1. What hypothesis do you think the product designer for- mulated before he began researching how consumers use buckets? Do you agree with his decision to use observa- tion rather than another method of collecting primary data? Why? 2. Is Home Depot using differentiated targeting, undif- ferentiated targeting, or concentrated targeting? How do you know? 3. Which segmentation variables does Home Depot appear to be using to reach consumer markets? Why are these appropriate? 4. Do you think Home Depot is segmenting the contrac- tor market using only business variables or a combina- tion of business and consumer variables? Explain your answer.

Strategic Case 3 Home Depot Builds on Research, Segmentation, and Targeting Nearly 40 years after Home Depot opened its first two stores, Before the rise of Home Depot and its big-box com- the Atlanta-based company is the U.S. market leader in one- petitors, consumers shopped at small hardware stores where stop shopping for home-improvement tools and materials. It the owners would offer advice and order any obscure tool rings up $83 billion in annual sales, mainly through more than or odd-sized nail that wasn't in stock. Although do-it-your- 2,260 North American stores but also through its online store selfers (DIYers) might have to wait for out-of-stock or spe and mobile-ready website. cially ordered items to be delivered to the store, it was the VYSUCCES best option available at the time. Today, bowever, consum ers and contractors all around the country have convenient grip opening on one side of the rim. These features make it access to hundreds of thousands of everyday and hard to find easier to hold the Big Gripper bucket steady while moving products stacked on floor-to-ceiling shelves under one giant and unloading it, solving a problem experienced by millions warehouse-sized roof. of homeowners. The Big Gripper is made in America, adding Over the years, Home Depot has expanded its merchandise to the appeal for customers who use their purchases to support selection and service extras to address the needs of specific U.S. manufacturers target markets. One key target market has always been do-it- Watch It. Try it. Do It Yourself yourselfers who tackle home projects on their own. Within this market, Home Depot has been giving special marketing Research shows that some Home Depot customers are first attention to women who want to learn how to tackle house timer DIYers, and others may have more experience but want repairs or improvements. The retailer is also targeting con to brush up their skills before they undertake a project. To meet these diverse needs, Home Depot offers a variety of struction professionals who use Home Depot as a local source of lumber and other building supplies free how to workshops and videos. Consumers can visit the local store for weekly lessons and demonstrations showing Getting to know DIYers everything from how to install closet Organizers to how to tile bathroom floors. In do it herself workshops, women Counting in-store and online purchases, Home Depot com- can test out different power tools, learn how to clean and pletes more than one billion transactions every year. This fills the company's database with all kinds of details concerning care for equipment, and get a hands-on feel for common who buys what, when, where, and how. Analyzing the data repair techniques. Home Depot even has free children's workshops to teach basic woodworking skills. Participants enables Home Depot to keep products in stock where and go home with a handcrafted item such as a racing car, as when they're needed. It also helps the retailer to plan the well as a workshop apron and a special pin. Feedback from proper merchandise assortment for each store in cach season. these workshops and inquiries about future workshops help To learn more about its customers, the company regu- Home Depot plan ahead to support customers' informational Iarly conducts shopper surveys and other marketing research and instructional needs, which in turn encourages store visits studies. Its marketing managers visit stores to hear first-hand and brand loyalty. from local employees about question 1 Knowing that many what their customers like, customers can't get to a dislike, return, and request, store workshop or prefer Reading the reviews of prod- to watch a process sev- ucts that customers post on eral times before trying it Home Depot.com also helps themselves at home, Home the company understand what Depot has also posted doz- its customers want and expect. ens of YouTube videos for In addition, its marketers consumers and profession- use observation to identify par- als. The retailer's free step- ticular customer problems and by-step demonstrations and needs that can be addressed product-specific videos through marketing. For exam- have already attracted more than 34 million views. ple, the company recently hired a designer to create a new Its thousands of Pinterest kind of bucket exclusively for pins give customers ideas the Home Depot. Even though the humble bucket is a main- and inspiration for home stay for many household uses, Home Depot wanted to develop improvement, decorating, gardening, and craft projects. By something new to showcase its customer-centered innovation checking the number of views on YouTube and Pinterest, The designer began by observing how people use buckets in Home Depot can quickly spot the most popular topics and and around their homes and gardens. He noticed that women, prepare additional videos and posts that fit viewers interests. in particular, have difficulty lifting, carrying, and unloading a Targeting Online and Mobile Customers conventional bucket full of soil or other contents. Based on this insight, he redesigned the plastic bucket by Although online sales are currently a tiny percentage of Home forming an indented "grip pocket" on the underside. He also Depot's overall revenues, research indicates that time-pres- added a large, comfortable handle in addition to a secondary sured customers are increasingly interested in browsing online Revies TELE HOME DEPOT Hipotesis the purchase, and drive there for immediate pickup. Custom- ers can also consult the app or call Home Depot's experts when they have questions about tools or supplies. If contrac tors submit an order in advance, the Pro Desk in each store can have all merchandise ready to load when these customers amive The better its contractor customers do, the more they can buy from Home Depot. So to help contractors serve their cus- tomers, 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 dis- counts and exclusive offers, among other benefits. Looking ahead, Home Depot will continue to use market- ing research, segmentation, and targeting to increase its cus- tomer base, keep customers loyal, and build sales year after 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. Home Depot is investing heavily to improve its back-office technology and expedite shipping so customers receive their orders quickly. Today, 90 percent of its customers who buy online receive their orders within two days, or even sooner, And, instead of opening hundreds and hundreds of new stores, Home Depot plans to increase its revenues by expanding its online inventory and adding new distribution centers to fulfill online orders quickly and efficiently. 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 custom- ers 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. Cus- tomers who are not DIYers can find a professional installer or contractor using Home Depot's RedBeacon 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 reveals that these customers are mainly small contractors with no more than five employees and less than $500,000 in annual revenues. For these customers, prod- uct 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 week day. 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 year." Questions for Discussion 1. What hypothesis do you think the product designer for- mulated before he began researching how consumers use buckets? Do you agree with his decision to use observa- tion rather than another method of collecting primary data? Why? 2. Is Home Depot using differentiated targeting, undif- ferentiated targeting, or concentrated targeting? How do 3. Which segmentation variables does Home Depot appear to be using to reach consumer markets? Why are these appropriate? 4. Do you think Home Depot is segmenting the contrac- tor market using only business variables or a combina- tion of business and consumer variables? Explain your answer you know