Home Depot hammers away with price message

So what's the story?
In order to seize significant market share in an increasingly aggressive category, Toronto-based Home Depot has unveiled a new marketing campaign with a hefty price push.

So what’s the story?

In order to seize significant market share in an increasingly aggressive category, Toronto-based Home Depot has unveiled a new marketing campaign with a hefty price push.

‘I think that, particularly in Ontario, with all the new competition in the marketplace, we wanted to remind people that we are the low-price leader,’ says the chain’s advertising manager Maggie Bahler, who adds that the new message isn’t exactly groundbreaking for the home improvement retailer.

‘Our tag line has always been, ‘low prices are just the beginning,’ so pricing has always been part of our strategy. Now there’s just a stronger focus on that platform.’

The creative, produced internally at Home Depot USA’s Atlanta-based offices, kicked off with a new TV spot on Oct. 31 that is somewhat reminiscent of Wal-Mart’s smiley-face ads. But in the Home Depot commercial, it’s a graphic hammer that floats around the store, smashing down prices on featured products. The tag line is: ‘Lower Prices. Nailed,’ and the cartoony hammer is also visible on store signage and in a catalogue that drops this month.

A hammer, huh? That sounds original.

According to Bahler, Home Depot isn’t concerned about confusing its image with any of its foes, like, say, The Building Box, a home improvement chain owned by Montreal-based Réno-Dépôt, which initiated its $350-million foray into Ontario last year.

The Building Box’s TV, print and Web efforts all centre on an outrageously clumsy foam mascot called Hammer Head, who accidentally crashes through windows and takes out chandeliers with 2x4s. Bahler says the distinction is clear because Hammer Head, while arguably still quite a tool, is a real person dressed up in a suit, as opposed to a graphic image, as in Home Depot’s case. ‘It’s hard for us to stay clear of the hammer in this category,’ she says.

Surely there are other tools vying for attention. How ’bout a screwdriver?

Richard Talbot, a retail analyst with Talbot Consultants in Unionville, Ont., thinks that one of the objectives of this new initiative is to baffle shoppers through the use of the hammer. ‘Home Depot can pick up Building Box shoppers, who would go to a Home Depot store by mistake,’ he says. ‘There’s no question Building Box is having an impact on Home Depot’s sales.’

In fact, Home Depot’s comparable store sales for the third quarter of fiscal 2001 were flat with the previous year.

Although it’s not uncommon for a retailer to mimic competitors, what’s strange in this situation is that it is normally a strategy utilized by the underdog, explains Talbot. ‘It’s unusual to see it employed by the category leader; I haven’t seen it happen before. Normally the leader just keeps its own niche and hammers away at it.’ (No pun intended of course.)

But can a pricing strategy truly nail sales?

While the threat of recession didn’t influence the conception of this campaign, Bahler concedes that it does work in today’s turbulent economy. In Talbot’s opinion, the Wal-Mart-esque strategy makes sense, particularly since the home improvement battle is bigger than Home Depot may have originally anticipated.

‘If you’re fighting for market share, then obviously you want to try to stress prices,’ he says. Plus, as Talbot explains, the cocooning trend and trepidation about travel evident since the tragic events of Sept. 11, combined with falling mortgage and interest rates have caused consumers to turn to home spending.

To boot, this is happening in a category that was already ringing up healthy sales. For example, Réno-Dépôt’s majority shareholder, U.K.-based Kingfisher, announced in its recent annual report that during 2000-2001, its home improvement sector sales grew by 12.5% from just over £4.5 billion (CDN$10.2 billion) to almost £5.1 billion (CDN$11.5 billion). The firm also recorded a 4.8% increase in same-store sales for the third quarter.

Meanwhile, at Montreal-based Rona, which has 540 stores in Canada that offer hardware, home improvement and gardening products, annual sales are approaching $3 billion, according to its Web site.

‘This market is really hot right now,’ says Talbot, ‘so Home Depot is trying to pull out all the stops.’

Let’s just hope the chain doesn’t self-injure with all its excessive hammering.