Marketing 18th Edition by William Pride,Ferrell

Exercise 3

Home Depot Builds on Research, Segmentation, and Targeting
Nearly 40 years after Home Depot opened its first two stores, the Atlanta-based company is the U.S. market leader in one stop shopping for home-improvement tools and materials. It rings up $75 billion in annual sales, mainly through more than 2,260 North American stores but also through its online store and mobile-ready website.
Before the rise of Home Depot and its big-box competitors, consumers shopped at small hardware stores where the owners would offer advice and order any obscure tool or odd sized nail that wasn't in stock. Although do-it-yourselfers might have to wait for out-of-stock or specially-ordered items to be delivered to the store, it was the best option available at the time. Today, however, consumers and contractors all around the country have convenient access to hundreds of thousands of everyday and hard-to-find products stacked on floor-to-ceiling shelves under one giant, warehouse-sized roof.
Over the years, Home Depot has expanded its merchandise selection and service extras to address the needs of specific target markets. One key target market has always been do-it-yourselfers who tackle home projects on their own. Within this market, Home Depot has been giving special marketing attention to women who want to learn how to tackle house repairs or improvements. The retailer is also targeting construction professionals who use Home Depot as a local source of lumber and other building supplies.

Getting to Know DIYers
Counting in-store and online purchases, Home Depot completes more than one billion transactions every year. This fills the company's database with all kinds of details concerning who buys what, when, where, and how. Analyzing the data enables Home Depot to keep products in stock where and when they're needed. It also helps the retailer to plan the proper merchandise assortment for each store in each season.
To learn more about its customers, the company regularly conducts shopper surveys and other marketing research studies. Its marketing managers visit stores to hear firsthand from local employees about what their customers like, dislike, return, and request. Reading the reviews of products that customers post on HomeDepot.com also helps the company understand what its customers want and expect.
In addition, its marketers use observation to identify particular customer problems and needs that can be addressed through marketing. For example, the company recently hired a designer to create a new kind of bucket exclusively for the Home Depot. Even though the humble bucket is a mainstay for many household uses, Home Depot wanted to develop something new to showcase its customer centered innovation. The designer began by observing how people use buckets in and around their homes and gardens. He noticed that women, in particular, have difficulty lifting, carrying, and unloading a conventional bucket full of soil or other contents.
Based on this insight, he redesigned the plastic bucket by forming an indented "grip pocket" on the underside. He also added a large, comfortable handle in addition to a secondary grip opening on one side of the rim. These features make it easier to hold the Big Gripper bucket steady while moving and unloading it, solving a problem experienced by millions of homeowners. The Big Gripper is made in America, adding to the appeal for customers who use their purchases to support U.S. manufacturers.
Watch It, Try It, Do It Yourself
Research findings show that some Home Depot customers are first-timer DIYers and others may have more experience but want to brush up their skills before they undertake a project. To meet these diverse needs, Home Depot offers a variety of free how-to workshops and videos. Consumers can visit the local store for weekly lessons and demonstrations showing everything from how to install closet organizers to how to tile bathroom floors. In "do it herself" workshops, women can test out different power tools, learn how to clean and care for equipment, and get a hands-on feel for common repair techniques. Home Depot even has free children's workshops to teach basic woodworking skills. Participants go home with a handcrafted item such as a racing car, as well as a workshop apron and a special pin. Feedback from these workshops and inquiries about future workshops help Home Depot plan ahead to support customers' informational and instructional needs, which in turn encourages store visits and brand loyalty.
Knowing that many customers can't get to a store workshop or prefer to watch a process several times before trying it themselves at home, Home Depot has also posted dozens of YouTube videos for consumers and professionals. The retailer's free step-by-step demonstrations and product specific videos have already attracted more than 34 million views. Its thousands of Pinterest pins give customers ideas and inspiration for home improvement, decorating, gardening, and craft projects. By checking the number of views on YouTube and Pinterest, Home Depot can quickly spot the most popular topics and prepare additional videos and posts that fit viewers' interests.
Targeting Online and Mobile Customers
Although online sales are currently a tiny percentage of Home Depot's overall revenues, researchers indicate that time-pressured customers are increasingly interested in browsing online or by cell phone and ordering with a click. Some customers like the ability to buy online and pick up their purchases at the nearest Home Depot store, avoiding any shipping delays. Others are looking for same-day delivery to home or work site, so they can start or finish a project on time.
With speed in mind, retailers like Walmart and Amazon are experimenting with same-day delivery of online purchases. In this competitive environment, Home Depot is investing heavily to improve its back-office technology and expedite shipping so customers receive their orders more quickly. Today, some purchases arrive in just two days but others may not arrive for as long as seven days. In the near future, Home Depot expects to offer two-day delivery by fulfilling online orders from nearby stores. It is also gearing up for same-day delivery of lumber and other materials that contractors and consumers need in a hurry for a project already underway. Customers will have the option of tracking their shipments via updates sent to their cell phones.
For customers on the go, Home Depot's smartphone apps allow convenient access to product specifications, pricing, and customers' reviews. Customers can set up a wish list for products they want from Home Depot. When these customers visit a Home Depot store, sensors detect the app and offer directions to the aisle and shelf where wish-list products are located. The retailer also uses the app to offer coupons on certain products as customers walk through the store. Customers who are not DIYers can find a professional installer or contractor using Home Depot's Red Beacon app.
Targeting the Pros
Purchases and equipment rentals by building professionals account for more than one-third of Home Depot's revenues. The retailer's research findings reveal that these customers are mainly small contractors with no more than five employees and less than $500,000 in annual revenues. For these customers, product availability and price are top concerns. Contractors who buy from Home Depot can schedule delivery at a job site on any day of the week, not just on a weekday. If they run low on lumber or nails, they can use the retailer's Pro app to locate what they need in stock at a nearby Home Depot store, make the purchase, and drive there for immediate pickup. Customers can also consult the app or call Home Depot's experts when they have questions about tools or supplies. If contractors submit an order in advance, the Pro Desk in each store can have all merchandise ready to load when these customers arrive.
The better its contractor customers do, the more they can buy from Home Depot. So to help contractors serve their customers, the retailer offers a number of handy online tools. For example, the retailer has web-based software that contractors can use to prepare estimates and proposals, select specific materials for each job, and calculate costs. Contractors who enroll in the Pro Xtra loyalty program receive special discounts and exclusive offers, among other benefits.
Looking ahead, Home Depot will continue to use marketing research, segmentation, and targeting to increase its customer base, keep customers loyal, and build sales year after year.
Question for Discussion
Which segmentation variables does Home Depot appear to be using to reach consumer markets? Why are these appropriate?