Dollar Tree Analysis
IBP Objectives * Focus on continual growth and improvement while providing a reasonable return to our investors. * Obtain more of the middle-income consumers as consumers, opposed to just low-income consumers. * Increase the public’s awareness of Dollar Trees products, inventory, and quality of products.
Have Dollar Tree become a part of consumers recall. * Inform consumers of the extreme quality of Dollar Tree’s products, no products are expired or out to date. We just get an extreme discount with loyal distributors. * Change customer’s attitudes towards Dollar Tree and discounts stores in general.
Discount stores carry the same quality name brands as department stores, while staying true to their single price of $1 for everything. * Increase sales and customer traffic in stores from $5,882. 4 million annual revenue by 5% to $ 6,176. 52 million. * Increase consumer purchases from seasonal purchases to everyday purchases. Most people shop in discount stores for seasonal, party supplies opposed to everyday consumer needs, like dish soap. IBP strategy Being a dollar store, Dollar Tree’s usual target audience is primarily low-income households with about 55% of their customers making less than $40,000 annually (IBISWorld, 2011).
About 69% of African Americans shop at dollar stores at least once a month compared to 50% of Caucasian consumers (Mintel, 2005). Dollar Tree has successfully marketed themselves to lower income Hispanics and African Americans, but there is an opportunity in another market. In recent years there has been a rise in the number of upper income consumers using Dollar Stores. Everyone would much rather save money shopping, which is why with the recent economic downturn, it has become more common for middle and upper income families to supplement their shopping needs with dollar stores.
We see an opportunity to market to this newly emerging market, and believe that we need to capture brand loyalty before the recession is over. Dollar Tree has a unique opportunity with the recession. Because so many people have been affected by the current economy, more than ever people are looking for cheap ways to maintain their lifestyles. As lower income households continue to shop at dollar stores, people who were once wealthy or are still considered wealthy are starting to reconsider their shopping behaviors. Offering products like juice, spices, hips, and several other food and drink products, any homemaker could easily get all of their grocery shopping complete without checking the price tag (“Dollar Tree, 2012”). The middle class in America typically consists of people with a fast paced lifestyle, and they are all very busy. They work hard for their money, and are always looking for deals, but sometimes don’t have the time to go from store to store searching for the best price. Simply put, this demographic does not like to waste time, which will be one of our key marketing points.
There are very few stores that offer the amount of different products that Dollar Tree does. There aren’t any stores that have the variety of products that Dollar Tree offers for only one dollar. You can get office supplies, party supplies, medicine, food, games and toys, and much more. The medium income demographic would be attracted to this because they can get all of their errands done at one store for a portion of the price. As well as targeting medium-income households, we will narrow that down to 25-34 year olds in that demographic. These are people who are starting families and starting careers.
They are busy trying to make it in the world, and targeting this demographic would prove extremely beneficial for Dollar Tree. We can establish brand loyalty with this relatively young market, and possibly profit in future years when these younger family’s children start shopping. On top of targeting 25-34 year olds in the middle class, we will also continue to target Dollar Tree’s current market of lower income households. We will run advertisements in these lower income areas simply to serve as a reminder of Dollar Tree’s low fixed price of a dollar.
The one quality that puts Dollar Tree ahead of all other dollar stores is that it actually sells all of its products at one dollar. It does not matter what the product usually sells for or what it should sell for, because Dollar Tree’s business works in a way that makes them capable to sell their products at the simple price of one dollar. Because of this unique aspect, we will focus a large portion of our advertising on that message. Consumers can do all of their shopping at one low price, and in return, receive quality products which satisfy their needs. Our advertising will give off the personality of the average working family.
Dollar Tree is not a fancy store and that is certainly not the image that our advertising will convey. We want people to be able to relate to Dollar Tree and have the feeling that shopping at our stores is like shopping at a Walmart or Cosco, but cheaper and less of a hassle. It’s the one stop shop for all of your family needs. For our media plan, we decided to advertise through Television, Newspapers, and Internet, and these advertisements will run for a whole year. Dollar Tree’s advertisements will give off the same consistent visual appeal to all of its targeted consumers.
Moreover, all elements of Dollar Tree will portray a consistent image, while visually appealing to their target consumers. With that being said, our creative strategy will focus on the portrayal of Dollar Tree as a family business with great products at low prices. To do this, advertisements will show off many popular, trusted name brands with the intent to influence consumers into believing Dollar Tree carries quality and trusted products. In order to get as many customers into our stores as possible, our advertisements will visually appeal to middle class families.
In addition, advertisements will contain visuals of various families shopping at its stores, and have the families appear to be very stress free and loving. These visual appeals will give off the impression that Dollar Tree caters to everyday middle-class consumers by offering an enjoyable family-friendly environment. Dollar Tree competes with many big-chain grocery stores in the country like Wal-Mart, Meijer, and Kroger. These are all huge stores with larger budgets than Dollar Tree, giving them the ability to create expansive creative campaigns that register with consumers.
We don’t ask Dollar Tree to go over their limit, but to work with what they have, represent themselves well, and differentiate from other competitors. We believe that there are amazing opportunities for Dollar Tree within their market, and that they are not taking advantage of them by not committing to a traditional ad campaign. We found out that they are missing out on many beneficial ways to increase the company’s income, by not advertising much, and not representing themselves well. Also, differentiating Dollar Tree from other stores is a very important aspect, because too many stores cause clutter to consumers.
We have to make Dollar Tree stand up as something special, different, and relatable to target consumers. All of these elements would get the store new shoppers as well as maintaining their current customer base. Media Strategy Dollar Tree’s first problem is that they don’t allocate enough money in their advertising budget to produce an effective campaign that has the ability to produce worthwhile reach and frequency. If they wish to emulate stores like Wal-Mart it is essential that they advertise like them. Wal-Mart’s annual ad budget is $2. billion; we are not trying to suggest that Dollar Tree spend $2. 1 billion. However that $2. 1 billion spent on advertising is only . 8% of Wal-Mart’s annual sales, this is the strategy we suggest Dollar Tree employ (Ries, L. , 2011). Dollar Tree’s current advertising budget is $11. 1 million about . 2% of their annual sales. By increasing the ad budget to . 8% of annual sales, which by market standards is still below average, their new budget would be $47 million a budget that can actually buy effective GRP’s year round. The optimal media strategy for Dollar Tree is to use a pulsing technique.
A pulsing strategy is most effective because consumers use their products year round, but there are significant seasonal spikes in consumer spending around holidays, mainly Easter and Christmas. To do this, it’s important that Dollar Tree maintain a moderate level of reach year round of 75 or at least 3/4th of the target audience. At the same time, Ostro’s Matrix indicates that an appropriate level of frequency should be at 4. 1 exposures. During the months of March, April, November, and December is when we plan our flights.
During the flighting months reach increases to 80% of the target market and frequency to 4. 5 exposures in the national market. It is also during these months that we use an integrated spot market strategy to maximize consumer spending in local markets that Dollar Tree has a particularly high presence in by increasing reach to 90% and frequency to 6 exposures. These spot markets include 5 DMA’s in California and Florida (Griffin, J. , 2012) Los Angeles, Sacramento–Stockton, San Francisco, Miami-Ft. Lauderdale, and Tampa-St. Pete making up 11. 31% of the U. S. population.
To reach our targeted audience of middle-class Americans, it was decided to use TV as the primary vehicle to maximize exposures at the national level. To support the brunt of the ad campaign about a quarter of the budget was spent on half page full color ads in national newspapers since 79% of Americans with white collar jobs read the newspaper (MC Marketing Charts, 2009). Dollar Tree has invested into Dollar Tree Direct, an online e-commerce business, so an additional quarter of the budget was used to buy internet sponsorships, embedding a link to Dollar Tree Direct onto already branded websites (Dollar Tree Inc. 2010). Research Questions Dollar Tree is having issues determining the consumer’s current awareness of their product, recall of their product, and approval ratings. Several research methods would be effective to obtain this information. Such as survey research, Dollar Tree can pass out surveys to their target consumers using geographic location or an online survey targeting the sites their audience will frequent; or through email lists. Another issue of Dollar Tree is that in the past they were unsure of what their target audience should be.
Since the economy is so poor, they have expanded their target reach from low-income to the middle-class, but who accompanies this middle class. The middle-class is a large sector that contains many different incomes, lifestyles, etc. To deal with this dilemma Dollar Tree can perform focus groups to figure out who is shopping at Dollar Tree. Why they are shopping there, if they are not shopping there; why not? They can get in-depth answers on what the public really thinks of Dollar Tree, and similar stores within their market sector.