ANALYSIS: Client Profile - Efforts to build new Kmart image won'tcome cheap. Kmart was once synonymous with discount retailing. But theTroy, MI-based chain's days of defining that sector are long gone. JohnFrank reports

Not so long ago, if you wanted to go to a discount shop, Kmart was

easily your first and best option. In recent years, Target and Wal-Mart

have dominated and expanded the marketplace Kmart created. Wal-Mart has

won consumers by consistently pushing low prices and a value


Target has carved out a niche as an offbeat, funky discounter that

stresses style over price, attracting shoppers who might not otherwise

consider a discount store.

Kmart's images, and sales, have suffered by comparison. "They have not

really kept up their differentiation in the market," says Sandy

Hermanoff, president of Hermanoff & Associates, a Michigan agency that

has done PR work for Kmart in the past.

First steps to revival

In fact, Kmart's problems became so bad, the company brought in new CEO

Charles Conaway last May to put it back on track. Conaway had been

president and COO of CVS, a drug store chain. He's moved to address the

store's operational and supply concerns, but is also working to

reinvigorate marketing and PR.

That effort has not been entirely successful. Last December, Conaway

hired Brent Willis from Coca-Cola to head Kmart's marketing efforts.

That appointment was followed by the departure of the company's vice

president of corporate affairs, Shawn Kahle, who left in December as

Conaway and Willis sought to bring in new blood.

But Willis himself did not last long, leaving after only four


That hasn't helped Kmart's image or its marketing/PR initiatives.

"Obviously there wasn't a meeting of the minds. To me, that's an

indication of a bit of internal disarray," says Eric Yaverbaum, founder

of Jericho Communications who was approached six months ago by Kmart

about possible PR work. He didn't pursue discussions with the retailer

because his firm represents IKEA.

Just before Willis' surprising departure, he hired Lori McTavish as

Kmart's new VP communications. She had spent 15 years with Chrysler and

faces a daunting PR task, say journalists, PR people and industry


Kmart seems determined to stress a low-price message as the road to

revival for the company. It is investing millions in the strategy. But

that's the same message Wal-Mart is already successfully conveying.

Kmart needs to craft a smarter PR message to convince shoppers it's

offering better value than Wal-Mart and other discount rivals.

Hermanoff says one of McTavish's major challenges will be ending

internal disagreements over PR strategy and winning over employees to

the new image Kmart wants to create as a low-price retailer. "Before the

brand can come back strong, they need to eat, drink and sleep the brand

internally. They have to believe in it," she says. "They have a lot of

internal challenges and I think the public picks up on that."

Mike Duff, a senior editor with DSNRetailing, has covered Kmart for 12

years. He says, "They have a very basic marketing challenge. They have

to prove to their consumers that they're not the third choice." Right

now Kmart is in second place. Sales for the year ended January 31 were

dollars 37 billion, but they were accompanied by a loss of dollars 244

million. Meanwhile rival Wal-Mart had sales of dollars 48 billion for

the year ended April 30 and net income of dollars 1.38 billion. Target's

income for the year ended May 5 was dollars 254 million.

How McTavish hopes to address the PR challenge is unclear. She declined

requests to be interviewed for this story, saying through a spokesperson

that she wasn't ready to outline PR plans.

Constructing a new image

Observers say that before she can reinvigorate Kmart PR, she'll first

need to change how PR is viewed at the retailer. Past Kmart PR efforts

centered largely on staging major announcements about new products or

new alliances with the likes of design maven Martha Stewart, say Duff

and others. Besides such happenings, "they're not very accessible," says

Hermanoff. "Management either believes in PR or they don't. I hope the

new senior management are believers."

Duff adds that "the PR operation there has been consistently

professional" and does a good job handling events such as the April New

York City announcement of the return of Kmart's Blue Light Special, a

price promotion.

But with the restructuring that's been going on in PR as well as in the

company's executive suites, Duff says, "there's not the closest

relationship there between the executives and the PR function."

Externally, Kmart's challenge is to carve out a niche as a value

retailer without conveying the message that low prices mean cheap or

shoddy merchandise.

That was the image trap Kmart fell into in the past when it became known

more for dingy stores, out-of-stock merchandise and unhelpful store


"Kmart has to be careful because they don't want people to think of the

old Kmart," says Kevin Keller, a marketing professor at the Tuck School

of Business Administration at Dartmouth College in Hanover, NH. "Kmart

is an American icon. People think of it as a discount brand where

discount means cheap. The key to building a strong brand long-term is

being innovative and relevant."

Speaking at the company's annual meeting May 15, Conaway listed

marketing effectiveness as a top priority. He mentioned such

achievements as picking a new ad agency, TBWA/Chiat Day, and launching

an ad campaign for the return of the Blue Light Special.

The company also has started the "Blue Light Always" tagline to note

value-priced items it sells. "Our goal is to build the Kmart brand as

'The Authority for Mom, Kids and Home,'" says Conaway. "We are reshaping

our marketing efforts to be the most integrated and insightful in the


Advice from the outside

Kmart still has high brand recognition with consumers, but needs to

actively use PR to update that image, says Adrienne Arleff, an account

executive with Magnet Communications. She suggests that Kmart make more

use of celebrity connections. "Maybe they should partner with more of

the Martha Stewarts of the world," she says. Kmart sells a line of

Stewart sheets, towels and other housewares and recently announced a new

line of Stewart branded kitchenware.

PR must also continue hammering home the message that Kmart has cleaned

up its stores. "They have to focus on retail blocking and tackling,

cleaning stores, training employees," says Luke Haase, a veteran of the

Detroit PR scene who now runs his own agency in Traverse City, MI, but

once did outside PR work for Kmart.

To distinguish itself as offering good value, Kmart should move beyond

talking just about low prices and offer consumers such service as free

counseling on how to cut home energy bills, suggests Yaverbaum. "They

should be demonstrating value. They've got to make their store a

shopping experience," he says. PR's role is to publicize such changes

and new services.

"Kmart created a category and others have evolved it," explains Mark

Curran, a managing partner in the global marketing practice at Ogilvy

Public Relations. "The rules of the game have changed," he says.

Shoppers today are looking for more than prices, "there is a need to

capture consumer imagination," he says.

Announcing the return of the Blue Light Special, a well-known Kmart

marketing ploy from the past, captured positive media attention. Wall

Street was relieved with the smaller than expected first-quarter loss in

May, which helps convey the fact that the company is making


McTavish's job going forward is to build on such positive press and find

more ways to use PR to bring shoppers back into the aisles of Kmart

2,100 stores. It will take more than a Blue Light.


Chairman and CEO: Charles Conaway

VP of communications: Lori McTavish

Director, corporate media relations: Mary Lorenz

VP of investor relations: Julie Musch

Agencies: Project basis, MWW (for public affairs); Kekst & Company (IR)

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