Phase II Deliverables

Marketing 361, Section #1

February 25th, 2020

TEAM #5
Aaron Ng
Caden Mallory
Jared Moon
Jordyn Shelton
Karen Vo
Kevin Bu
As requested, below is further analysis of Nordstrom, Inc.'s current marketing, and segmentation
strategies. The report will provide a more elaborate comprehension of the current status of
Nordstrom's marketing portfolio as well as provide primary and secondary research for the
findings. Attached below is an in-depth explanation of Nordstrom's current company/industry
trends, and expansion of the SWOTT analysis and target segmentation, and a detailed report of
the current competitive landscape.
 
Company & Industry Description
Product/Service Description, USP, & NAICS
Nordstrom Inc. is an American chain luxury department store that operates in the department
stores in the US industry under the NAICS code 45211 (Hiner, 2020). Nordstrom provides
consumers with various products ranging from apparel, shoes, cosmetics, and accessories for
men, women, and children. Nordstrom's primary goal is to ensure their customers are getting
quality service that upholds their reputable customer service.
 
Life Cycle, Growth Rate, Competition
With the rise of e-commerce and trends like competitors outreaching their products to grocery
products, the US department store industry's life cycle is on the decline for the next four years.
As consumers utilize the convenience of digital shopping, the need for establishments decreases.
Additionally, because the markets for department stores in the US have become saturated,
internal issues arise as key competitors, such as Macy's and Neiman Marcus in the industry, are
pressured to provide developmental growth (Hiner, 2020).
 
Environment & Seasonal Trends
Nordstrom is keen on improving the community and the environment by assisting nonprofit
organizations in their community and reducing emissions produced by their business. Each year,
Nordstrom strives to give back to their supporters by incorporating a Treasure & Bond program,
and a 1% offer back system. Nordstrom believes that supporting their communities will ensure a
prosperous society and continuous loyalty. In addition to community support, Nordstrom also
strives to help the environment. As our global climate has begun to change, Nordstrom vows to
reduce or eliminate waste production in every aspect of its business, if possible (Nordstrom,
2019).

Unique Selling Proposition

Nordstrom offers a variety of unique augmented and actual product aspects. A primary unique
selling proposition Nordstrom offers is "Free Returns, All the time." With this generous return
policy, customers may return any item at any time, no matter what. Additionally, in-store,
Nordstrom offers free fashion stylists, free consultations, and even an in-store café for its
customers.
 
SWOTT Analysis/Target Segmentation
By conducting further analysis of Nordstrom's customer segmentation, we have rearranged a few
of Nordstrom’s strengths and weaknesses (See figure 1 in attachments). Nordstrom has shown
steady trends and continued their success through unique selling propositions and customer
satisfaction - we are without a doubt that Nordstrom will be able to keep their progress through
updating and turning opportunities and weaknesses into strengths.
Further Target Market Elaboration
To most accurately identify and quantify Nordstrom's three target markets, various amounts of
primary and secondary data were collected. First, by using Nordstrom's NAICS code, 452210,
we were able to identify the percent of each target age that consumed a portion of the market
(See Figure 3 in attachments). Second, we began conducting primary research by holding an
interview (See Figure 4 in attachments) with two former marketing interns and one current
employee asking them about Nordstrom's target markets. Finally, we used a variety of different
secondary sources to quantify each target market based on the US population, percentages of
people's age, and income.
 
Primary Target Market
As mentioned previously, Nordstrom’s primary target consists of middle to high-class Caucasian
women, aged 26-45 living in suburban/urban areas (See figure 2 in attachments). Beginning first
with understanding that this is 46% of the market segmentation for the industry, we found that
77.8% of the average white household makes $100,000 or more each year. From that, 49,000,000
households make that and are 25-44 (Household income, 2018). We believe all potential people
to be a target in this market are 27,027,000. Based on current trends, Nordstrom builds in
suburban areas of high population and large areas of foot traffic, making it easier for target
marketers to bring in more people through the doors. We were also able to identify this target
market's main competitors, including but not limited to Macy's, Bloomingdales, Saks Fifth
Avenue, Neiman Marcus, and J. Crew (Parker, 2018). Because members of this target market are
generally looking for higher-end clothing, these other stores would be Nordstrom's main
competitors for getting their primary target market's business.
 
Secondary Target Market
Nordstrom’s secondary target market consists of middle-class women aged 16-34 who make
$60,000-$100,000 a year (See figure 2 in attachments). This market segmentation is about
Nordstrom's up and rising chain store, Nordstrom Rack, which is their discount store. We were
able to conclude from primary interviews and secondary research, that this market segment is
around 18,315,000 (Household income, 2018). As Nordstrom Rack continues gaining popularity
and more stores rise in urban shopping arenas, this target may be reached more effectively than
any other. Competition regarding Nordstrom's secondary market will include stores like TJMaxx,
Burlington, Express, Dillard's - stores that carry a variety of products but may be cheaper.
 
Tertiary Target Market
Although Nordstrom’s primary and secondary target markets consist of middle to high-class
women, we believe that our tertiary market would include middle-high class married men who
make $75,000 or more and who most likely live in urban/ suburban areas (See figure 2 in
attachments). According to Statistical Atlas, men who are married and make $75,000 or more
per year in the United States make up 12% of the population (Household income, 2018). Tertiary
targets are more likely to be more hesitant when buying; however, Nordstrom has a variety of
selections just for men. From our research, this market segments about 38,000,000 of our tertiary
market. Even though Nordstrom offers a wide range of brands and all types of clothing,
accessories, and shoes for married men that make $75,000 or more per year, we have competitors
that are targeting the same segmentation. Competitors like Lululemon, Banana Republic, Men's
Wearhouse, and Express provide specific selections for men, as well as lower prices (Parker,
2018). However, Nordstrom is a department store that provides all choices for our tertiary target
and all in one store.
 
Competitive Analysis
Discussion of Competitive Landscape
The competitive environment for Nordstrom is unique and differs significantly from other retail
stores. This competitive landscape is due to "the strategic decisions like the diversification into
off-price and development of omnichannel plan" (Daphne 2017). Nordstrom navigates its
competitive environment by focusing on the customers. There are a significant number of retail
stores in the world, and some of them are very successful. As such, Nordstrom has competitors
everywhere. The only difference that would distinguish Nordstrom from other retail stores are
the strategies and plan they implement to the company. If we were to put it in terms of Porter's
five forces, Nordstrom would have the following – highly competitive rivals, high threat of
substitutes, top to moderate buyer power, high to moderate risk of new entrants, and low supplier
power.
 
Micro Competition
Nordstrom competes heavily with other successful retail stores (See figure 5 in attachments).
The company is a high-end retail sales company that offers shoes, jewelry, cosmetics, fashions,
and more. As such, they sell their products at a very high price, resulting in customers to think
twice before buying their products. The biggest issue of Nordstrom regarding competition is the
high price they offer for each high-end product. With that said, Nordstrom faces some fierce
micro competition where customers are also their top priority. The top three retail stores that
compete with Nordstrom are Macy's, Neiman Marcus, and Saks Fifth Avenue (McCormac).
 
All three of these companies are known as the top competitors to Nordstrom based on customer
service and the products that they sell. These companies value customers in its highest regards
and offer the same type of products that Nordstrom sells: accessories, clothing, cosmetics,
fashion, shoes, and more. They are all very successful retail stores that have been around since
the 20th century. Therefore, it is not surprising that they are Nordstrom's top competitors.
 
Macro Competition
The Marco level is much more enjoyable. Retail does not just include clothes, shoes, and
jewelry. The retail industry includes juggernauts like Amazon and Walmart, who have no one
product they specialize in, instead- a variety of products. The retail market is one that is subject
to the constant change in trends. The current trend in the Marco retail market is eCommerce.
Many consumers are starting to lean more and more towards online shopping while physically
going to the store is still more preferable in the eyes of the consumer. The 20% growth in
eCommerce in 2018 and 2019 (Wertz, 2019), can be used as a good predictor that eCommerce
will have a significant influence on the competition with the retail market. This competition can
already be felt within our company as we're enhancing our online website and social media
presence.
 
Identification of Top Three Marketing Problems
Marketing Issue #1
Back in 2018, Nordstrom stopped distributing money towards digital marketing, meaning that we
were not adding any more funds to the current budget and not recreating an image through online
platforms. From this decision, Nordstrom has been affected through loss of foot traffic in stores,
not being able to sell their season-based apparel entirely (Reuters, 2019). We see this as a
problem that is directly affecting Nordstrom sales and revenues.
 
Marketing Issue #2
The second issue that Nordstrom is facing is the failure to market and develop its loyalty
program accurately. The program consists of four levels where each tier must spend a certain
amount each year to maintain their status- member ($0-$500), insider ($500+), influencer
($2,000+), ambassador ($5,000+). Based on research, we know that 52% of consumers are likely
to switch companies if they don't feel valued through unique selling propositions and a custom
experience (Vera, 2017). What this means is that The Nordy Club is an imperative aspect of
continuing brand loyalty. If we don't continue to alter the program based on consumer needs,
Nordstrom will soon fall behind competitors.
 
Marketing Issue #3
The final issue Nordstrom and the entire department store industry is facing is the decrease of
customers entering stores and choosing to shop online. This especially impacts Nordstrom
because they pride themselves on the best customer experience. We want to focus our efforts on
increasing footsteps through our doors, and considering that 86% of customers will pay more for
better customer experience, we believe it is in the best interest of the company to enhance their
customer satisfaction efforts (Vera,2017).
 
Conclusion
The preliminary solution to issues
Marketing Issue #1
After looking at many options for answers, we believe we have come up with a potential three to
solve the digital marketing issue (See figure 6 in attachments). By paying a social media
influencer that is already influencing a demographic that Nordstrom would want to target is more
efficient, but Nordstrom needs to widen that web. Another option is using an AI data system to
help focus on demographics in specific target groups with more precision. AI could help keep up
with trends so that Nordstrom could be proactive in managing our inventory turnover. A face
recognition system in the stores to help target groups receive proper advertisements on products
based on appearance and demographic. A member can walk into a store and be recognized and
have deals or products suggested to them based on their hair color, eye color, style of dress, or
spending habits with the store.
 

Marketing Issue #2
Our second marketing issue is regarding the way we market the loyalty program, and we came
up with three solutions in hopes of revamping the loyalty program. Club members should get
more in-store benefits for their birthdays and membership anniversaries based on their
membership level.  Adjust the Nordy Club membership levels so that early access is not
confusing or frustrating to our customers. The “Insider” level should be eliminated, and
Nordstrom should maintain and adjust "Member," "Influencer," and "Ambassador" perks.
"Insider" level will merge with the "Influencer" level but will need to spend the necessary
amount to the "Influencer" level. When maintaining the member status level, the "Influencer"
and "Ambassador" tiers should reduce by $500 to increase the number of customers who are
receiving better benefits. Early access to the anniversary sale should be limited only to the
"Ambassador" level.
      
Marketing Issue #3
Lastly, we have come up with three possible solutions to hopefully boost footsteps through
Nordstrom’s stores (See Figure 6 in attachments). Sending out post-purchase “thank you”
emails that offer a sign up for the Nordy Club, future offers, and other beneficial information to
increase customer engagement and loyalty could grow foot traffic. Implementing an in-store
incentive allowing for necessary alterations to all levels of the program, or giving an additional
10 points to consumer's Nordstrom notes balance if they spent $100 or more in stores would be
two other ways to boost in-store interactions. If Nordstrom implements one of these solutions to
increase foot traffic in stores, the customers’ online benefits and experiences will never be
anything like the in-store experience.
 
Depth of Solution Processes
In regard to Nordstrom’s marketing problems there are numerous solutions we feel the company
can achieve to progress forward. Generally, we believe that the answers will depend on whatever
marketing issue we are focusing on and the specific need of each retail store location.

The research conducted on Nordstrom's industry overview, company review, marketing issues,
SWOTT analysis, and target markets indicates that Nordstrom continues to strive for the best
customer satisfaction in all they do. However, just like any company, they find struggles and
concerns within the corporation. As Nordstrom's marketing issues preface, and as their target
markets begin to surface, we hope this information finds you well and gives a more in-depth look
at Nordstrom's marketing strategy. Additional details regarding Nordstrom's strategy and final
marketing solutions will come at a later date. Please reach out to
[email protected] with any questions you may have.

Attachments
Figure 1: SWOTT Analysis
 Favorable Unfavorable

Strengths: Weaknesses:
Internal ● The integrated multi-channel retailing platform ● Inventory turnover ratio
facilitates a seamless shopping experience ● Digital footprint
● Revenue growth through Website Sales ● Has a brand image of being more
● High-quality products costly
● Ability to reach a wide variety of customers ● Limited to only US and Canada
● Customer Service ● High Competition (Figure 5)

Opportunities: Threats:
External ● Positive outlook for the e-retail industry in the US ● Changing fashion preferences
● Growth in the US Men’s departments ● competitive pressure
● Increase in consumer spending in the US ● Dying department stores and
● Improving the quality of service by investing in shopping malls
Technologies ● Substitute Products
● Asia Apparel Market

Trends:
● Increase in the online shopping experience
● Expansion of outlet store industry
● Target niche luxury consumers
● IBISWorld expects more money will be allocated toward marketing throughout the entire industry

Figure 2: Target Market Segmentation

Primary Market Secondary Market Tertiary Market
Target Description
Segment Basis #1 Middle-High Class Middle Class Middle-High Class
Segment Basis #2 Caucasian Women (26-45) Women (16-34) Married Men
Living in Urban/Suburban
Segment Basis #3 "Discount Shopper" Aged 26-45
ares
Income Bracket $100,000 + $60,000-$100,000 $75,000+
True Target Size 27,027,000 18,315,000 38,000,000

Figure 3: Industry (45211) Market Segmentation

Attachments
Figure 4: Primary Research Survey
Figure 5: Number of Department Stores in the US

Figure 6: Marketing Problem Chart

Problems PossibleSolution #1 PossibleSolution #2 PossibleSolution #3
Invest in face recognition in stores to boost in-
Lagging Digital marketing Use AI systems to focus on specific store customer service and allow Nordstrom to
Problem #1 Invest in Social Media Influencers
coverage demographics to keep up with trends accuratley advertise towards certain target
groups.

Blend "insider" level of program, with Reduce spending brackets by $500 on the
failure to accuratley market Club members receive in-store benefits for influencer level to focus on the other influencer and ambassador tiers to give more
Problem #2
loyalty program birthdays and membership annaversies three levels to provide opportunity to consumers an opportunity to receive better
other levls and adjust other level perks benefits

Send out post-purchase "thank you" emails Give in-store consumers an additonal 10
Basic Alterations should be available
inability to draw consumers into to all consumers that offer a sign up for the points to their loyalty program, if they make
Problem #3 for all consumers, not just Nordy Club
stores Nordy Club, future offers, and other a purchase $100 or more to incentivize in-
Members
beneficial information. store purchases

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