Situation Analysis: Home Depot. Samantha Dintsch Rebecca Harris Camille Harvey Natalie Townsend Mary Carlie Vaughn Natalie White

Transcription

1 Situation Analysis: Home Depot Samantha Dintsch Rebecca Harris Camille Harvey Natalie Townsend Mary Carlie Vaughn Natalie White

2 T a b l e O f C o n t e n t s Introduction 1 Industry Overview 4-8 Client Profile: The Home Depot 9-11 Competitor Analysis: Lowe s Comparative Analysis Secondary Competitor Analysis: Sears and WalMart 14 Consumer Analysis 15 Quantitative Research Qualitative Research Marketing/Communications Recommendations Appendix I: Survey Appendix II: Qualitative Guide Reference List

3 I n t r o d u c t i o n A s the largest home improvement store in the United States, The Home Depot has made a name for itself in the home improvement industry. With the recent decline in the home improvement industry and increased competition from Lowe s, The Home Depot must innovate in order to maintain its place in the market. By analyzing the home improvement market and competition within the market, The Home Depot can gain insight into industry trends and market its brand accordingly. The following report will explore the home improvement industry as a whole, The Home Depot and its competitors, and the consumer base. B y highlighting valuable information about the home improvement industry, the industry overview provides the information necessary to begin researching The Home Depot. The Industry Overview also illustrates how The Home Depot compares to its competitors. Key points in the Industry Overview are the history of the industry, industry size, advertising expenditures, growth Industry Overview are The Home Depot s primary and secondary competitors, social and cultural trends, the effect of the economic environment on the industry, regulatory and legal issues, and new developments within the home improvement industry. Following the Industry Overview is the Client Profile and Competitor Analysis. This section is very important because it not only provides information about The Home Depot s history, sales, and marketing mix, but it also provides the same information about The Home Depot s primary competitor, Lowe s. T he final section of the situation analysis is the Consumer Analysis. In order for The Home Depot s marketing efforts to be successful it must be aware of its target market. This section analyzes consumer trends in the home improvement industry, highlighting the demographics and psychographics that comprise the overall target market. B y looking at all the different aspects of the home improvement industry, we can better recognize The Home Depot s role within the industry. Knowing the details of the industry is crucial to implementing the correct marketing strategy in order to maintain The Home Depot s place in the market. T o gain further information about females attitudes and beliefs of The Home Depot, our group designed and conducted a survey. We hand distributed the survey in locations such as The Home Depot, Lowe s, WalMart, Sears, Bed, Bath and Beyond. The ultimate goal of this survey was to discover information on the following research objectives: To measure the target market's current, past (last 12 months) or future (next 12 months) home improvement projects or plans, to assess the target market's attitudes and beliefs about home improvement retailers, to assess the target market's attitudes and beliefs about The Home Depot, to assess the target market s attitudes and beliefs about Lowe s in comparison to your client, to measure the target market's The Home Depot usage, and to identify if there are consumer behavioral differences in age, gender, income, etc. A fter the survey was conducted there was still some lack of information and gaps in fully understanding the home improvement consumers. Therefore we conducted six personal interviews to fill in those gaps, gain further consumer insight and attitudes towards The Home Depot. These personal interviews allowed more flexibility and probing than the survey. These interview questions directly addressed the needed information to conclude the findings from the quantitative research. 3

4 Figure : North Wilkesboro- Hardware Store opened H i s t o r y 1946 First Lowe s Home Improvement Store opened in North Carolina 1949 First Subdivision created by Arthur Levitt T he home improvement industry began primarily with many local hardware stores, such as Lowe s North Wilkesboro Hardware Store. Lucious S. Lowe opened this small store in North Carolina in After his death, his son, Jim Lowe and war veteran friend, Carl Buchan, took over the business. They expanded the business and created the first official Lowe s Home Improvement store in 1946 in North Carolina. 1 The home improvement industry boomed after World War II. In 1949, Arthur Levitt and sons created the first modern subdivision in Long Island. War veterans purchased the homes and since they all looked alike, the homeowners sought out hardware stores to buy items that would create individuality. A U.S. census showed that home repair/improvement boomed from 1982 to Overall, Lowe s dominated the industry until the 1980s. 2 Due to the popularity of the industry, Bernie Marcus and Arthur Blank founded The Home Depot in They opened their first store in Atlanta, Georgia in In 1980, The Home Depot introduced the first Do It Yourself workshop. This created a phenomenon within the home improvement industry Lowe s went public on NASDAQ 1978 Home Depot was founded 1979 First Home Depot opened in GA 1980 Home Depot offered first Do-It-Yourself program Now, the home improvement industry is one of the most thriving industries in The United States. 3 The Home Depot and Lowe s have even expanded their locations to Canada and in 2006 The Home Depot acquired a twelve store chain in China. The success of the home improvement industry is based largely on the boom that was generated by WWII veterans and the first subdivision that was created from the post-war efforts. 2 Ever since this boom, The Home Depot and Lowe s have been the two main players that comprise the Home Improvement Industry Home Depot went public on NASDAQ 2006 Home Depot acquired stores in China 2007 Lowe s opened first store in Canada Industry Overview Source: HomeDepot.com 4

5 Industry Overview I n d u s t r y S i z e A s shown in Graph 1, the sales in the home improvement industry are steadily increasing. Since 2000, its revenues increased from $176 billion to $306 billion in The Home Depot is the largest home retail center controlling 42-46% of the market. The primary competitor for The Home Depot is Lowe s because it sells the same products as The Home Depot and also appeals to the same target market. Lowe s controls the second Sales (in billions) Total Retail Sales by Home Improvement Retailers Year largest portion of the market with 27-30%. 5 One secondary competitor for The Home Depot is Wal-Mart because it offers a variety of home improvement products such as: paint, tools, and hardware for a low price. Sears is also a secondary competitor because it offers tools along with appliances and electronics that could be purchased at The Home Depot. The Home Depot spent more than $1.1 Advertiseing dollars spent (thousands) 1,200 1, Advertising Spending Year Graph: 2 Source: Leading National Advertisers million on advertising in 2005 and Spending less than The Home Depot, Lowe s invested $778 thousand in advertising in 2005 and $838 thousand in When combined, these two companies make up almost 80% of the home improvement retail market. Graph 2 reveals the overall trend of advertising expenditures among the home improvement industry. 6 Longer terms, trends underlying the home improvement industry remain favorable for continued sales and market share growth. -Arthur Blank 9 Graph: 1 Source: NHRA 5

6 S t a g e i n P r o d u c t L i f e C y c l e According to the North American Retail Hardware Association s annual report, the home improvement industry is mature. 4 At this mature stage, the industry is well established, sales volumes have peaked, costs are very low, competition is increasing, and stores strive to differ from the competition with the products offered. It still shows a positive growth as demonstrated by retail sales, featured in Graph 1. S e a s o n a l i t y According to Figure 2, quarterly income statements from the largest market shareholders in the industry, The Home Depot and Lowe s, show the most money is spent on home improvement during the second and third quarters. Statements report that during the second quarter, The Home Depot was most profitable and earned $21,585 million in profit. It was the least profitable in the fourth quarter with sales of $18,961 million. Lowe s was most profitable in the third quarter with sales of $14,166 million while its lowest sales, $10,405 million, occurred in the first quarter. 7 G r o w t h & P o t e n t i a l F o r e c a s t Figure: 2 Quarterly Income Statements: Home Depot and Lowe s (millions) Quarter Lowe s The Home Depot 1. Ending Jan 07 Quarter 2. Ending Apr 07 Quarter 3. Ending Jul 07 Quarter 4. Ending Oct 07 Quarter $10,405 $20,265 $12,172 $21,585 $14,166 $19,144 $11,566 $18,961 The growth potential for the home improvement industry is neutral. The housing market has been on a decline for nearly two years and is not predicted to show any improvement through Although the housing market is low, there is still hope for the home improvement industry due to the fact that home ownership has remained healthy. Since ownership has remained positive and homeowners view their homes as investments and therefore spend more on improvement than renters do, this should continue to drive market growth. According to market research firm Global Insight, the total home improvement products market in the U.S. was estimated to have declined to $308.9 billion in 2007, from $312.9 billion in However, it is projected to advance to $394.1 billion by 2012, a 5.0% compound annual growth rate. 8 T h e E c o n o m y GDP Decline Source: hoovers.com Graph 3 shows that the real domestic growth product (GDP) decreased 2.9% in 2006 to 2.2% in 2007, which leads economists to believe that the GDP will fall another 1.9% in Some of the factors that may account for the decline in GDP could be: the ever Industry Overview 6

7 Industry Overview Graph: 3 Source: Global Insight % change GDP (% change) Year lingering effects of Hurricane Katrina on the Gulf s energy production, low automobile sales, reduced business investment and reduced federal defense. Currently, the economy is facing a deficit in personal consumption and federal spending. However, the home improvement industry sales may not decline due to home owners hoping to add value to their home in practical and economical ways. 11 Consumer Price Index Consumer Price Index (CPI) is an index number that measures the average cost of consumer goods and services purchased by households. The industry shows a negative change of 2.2% in 2007, from 2.9% in CPI is important to the home improvement industry because it can be used to index salaries, wages and prices. Consumer Confidence Consumer confidence has taken a recent decline as people take notice of falling home values, the weak job market and high gas prices. In January 2008, the index of consumer confidence fell to 69.6 from 78.4, which is the lowest index since Consumer spending is also expected to slow from 2.9% in 2007 to 1.8% in Unemployment Rate The home improvement industry is also affected by high unemployment rates in the US. Graph 4 displays the increase of unemployment rates over the past seven years. 10 High unemployment causes a decrease in consumer confidence and spending because the more uneasy consumers feel about their job stability, the less likely they are to spend money. This could also be a leading cause as to why the number of housing starts, shown in Figure 3, has declined over the past six years Graph: 4 Source: Global Insight Unemployement Rate (%) United States Unemploy m ent Rates Year L e g a l a n d R e g u l a t o r y I s s u e s Regulations are set on the home improvement retailing industry to maintain a free and competitive economy. The regulations for the home improvement industry are determined by each individual state. The Sherman Antitrust Act prevents monopolies from using its power to censor the competition. Another regulation, The Wilson Tariff Act, prevents the restraints of importing trade. Furthermore, the Clayton Antitrust Act protects the marketplace by banning trusts

8 board of directors, fixed prices, etc. to control the supply and price of products to gain a monopoly. These regulations are put in place to ensure that the general public is provided with the best prices, quality and to maintain competition between businesses. 14 Since the highest complaint in the industry among consumers is home improvement fraud, The Federal Trade Commission, the National Association of Home Builders Remodelors Council and the National Association of Consumer Agency Administrators have created a kit called Home Improvement: Tools You Can Use, which lists several tips for hiring a contractor and avoiding home improvement fraud. 15 2,20 0 1,900 1,70 0 1,50 0 1,300 1,100 S o c i e t a l & C u l t u r a l i s - s u e s The main factor in how consumers make their home improvement purchasing decisions is based on their level of income and the allocated budget for home improvement products and projects. The larger the budget, the more choices consumers have regarding the durability and finish of the products they choose. Therefore, the amount of money that consumers have to spend on their purchases not only increases demand for improvement products but will also affect the range of products offered. 11 The main two customers in the industry are: Do-It Yourself Do-It-For-Me Housing Market (number of housing starts in thousands of units per year) These are social considerations for the industry to remember in order to provide the best customer service and products. 16 Do-It-Yourself The Do-It-Yourself Market (DIY) is a large customer group in the home improvement industry where consumers purchases supplies and complete their own projects. This is a driving trend for the industry that accounts for approximately 40% of the total market. To increase spending among DIY consumers, home improvement retailers have started to provide in store customer assistance and websites specifically for DIY projects. 16 Figure: Source: Standard and Poors Industry Overview 8

9 I n d u s t r y O v e r v i e w S o c i e t a l & C u l t u r a l i s s u e s Do-It-For Me T he Do-It-For-Me Market (DIFM) is a large home improvement industry group in which consumers purchase supplies and hire a thirdparty to complete the project for them. This market is predicted to increase with the retirement of many baby boomers, which should lead to continuous home improvement spending. 16 Baby Boomers A s America s baby boomer population gets older, they are increasing their spending. Baby boomers are responsible for more than half of all home improvement expenditures, today. They are expected to increase their spending on home improvement projects after their kids have moved out. Within the home improvement industry, they are expected to influence the do-it-for me service category. pact on the home improvement industry. 11 Additionally, this population is likely to drive an increase in existing home sales as many of them either look to downsize or acquire a second vacation or retirement home. These scenarios should have a positive im- Green Movement O ver the last few years, buying environment ally friendly products for the home has become an increasingly important consideration for homeowners looking to make "green" improvements to their living space. Consumers feel the need to add environmentally friendly, green, products and practices to their homes in order to make it healthier 9 and more comfortable. The industry s main stores, The Home Depot and Lowe s, have added green products such as flooring, lighting, paneling, materials such as paint and varnish, appliances, heating and cooling systems, and electronics. As the world adjusts to going green, the Home Improvement Industry is adjusting to provide environmentally friendly products and options for the consumer. 20, 27

10 H i s t o r y H ome Depot was founded on June 22, 1978 in Atlanta Georgia. It was started by two entrepreneurs, pictured in Figure 5, Bernie Marcus and Arthur Blank. Marcus and Blank found themselves without jobs after the change in management at the Handy Dan home center chain. Marcus and Blank decided to open their own home improvement store. From the beginning, the employees at Home Depot recognized the importance of customer service. The employees had vast knowledge of all their products and even offered how to clinics to consumers. By 1984, the company was operating 19 stores and reported sales of $256 million, a 118% increase from In 1986, The Home Depot s sales reached the $1 billion mark, and the company was operating 50 retail outlets. Home Depot surpassed Lowe s in sales in 1989 to Bernie and I picked ourselves up, and we mapped out Home Depot on a napkin in our favorite coffee shop. -Arthur Blank 18 Figure: 4 Source: HomeDepot.com 1984: Had 19 operating 1978: Corporation founded by Marcus and Banks 1981: Company went public on NASDAQ stores and sales of $256 million become the largest home-repair chain in the US. 17 Figure: : Surpassed Lowe s as top home improvement industry seller Source: referenceforbusiness.com 2006: Extended stores to China C l i e n t P r o f i l e 1980: First how-to product training seminars began 1986: Had 56 operating stores and reached $1 billion in sales 2000: Launched online store 2005: Launched Rebuilding Hope and Homes for Katrina victims 10

11 C lient Profile Sales The revenues for The Home Depot are rising slowly but steadily. From 2002 to 2007, the sales have increased from $55 million a year to more than $90 million a year. As shown by Graph 5, sales beginning to level off is an indication that The Home Depot is in the mature stage of the product life cycle. 19 Graph: 5 Source: Standard and Poor s Sales (in millions) 100,000 80,000 60,000 40,000 20,000 0 Revenues for the Fiscal Year Ending January The ad expenditures for The Home Depot have increased from $1,109 million in 2005 to $1,118 million in 2006, shown in Graph 2, page 4. Although The Home Depot has a solid consumer base, advertising is important so it doesn t lose sales to the competitors. The increase in money spent on advertising corresponds to the increase in the revenues for The Home Depot. 6 Media Allocation Year Advertising Expenditures Figure 6 indicates that television dominated the media allocation for The Home Depot in Outdoor advertising held the lowest part of the media allocation. The Home Depot shows its advertisements on 11 television to reach the largest number of its target audience. 6 21% Share of Voice The share of voice shows where the advertising dollars are best being spent. The share of voice is the total percentage of advertising that The Home Depot possesses within the home improvement industry. Figure 8 shows that in 2005 The Home Depot held 71% of the market share, then dropped down to 57% in Positioning The Home Depot Media Allocation 1% (Percentage) 0% 50% 7% Figure: 6 Source: Ad Age 21% Magazines Newspapers Television Radio Outdoor Internet The Home Depot reports that one key to its success is treating people well. The company executes this important principle within the company by urging associates to be creative, express their ideas, take risks, acknowledging and rewarding good performances, and teaching its employees in order to grow. Most importantly, the company wants customers to feel as if they are number one when they enter any of The

12 Home Depot stores. The Home Depot strives to provide excellent customer service by providing customers with information that will maximize all of the benefits of products purchased. Its eight core values are giving back, excellent customer service, creating shareholder value, entrepreneurial spirit, taking care of their people, respect for all people, doing the right thing, and building strong relationships. 21 New Developments The Home Depot announced in April 2007 that it would offer more environmentally friendly products. There were more than 2,500 products included in this announcement ranging from front-loading washing machines to water efficient toilets, to programmable thermostats. The Home Depot s slogan for Eco Options is Improve your Home. And the Environment. 22 Creative Strategy Figure: 8 Source:Leading National Advertisers Share of Voice Year Brand Total Magazine Newspaper TV 06 57% 51% 54% 51 % 43% 49% 46% 49 % 05 71% 70% 53% 53 % 29% 30% 67% 67 % Radidoonet Out- Inter- 70% 77% 27% 30% 23% 73% 67% 53% 23% 53% 67% 77% Since females will most likely remodel, The Home Depot has targeted them by making the interior of its store softer, adding more kitchen layouts, and an assortment of appliances Much of The Home Depot s advertising is about showing the feeling of satisfaction homeowners get from home improvement. The ad to the right shows a young woman being convinced that it is possible for her to retile her floors, despite her doubting husband. The Home Depot s ads show the power of the brand and how associates can help regular people accomplish great things in their home. There are several links available on the company s homepage that offer additional advice and services aimed at the different target audiences that shop at The Home Depot. It offers a link that is targeted at DIY consumers. This link has online workshops that the DIY consumer can view from the privacy of their own home. There is also a link, shown to the left, providing information, maps, and pictures of the philanthropic work that The Home Depots has been doing with Habitat for Humanity in the rebuilding of homes after Hurricane Katrina. The Home Depot also has a complete website, shown above, dedicated to the NASCAR sponsorship it has with Tony Stewart s number 20 racing team. Recently, for the Home Depot, there has been a Public Relations offensive to help protect the environment. This campaign is aimed at all consumers to become actively interested in environmental issues and support environmental causes. The need for this Public Relations campaign is due to the world population expanding and the depletion of natural resources. 20 C lient Profile

13 Graph: 7 Source: Shareholder.com Positioning Lowe s is the primary competitor for the Lowe's Net Sales Lowe s promotes a warm, family friendly im- C ompetitor A n a lysis Home Depot because they are the closest competitor in terms of net sales, share of voice, number of stores in the United States. History Lowe s Home Improvement stores began with Lucious S. Lowe. He opened North Wilkesboro Hardware Store in North Carolina in in 1946, Lowe and his sons expanded the business and opened the first Lowe s. Lowe s held the number one spot in the Home Improvement Industry until 1978, and they are now second to The Home Depot. They have over 1,500 operating stores within the US. 1 Sales Since 2002, Lowe s has consistently increased its amount of sales every year. Graph 7 shows the exact amounts of increase from 2002 to Media Allocation Lowe s allocates the majority of its advertising expenditures on the medium of television. The second largest advertising expense is Amount of Net Sales (billions) Year which Lowe s spends more advertising dollars compared to Home Depot. 6 Lowe s advertising expenditures are less than The Home Depot. In 2006, Lowe s increased their advertising expense to $835.thousand, but The Home Depot still spent $279.6 thousand more. Graph 8 gives a visual representation of the numbers above. 6 Net Sales % Change Advertising Expenditures Graph: 8 Source: Ad Advantage Amount of Money spent (thousand) 1, , Advertising Expenditures Year of Expenditure The Home Depot Low e's age and gives a feeling of connection through their slogan, Lets build something together. Creative Strategy Lowe s is invested in the well being of the communities they service. Lowe s Charitable and Educational Foundation recently announced their donation of $500,000 to the YMCA in Toronto. 24 Their contributions focus on education, community renovation, and the construction of safe and affordable housing. To ensure the satisfaction of customers, Lowe s web page provides information on installation, credit options, and protection plans. 25 New Developments December 10, 2007: Opened first three stores in Canada. Three more to open by first of February Earned Environmental Excellence Award from the EPA s SmartWay Transport Partnership through their attempts to lower green house gas emissions by decreasing carbon dioxide emissions on the highway. 26,27 newspapers. Internet is the only medium on 13

14 Figure 9 Photo Source: The Home Depot, Lowe s. Hoovers.com The Home Depot Lowe s Year Founded Number of weekly visits Slogan 22+ million 14 million You can do it. We can help. Let s Build Something Together 2006 Sales $90.8 billion $46.9 billion 2006 number of stores Stores outside of US Number of products available Number of employees Number of stores opening in 2008 FORTUNE 500 List DIY Workshops Offered 2,074 1,385 Canada, Puerto Rico, US Virgin Islands, Mexico, China Canada 40,000 in store 40,000 in store 364, , Ranked #17 Ranked #45 Yes Yes T he Home Depot and Lowe s are the major companies that comprise the Home Improvement Industry. Figure 9 demonstrate the differences between the two companies. As depicted in the table, Home Depot has more weekly visits from customers, larger sales, more stores, stores in more countries, more employees, and is ranked higher in the FORTUNE 500 List than Lowe s. C omparative A n alysis 14

15 Secondary Competitors We have identified Sears and WalMart as secondary competitors because they each pose a threat to Home Depot s sales by targeting a similar market and having similar services or products. Sears, Roebuck and Co. is the leader of the U.S home appliance market. It is also a leader in retail sales for tools, lawn and garden equipment, and home electronics. Sears stores carry top names like Kenmore, Craftsman, and Die Hard; brands that can not be found at other retailers. 28 Known for its extensive service and repair plans, Sears provides the country with the largest product repair service. Sears rivals Home Depot for sales based upon their vast appliance selection, top brand names, home service and repairs. Although Sears product selection extends beyond home appliances, their commitment to service, protection, and installation services place them in the arena of home improvement retail and therefore make them an indirect competitor of The Home Depot. 29 WalMart grossed $348,650 million this past year. 30 WalMart is competition for The Home Depot because they provide hardware tools and home appliances amongst their broad selection of products. With an emphasis on customer service, WalMart offers paint, gardening supplies, and tools at a low price. Known as one of the original supercenters, consumers view WalMart as their one stop shop for groceries, beauty supplies, electronics, and hardware materials. 31 The convenience of finding everything in one location is attracting busy consumers more and more. As a result of the totality of WalMart shopping centers, Home Improvement centers like The Home Depot might be less appealing to consumers in need of small home repairs or tool purchases. Consumer Analysis Simmons Market Research Bureau (SMRB) is a syndicated research company that gathers 15 and displays information from many different sources to assist companies in how to better understand its target consumers. This information for The Home Depot has been categorized into different demographics, psychographics and geographics. With these facts, the SMRB has divided the sample into DIY consumers versus DIFM consumers, expenditures on home improvement and remodeling in the past versus remodeling in the future. The samples represent those 21 and older. Total Expenditures Men and women are most likely to spend $251-$999 on home improvements. As age increases, the money spent on home improvement also increases. Caucasians and African Americans are most likely to spend $251-$999 on home improvements. As to be expected, as the household income increases so does the likelihood of people spending more money on home improvements.

16 Home Remodeling: Last 12 months vs. Plan in the next 12 months Females (106) are above average and held 52% of the sample to have remodeled in the past 12 months. More than average males (104) held 51% of the sample in planning to remodel in the next 12 months, furthermore men have more influence in the purchase of remodeling products at 55%. 32 Ages are most likely to have completed a project in the last 12 months with 27% and 31% are also most likely to remodel in the next 12 months. Caucasians, held 86% of the sample, are most likely to have remodeled in the past and 85% plan to remodel in the future; while all other races have below average index numbers to complete any project. People who attended college for less than 1-3 years held 30% of the sample to have remodeled in the past 12 months and held 31% in planning to remodel in the future. People with and income of $150,000- $249,000 had the highest percentage for planning to remodel, making them most likely to remodel. Overall, the Midwest is the most likely to have completed projects in the past or to complete projects in the future. 35 DIY vs. DIFM Females (109), people ages (140 and 132), college graduates, and the Northeastern region (124) are most likely to be DIFM customers. Males (103), people ages (126 and 130), those who attended college for less than 1-3 years, and the Midwestern region (above 100) are most likely to be DIY customers. Households with an income $60,000-$99,999 are most likely to be DIY customers. Consequently, households with incomes above $250,000 are most likely to be DIFM customers. 36 Target Market According to the interpretation of the Simmon s Market Research Bureau, The Home Depot should focus on white females, ages 35-54, with an income above $60, 000 from the Midwest region. With this target market, the Census Bureau predicts that The 16 Home Depot will market to a white population of 239,746,254, a female population of 151,886,332, an age population of roughly 84,082,929 (the ages used were in order to estimate this population), and a regional population of 66,388,795.

17 Q u a n t i t a t i v e R e s e a r c h T o gain further information about females attitudes and beliefs about The Home Depot, our group designed and conducted a survey. The ultimate goal of the this survey was to discover information on the following research objectives: To assess the target market's attitudes/beliefs about home improvement retailers. To assess the target market's attitudes/beliefs about The Home Depot. To assess the target market s attitudes/beliefs about Lowe s in comparison to The Home Depot. To measure the target market's The Home Depot usage. Research Objectives To identify if there are age, gender, income, etc. variable differences for the above categories. Methods W e went to different retail locations where we handed out our survey for respondents to complete. The sample for the survey was all adults 21 years and older who had completed a home improvement project in the last 12 months, who were currently involved in a home improvement project or planned to complete a home improvement project within the next 12 months. The sample size for the survey was 97. The data collection method is shown to the right in Figure 10. With our chosen survey method, self-administered intercept, we reduced bias by not going online or using a telephone method. Therefore, nonrespondent error was reduced because self administered intercept is more personal and evoked better participation. Also, we clearly identified ourselves as students to reduce auspices bias. Overall, the only bias that could have resulted from our survey would have been interviewer bias because ultimately our presence could have influenced some respondents. Name Location How survey conducted Sam Sears Self-administered intercept Rebecca Target Self-administered intercept Camille Lowe s Self-administered intercept Natalie T. WalMart Self-administered intercept Mary Carlie Home Depot Self-administered intercept Natalie W. 17 Bed, Bath and Beyond Self-administered intercept Proposed Design Survey Figure 10 # of surveys completed T he method that we used was self administered intercept. Figure 11, to the right on page 17, shows which questions in our survey answered certain research objectives. Our proposed survey consisted of 28 variables

18 Efforts to Reduce Survey Design Bias I n order to assure the most accurate information possible, we took the following precautions in designing our survey. 1. We did not assume that the respondents participated in home improvement projects because we asked screening questions at the beginning to verify that they were 21 or older and met the criteria to give their opinions on the home improvement industry. We also screened by asking if those who participated in the survey had experience with The Home Depot. 2. To made sure not to combine two questions, we eliminated the word and in order to prevent confusion. 3. We kept questions short and the survey brief to maintain the respondent s attention. 4. We used clear, understandable language. 5. Demographic and sensitive questions were kept until the end, with the exception of screening questions, to ensure greater cooperation throughout the survey. 6. We placed demographic questions at the end, along with fairly broad choice options to ensure more accurate responses to personal questions, such as age and income. 7. Filter questions were used to save the respondent from confusion and eliminate irrelevant questions. 8. We did not use leading questions that suggested any answer as right or wrong. 9. We provided extensive instructions on how to complete the survey to enhance accurate data collection. 10. We provided mutually exclusive/non over-lapping ranges to reduce confusion. 11. We grouped like scales to simplify the survey. 12. We provided all possible response choices by using the tried and true Likert scale with five available options and provided blanks labeled other when necessary. 18 Research Objective To measure the target market s current, past (last 12 months) or future (next 12 months) home improvement projects or plans. To assess the target market s attitudes/beliefs about home improvement retailers. To assess the target market s attitudes/beliefs about The Home Depot. To assess the target market s attitudes/beliefs about Lowe s in comparison to your client. To measure the target market s The Home Depot usage. To identify if there are age, gender, income, etc. variable differences for the above measures. Figure 11 Survey Question Number(s) 2 3, 4, 17 7, 8, 11 12, 13, 14, 15, 16 5, 6, 9, 10 1, 18, 19, 20 Q u a n t i t a t i v e R e s e a r c h

19 Q u a n t i t a t i v e R e s e a r c h Attitudes & Beliefs on Home Improvement Retailers The majority of respondents (81%) (79/97) either agreed (47%) (46/97) or strongly agreed (34%) (33/97) that home improvement retailers provide them with the materials needed to complete home improvement projects. However, there were no respondents that disagreed with this statement and 19% (18/97) remained neutral in their response. Attitudes & Beliefs about The Home Depot Our quantitative research yielded a new discovery when respondents were asked about their familiarity with The Home Depot s advertising campaign. Over half of the respondents, 57% (55/97) were not able to give their opinion about The Home Depot s advertising campaign because they did not know what it was, shown in Graph 9. Of the 42 respondents that gave their opinion of the campaign s direction, 38% (16/42) said they feel that The Home Depot markets itself more towards males. Where as only 5% (2 of the 42) felt that the campaign was geared more towards women. n=97 Results and Discussion Graph 9 The remaining 57% (24/42) agreed that the campaign is marketed to both sexes equally, shown in Graph Which Sex Do Y ou Feel that The Home Depot Markets Itself Predominantly Towards? 19 5% 38% 57% Males Are Y ou Familiar with the Current Advertising Campaign for The Home Depot? Graph 10 MEN WOMEN Females Equally Yes No Home Depot Usage Based upon our primary research we found that 11% (4/38) of male respondents had attended at least one workshop at The Home Depot in the past twelve months. Where as, 14% (8/59) of female respondents had attended at least one workshop. Of all respondents male and female, 88% (85/97) of consumers had not attended a workshop in the past year. Of all respondents that answered yes to attending a workshop in the past year 75% (9 out of 12) said that they had only attended one. This finding led us to further investigate why consumers are not taking advantage of The Home Depot s workshops. Attitudes & Beliefs on Lowe s vs. The Home Depot When asked about their satisfaction of the brand offered at The Home Depot, respondents (n=97) were almost satisfied with brand selection with a mean of (3.88). Compared to Lowe s, which received a mean of (3.91), respondents seemed more likely to be satisfied with the brands offered at Lowe s. Figures 12 and 13 compare the percents and means for the Home De-

20 Percent and Means for The Home Depot Attributes Mean Convenience of location 3% 8% 20% 45% 24% 3.78 Cleanliness of 1% 7% 22% 50% 21% 3.81 store Customer service 0 8% 29% 41% 22% 3.76 Products offered 0 3% 19% 52% 27% 4.02 Brands offered 0 3% 25% 54% 19% 3.88 Pricing of products Lowe s. In terms of cleanliness and layout, The Home Depot once again received a slightly lower mean. On average, respondents said they were almost satisfied with the layout (mean of 3.82) and almost satisfied with the cleanliness of The Home Depot (3.81). Respondents on average were much closer to being satisfied with the layout of Lowe s (3.97). However, Lowe s scored a mean of (4.02) in store cleanliness, which was considerably higher than the mean for The Home Depot. These results showed us that on average consumers are less satisfied with the overall appearance and environment of The Home Depot. Figure 12 Figure % 34% 49% 10% 3.62 *On a scale from 1 to 5, 1 being Very Dissatisfied to 5 being Very Satisfied There was a significant difference in gender and respondents that had visited a Lowe s store. Significantly more females (12%) (7/59) than males (0%), had not visited a 20 Percent and Means for Lowe s Attribute Mean Convenience of location Cleanliness of store % 29% 33% 27% % 22% 93% 7% 4.02 Customer service 0 4% 28% 50% 18% 3.81 Products offered 0 1% 24% 50% 24% 3.98 Brands offered 0 2% 28% 47% 23% 3.91 Pricing of products Variable Differences 0 8% 31% 50% 11% 3.64 Lowe s home improvement center in the past twelve months (Chi Square= 4.859,d.f.1; Sig=.028). Significant Differences between Men and Women Percentages Measure Men Women Chi-Square Value Respondents who have visited a Lowe s store. Significance 100% 88% Q u a n t i t a t i v e R e s e a r c h

21 C o n s u m e r I n s i g h t s Purpose T he purpose of using qualitative research was to collect and provide insights and explanations directly from the respondents, shown in Figure 14. Using qualitative research helped the researcher understand the data from quantitative research and gain a more in depth perspective of the consumer s attitudes, motivations and feelings in their responses. The purpose of our qualitative research was to gain insight into the following objectives: To determine why consumers did not take advantage of DIY workshops at The Home Depot. To determine why consumers were less than satisfied with the brands offered at The Home Depot. To determine why many consumers do not have knowledge of The Home Depot s advertising campaigns. To determine why consumers were less satisfied with the cleanliness and layout of The Home Depot when compared to Lowe s. W e used structured personal interviews to gain further insight into consumer behavior. The reason we used the personal interview was because it is a private, face to face conversation. This gave us the opportunity to tailor questions to specific respondents. We felt that this was the best suited technique for our research because it allowed us to probe open-ended questions that explored our objectives, and allowed the respondent to provide the interviewer with more personal and thorough answers. We addressed our objectives through personal interviews that each group member conduct.ed, shown in Figure 13. Each group member personally interviewed a man or woman who met the general requirements to participate in our research. We located willing participants outside of a Knoxville location of The Home Depot. We asked those subjects who agreed to participate in our research prepared interview questions. The interviews were conducted on April 10, Methods Name Location How interview conducted Sam The Home Depot Self-administered intercept Rebecca The Home Depot Self-administered intercept Camille The Home Depot Self-administered intercept Natalie T. The Home Depot Self-administered intercept Mary Carlie The Home Depot Self-administered intercept Natalie W. The Home Depot Self-administered intercept Figure # of interviews completed

22 Methods used to Reduce Survey Design Bias O verall, there were general limitations in our conducted qualitative research. Small sample size prevented population generalizations and interpretations of the data were more subjective than quantitative data. This directly correlated to the personal interview technique because the interviews were sensitive interviewer bias, problems with data analysis, and overall generalization. To overcome limitations, each group member was aware of possible interview bias and questions were prepared and practiced extensively, prior to the interviews. Group members were also aware that the data is subjective and may not represent The Home Depot consumers as a whole. To avoid any incorrect generalizations, additional interviews could have been conducted if it seemed that responses were skewed in any particular interviews. To analyze the results we met as a group and compared each member s findings. We took those findings and applied them to our previously stated objectives. Additionally, we went back to our quantitative research and compared it to our qualitative research and determined how representative of the population our respondents were. Research Objectives To determine why consumers did not take advantage of DIY workshops at The Home Depot. Survey Design Survey Question Number(s) 5, 6, 7 To determine why consumers were less than satisfied with the brands offered at The Home Depot. 18, 19, 20, 25 To determine why many consumers did not have knowledge of The Home Depot s advertising campaigns. To determine why consumers were less satisfied with the cleanliness and layout of The Home Depot when compared to Lowe s. Figure 14 13, 14, 15, 16, 17 8, 9, 10, 11, 21, 22, 23 C o n s u m e r I n s i g h t s 22

23 C o n s u m e r I n s i g h t s F rom our quantitative research we discovered 4 main themes to further examine in our qualitative research. The themes identified were: (1) To determine why consumers do not take advantage of DIY workshops at The Home Depot. (2) To determine why consumers are less than satisfied with the brands and products offered at The Home Depot. (3) To determine why many consumers have no knowledge of The Home Depot s advertising campaign. (4) To determine why consumers are less than satisfied with the cleanliness and layout of The Home Depot. Direct quotes taken from personal interviews conducted are used to further elaborate and Figure 15 shows a profile of the respondents. DIY Workshops O ur respondents wanted DIY workshops to be offered at different times of the day. Workshops seem to only be offered on Saturdays, when I am working on projects at home. -Male, 56 Many people are too busy to attend the workshops that are held on the weekends. Workshops seem to only be offered on Saturdays, when I am working on projects at home. (Male, 56) This would allow a more diverse group of people to attend; such as parents who have children in school, people who work on the weekends, or people who cannot attend until after work. Most respondents agree that television is the best way to reach them and that advertisements for DIY workshops should be created to raise awareness and provide information to increase attendance. Brand Offering A lthough our primary research suggested that respondents preferred Lowe s brands over those of The Home Depot, our in-depth interviews revealed that those who frequent The Home Depot are actually quite satisfied with the brand selections offered. One I can t recall a Home Depot ad off the top of my head, but I remember seeing that Lowe s one with the bear during the championship basketball game. -Male, 36 respondent voiced this opinion by saying, Home Depot was the only place that I was able to find a certain grout cleaner. It was so wonderful that I told all my friends about it! (Female, 50) Also when questioned about eco-friendly products and brands, respondents said that going green did affect their purchase choices and will continue to affect them in the future as they become more environmentally aware. Cleanliness and Layout A ll respondents agreed that cleanliness was very important to them in terms of creating a positive shopping experience. General cleanliness was mentioned as an issue; however the overwhelming consensus from our respondents was that The Home 23

24 Depot had a warehouse feel to it that negatively influenced the perception of how clean the store was. The warehouse atmosphere appears cluttered and rugged, I wouldn t say it is unclean, however. (Female, 50) This quote showed that Lowe s has a more effective advertising campaign that creates top of the mind awareness with its consumers. The warehouse atmosphere appears cluttered and rugged, I wouldn t say it is unclean, however. -Female, 50 Knowledge of The Home Depot s Advertisement M uch like the survey respondents from our primary research, questionnaire participants were not aware of The Home Depot s advertising campaign. Questionnaire responses varied, however, a common theme was that The Home Depot s advertisements are simply not memorable. A 36 year old male said, I can t recall a Home Depot ad off the top of my head, but I remember seeing that Lowe s one with the bear during the championship basketball game. Personal Interview Respondents Interviewer Respondent Sam Dintsh Male, 36 Rebecca Harris Male, 56 Camille Harvey Female, 50 Natalie Townsend Female, 32 Mary Carlie Vaughn Male, 45 Natalie White Female, 38 C o n s u m e r I n s i g h t s 24

25 M a r k e t i n g R e c o m m e n d a t i o n s Create A New Female Focused Advertising Campaign E ven though many of the interviewees were not familiar with The Home Depot s advertising campaign, the respondents that were familiar with the campaign stated that the advertisements were targeted specifically towards males. Therefore, The Home Depot needs to develop more female friendly advertisements to gain a larger female consumer population. The campaign should show the advantages that Home Depot offers for females and be shown through female dominated media. This media would include print ads in Women's Day and First, television ads on Oxygen, continuing sponsoring shows on TLC and Lifetime, and on the internet. t o T h e H o m e D e p o t Create New DIY Workshop Activities A finding within our research shows the overwhelming lack of participation in the Do-It-Yourself workshops. Hardly any males or females had ever participated in the workshops that The Home Depot offers. Home Depot boasts the slogan of "You Can Do It, We Can Help," therefore, their DIY workshops should be in popular demand and utilized by more consumers. Therefore, an overall change needs to be made beginning with new activities that are gender specific. This could be achieved by splitting the month up and organizing female activities (for example: gardening tips, simple home repairs, crafting, projects and workshops for kids ) on two weekends and the other two weekends for male activities (for example: building tips, plumbing tips, lawn care and home repairs). These DIY workshops should also be better advertised through local radio, newspapers., and television. Re-vamp Store and Maintain Clean Store Environment A s our quantitative findings show, many of the respondents had concerns about the layout and cleanliness of The Home Depot. The survey concluded that overall Lowe's had a better layout and was thought to be a cleaner store. Therefore, small adjustment s should be made to the store layout in order to provide customers with a more efficient and easier way to find products. Also, cleanliness seems like a store specific characteristic, every store in every location should uphold the Home Depot name and image. Therefore, each store should be held accountable for maintaining a respectable and clean store appearance. A simple statement to store managers readdressing the cleanliness and encouraging the standards of a Home Depot store should help address the cleanliness issue. 25

26 Develop Better Customer Relations A huge problem for one of our personal interviewees was that The Home Depot did not stand behind their products. One respondent went into further detail about not being able to attain a broken part for a kitchen faucet and do to the lack of employee help and product availability she had to buy a completely new faucet, which cost her more than she planned on spending. Therefore, The Home Depot needs to stand behind the brands they offer, have extra parts to fix and maintain these products and develop proper customer service relations in order to make customers happy in any situation. Focus on More Eco-friendly Products and Advertisements A ccording to our personal interviews, not many customers are familiar with the eco-friendly products and brands offered by The Home Depot but do share interests in Going Green. Since, the "Go Green" Movement is gaining momentum across the United States being a part of this movement would gain credibility among those who are switching over to a more "green" lifestyle. Also, offering these products and brands is one way to stand out from the other home improvement competitors, mainly Lowe's. Therefore, The Home Depot should address the topic of global warming and products offered to "Go Green". One way to launch this specific idea would be to have a highly publicized Earth Day Sale, putting ecofriendly products on clearance and continue their Arbor day sales in order to promote more planting. Create More Memorable Advertisements to a Larger Audience Overall, The Home Depot should focus on better advertisement distribution to make the general public more aware of their corporation. On top of a female focused campaign, The Home Depot s general campaign should reach a larger audience and the advertisements should be more memorable to its audience. 26

27 27 Appendix 1: Survey Appendix 1: Survey Home Improvement Industry Opinion Survey This survey is being conducted by an advertising research class at the University of Tennessee. Your participation will help us to better understand the attitudes and opinions of consumers in the home improvement industry. Please read the following questions and respond by circling the corresponding answer as it pertains to you. Are you 21 or older? Yes No Have you completed a home improvement project in Yes No the past 12 months, are you currently involved in a home improvement project, or do you plan on starting a home improvement project in the next 12 months? If you answered No to one or both of the above questions, this concludes your eligibility for completing this survey. Thank you for your time and participation. If you answered Yes to both of these questions, please move forward to question 1 and complete the survey. On a scale of 1-5 with 1 being strongly disagree and 5 being strongly agree, please note your personal opinions towards the following statements. 1. Home improvement retailers in general provide necessary materials to complete home improvement projects. Strongly Disagree Strongly Agree 2. The decline in the economy has affected your home improvement purchasing behavior. Strongly Disagree Strongly Agree 3. Have you ever visited a Home Depot store? Yes No If yes, continue to question 4 If no, skip to question 12.

28 28.4. How many times in the past twelve month have you visited The Home Depot? (Please check one box only) or more 5. Based on a satisfaction scale of 1-5, 1 being very unsatisfied and 5 being very satisfied, how would you rate The Home Depot in the following categories based upon your personal experience? Very Unsatisfied Very Satisfied Convenience of Location Cleanliness of Store Customer Service Product Offering Brand Offering Pricing of Products The layout of a Home Depot store allows me to easily find the products I need. Strongly Disagree Strongly Agree 7. Have you ever attended a workshop at The Home Depot? Yes No If you answered Yes to question 7 please move on to question 8. If you answered No please skip to question How many workshops have you attended at The Home Depot? (Please check one box only) or more 9. On a scale of 1 to 10, with 10 being the highest, how would you rate your overall experience with The Home Depot? (Please circle corresponding number) Have you ever visited a Lowe s store? Yes No If you answered Yes, continue to question 11. If No, skip to question How many times in the past twelve month have you visited Lowe s? or more

29 29 Appendix 1: Survey Appendix 1: Survey 12. Once again, based on a satisfaction scale of 1-5 with 1 being very unsatisfied and 5 being very satisfied, how would you rate the following aspects of Lowe s? Very Unsatisfied Very Satisfied Convenience of Location Cleanliness of Store Customer Service Product Offering Brand Offering Pricing of Products The layout of Lowe s allows me to easily find the products I need. Strongly Disagree Strongly Agree 14. On a scale of 1 to 10, with 10 being the highest, how would you rate your overall experience with Lowe s? (Please circle corresponding number) If you were to choose one of the following retailers to meet your home improvement needs instead of The Home Depot which would it be? (If other, please provide the retailer) Walmart Lowe s Sears Other 16. Are you familiar with the current advertising campaign for The Home Depot? Yes No If you answered yes to the above question, please continue to on to question 17. If you answered no to question 16, please skip to question Do you feel that The Home Depot markets itself more towards: Males Females Both sexes fairly the same Please read all the answer choice for question 18 before answering, then check the corresponding box, if other, please explain.

30 Which of the following best describes your living situation? I own my residency. I rent my residency. 19. Please circle your gender. Male Female 20. Please check the box corresponding to your age range or greater 21. What is your marital status? Single Married Divorced 22. Please check the region of the United States that best represents your current residency? Northeast Southeast Midwest Southwest West I do not live in the United States. 23. Please check your annual income Under $24,999 $25,000-$49,999 $50,000-$74,999 $75,000-$99,999 _ $100,000 or greater Thank you for completing this survey. Your information will be used for research purposes only and will remain confidential.

31 31 Appendix 2: Qualitative Guide Appendix 2: Qualitative Guide The Home Depot Interview Guide Interviewer Name Background Information on Interviewee: Age Race/Ethnicity Gender Location of Interview Thanks again for agreeing to participate in this personal interview. We will start with some basic questions about your Home Depot experience. 1. Why did you choose to visit The Home Depot today? 2. Describe what a usual trip to The Home Depot would entail. 3. About how much time would you usually spend at a Home Depot location? 4. How many times have you visited a Home Depot location within the past month? 5. Are you aware that The Home Depot offers DIY workshops? 6. Have you ever participated in a DIY workshop at The Home Depot? If no, why? If yes, did you find it helpful? Whether you attended or not how did you find out about DIY workshops? 7. What would motivate you to attend a DIY workshop? 8. How easy is it for you to find the products you came to look for?

32 32 9. How often do you have to ask for help finding a product? 10. How familiar are you with the layout of The Home Depot? 11. What do you like about the layout of The Home Depot? 12. How do you feel about the size of The Home Depot? (Too large, too small) 13. Are you familiar with The Home Depot s advertising campaign? If no, why not? 14. What s the last Home Depot advertisement you saw? 15. What effect did seeing that advertisement have on you? 16. Do you feel like The Home Depot s advertising campaign is directed towards you? 17. Which media channel would best reach you for The Home Improvement advertisements? (radio, television, magazines, newspaper, internet) 18. Describe your feelings towards the variety of brands offered at The Home Depot. 19. Are the brands offered important to you? 20. Do you shop brand specifically? 21. Describe your feelings on the cleanliness of The Home Depot. 22. How important is cleanliness in a home improvement store to you? 23. What would you suggest to improve the cleanliness of The Home Depot? 24. As a male/female is The Home Depot your number one choice in terms of a Home Improvement store? 25. How important are eco-friendly products/brands to you? 26. How has the economy affected your home improvement purchasing behavior? 27. What do you like about The Home Depot? 28. What do you dislike about The Home Depot? 29. What improvements would you suggest to The Home Depot?

33 33 Appendix 2: Advertisements Appendix 2: Advertisements Due to the low amount of survey respondents that were familiar with The Home Depot advertisements,. These print advertisements were shown to personal interviewees when asked to discuss the latest Home Depot ads they had seen. 1. Lawn/Tractor Advertisement 2. Snow Thrower Advertisement These two advertisements show Home Depot products, but also have only males as the subject using these products.

34 3. Cabinet Advertisement 34