The Target Effect for Developers and Product Designers: Make more money through good design
How Target became the Taylor Swift of Grocery Shopping: A masterclass in product differentiation in a competitive market
The Target Effect is a well-documented phenomenon where shoppers who shop at the American grocery chain Target spend way above what was expected in their shopping trips. Combine this with its relatively premium market positioning in a very cut-throat American Grocery market, and Target has a lot of valuable lessons for those willing to learn them.
Target’s branding and customer loyalty are particularly important in a moat-free sector like Tech, where good features/ideas are often copied very quickly. Today, we will be going over my observations/research into the Target Effect, and how it has carved a very profitable niche in this very difficult section.
PS: The non-Americans here might be skeptical about this, but believe me. I don’t know what Target puts in their scented candles, but people go absolutely feral when they start filling up their shopping carts.
What Makes Target Effect so Powerful
- Fight on Experience not Hard Numbers: This is an idea we’ve touched upon a few times, but it is really hard to make a meaningful difference to customers by improving the engineering side of your product. It is generally much easier to improve the User Experience, which will let them overlook minor annoyances and build user retention. A good example of this can be seen with Instagram. Meaningfully improving load times is really hard (especially w/o breaking other things). The like button is a relatively simple engineering tool, but it almost defines the experience. In Target’s case, this means avoiding costly price wars with Walmart and instead making their shopping experience ‘fun’ (going to Target is a legit hangout activity for some people).-
- Prioritize emotional engagement & sensory immersion (positive music, colors) like Target’s vibrant aisles- If you’re anything like me, colors break your brain. That being said, multiple research pieces talk about the impacts of color on our moods. So don’t underestimate the power of a good pallet for influencing your users. I don’t think I need to convince you about the power of music and its ability to evoke emotion.
- Go beyond functionality with playful elements, gamification & interactive exploration to encourage discovery- Many apps (like investing app Robinhood) have tapped into the power of gamification to hook in their users. You don’t need to overhaul everything. A few well-timed animations, quirky sprites, and interactivity are enough to make the process more enjoyable for your users.
- Minimize friction points in the user journey for a seamless experience (one-click payments, intuitive navigation)- No further elaboration is needed here. People really value convenience (many services explicitly charge high markups for this). Don’t lose out on customers b/c of a terrible last-mile experience.
2. Find Your Niche, Monetize: Competition is for losers. So is trying to appeal to too many groups at once. Even if you have a broad-appeal product/service, it’s best to focus your time on making it the best possible offering for one group and expanding to the others slowly. Better to be a big fish in a small (but lucrative) pond than to be one of the interchangeable mediocrity in a big lake. This is the principle, behind the Blue Ocean Strategy, which we covered here. Some important steps here are-
- Identify a profitable base of loyal users by understanding their customer profiles very well.
- Offer exclusive content & features like Target’s limited-edition items, boosting subscriptions & in-app purchases. This is where profiling is key. With software, this is generally easier, but it’s best to build your products to ensure that you can easily pull and analyze customer data later.
- Utilize personalized promotions & loyalty rewards based on preferences & purchase history, driving targeted spending. I have some friends who go to Target w/o an agenda to check out what interesting seasonal deals they have. This is the ideal state for any product- a place where people go to ‘check things out’ w/o any agenda (Facebook and YouTube did this very well).
3. Harness the Power of Bias: We are filled with bias. Here, I’m not talking about things like racial bias, sexism, etc, but something deeper- the biases that are encoded into our brains (confirmation bias, status quo bias, etc). As I covered in my breakdown of biases in humans vs biases in AI, the biases encoded into biological life have an evolutionary function: they help us filter our large amounts of information to make decisions quickly. Grocery stores are masters of this (I would seriously recommend reading into this, some really interesting consumer psychology here).
- Subtly encourage desired actions by strategically placing features & promotions, similar to Target’s shop layout influencing impulse buys. You can build something similar into your products. Make the features you want used more front and center, and move the ones you want to be avoided out of common view. For security purposes, it’s generally to not give your system the ability to cause harm in the first place, as opposed to trying to fix all the leaks.
- Leverage social proof like user reviews & testimonials to build trust & influence buying decisions. More on this in the next section.
- Employ scarcity & urgency (limited-time offers, low stock notifications) to create a sense of exclusivity & incentivize immediate action.
- Employ Variable Rewards: Remember, my friends who go to Target agenda-less to look at the seasonal rewards? This is a good example, of variable rewards (yes the same ones used in Gambling, Social Media, and Games- the holy trinity of drug-free addiction). Where you can, employ the variable reward mechanism.
4. Fostering Community & Trust: Shopping at Target has now become a brand of itself, with it saying certain things about who you are. This is the end goal. Building a sense of community builds brand loyalty, which is very important for many software projects because they don’t have a traditional moat (successful ideas can be copied relatively easily).
- Build a sense of belonging through in-app forums, shared goals, & collaborative features- Community is very hard to replicate. Lean on that as a competitive advantage. The more you can build community-based features/products, the more invested people will get into your work.
- Tell a story- We resonate with celebrities, fiction, sports etc b/c the characters embody certain narratives and ideas. Your brand and product should do the same. Craft a mythos around your offerings, so that using your product says something.
- Ensure accessibility & inclusivity so your product caters to diverse needs & abilities- Good way to get some brownie points AND build a base amongst some traditionally underserved communities. This will also provide valuable business feedback.
By weaving these elements into your product, you’ll move beyond merely improving logistics. Your focus will instead be crafting an experience that connects with users on an emotional level. This fosters trust, loyalty, and ultimately, sustainable profitability.
Bonus Tip: Consider dynamic personalization using AI to tailor the experience based on individual behavior & preferences, further enhancing engagement & monetization potential. If you’re looking to find out how to do this (or if it makes sense for your business), holla at your boiii.
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