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
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
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)