”
