Workshop Series: John Roberts

19 September, 2014 - 10:45 to 12:00
Room 103 Colin Clark Building 39

Abstract

Kmart is a household name in many countries around the world. In Australia, Kmart was struggling in the first decade of the new millennium. Profits were meager and store traffic was stagnant. Furthermore, the brand was indistinct, having no strong position among the several discount department stores in the market.

Against this background, Kmart appointed a new CEO and CMO. One of the first steps taken by the new CEO was the introduction of everyday low pricing, as well as major store remodeling. This resulted in some moderate improvement in store visits but the brand message was still vague in the mind of consumers. To address this, Forethought Research undertook a thorough analysis of both the cognitive and affective factors that influence store choice. Affect was captured using a quick but effective method to measure nine key emotions, ranging from surprise to anger. We find that including these emotions significantly improves our model for likelihood to choose a store.

An additional benefit of measuring emotions is that it enabled Kmart’s advertising agency to create a television commercial that tapped into the specific emotions that most strongly predict store choice. That is, the model informed the advertising creative, something that is notoriously difficult to achieve successfully. The resulting television commercial proved to be highly effective. Using an econometric model we found that store visits were significantly enhanced, over and above Kmart’s usual advertising effects, subsequent to the launch of the new campaign that promoted two of the key emotions. Moreover, compared with store visits levels before the campaign, total annual visits increased by 20% over the next two and a half years, while the number of items sold increased by 42%. Last, EBIT increased by 30%. Interestingly, Kmart’s main rival had almost no EBIT growth over the same period, despite vigorous attempts to create advertising interference to counter Kmart’s highly successful television commercial.

The seminar is open to all academics and research students. Please encourage your RHD students to attend.

The seminar will be followed by lunch at St Lucy's (12.30pm start).

After lunch, John is available to meet with interested RHD students and academic staff between 2-4pm. Please sign up for a time slot if you wish to schedule a meeting.

Professor John Roberts, Australian Graduate School of Management