Strategy Brief (Part I)April 3, 2007
GOALS AND OBJECTIVES
The retail landscape has changed dramatically since the Gap's emergence as a powerhouse several decades ago. As the company has grown to become one of the giants of its industry, new challenges, including a more complex market and a more competitive landscape, have arisen that threaten
to unseat the Gap from its casual-wear throne. Compounding the problem, the company has responded to this new competition by trying to change its brand identity, leaving its consumers confused and frustrated. Due to these internal and external pressures, the Gap is facing a decline in sales and revenue.
to unseat the Gap from its casual-wear throne. Compounding the problem, the company has responded to this new competition by trying to change its brand identity, leaving its consumers confused and frustrated. Due to these internal and external pressures, the Gap is facing a decline in sales and revenue.
For the Gap to thrive, it must respond to the new retail landscape and its new competitors in an authentic way that will resonate with its core consumer. By reinvigorating the brand, the Gap has the opportunity to once again re-define the category.
Goal:
This plan will take advantage of the Gap's strengths and opportunities in the market, by organizing around the company's strengths and the competition's weaknesses, in order to execute the plan to position the Gap brand as the destination for everyday fashion.
Three objectives must be met to enact this goal. These objectives are both narrow and measurable, enabling the company to determine its progress. Additionally, the objectives present pragmatic solutions to solving the Gap's recent troubles; by tightening the core target audience and clarifying the company's messaging, the Gap will be able to more effectively reach its most valued consumer.
Objectives:
1. Efficiently integrate the brand message within the market environment
• Plan execution, reach and application of resources
1. Determine the positioning for the brand within the core purchaser segment
• Focus on the market the Gap can attract with a message that will resonate with them
2. Increase the percentage of the core customer segment that views the Gap as the destination for everyday fashion
Essentially, the Gap must find a niche in the retail landscape by identifying a market it can claim and by fulfilling a function it can champion.
As stated, the retail landscape is over-cluttered. However, the Gap still has the opportunity to discover an unclaimed space in the industry and work to own that space. For the Gap, a brand with roots in quality, comfortable merchandise, which was valued by consumers for trend-resilient product offerings, this unclaimed space is every day fashion.
Strategy Statement:
By positioning the company as the champion of everyday fashion, the Gap will create an opportunity to reach an underserved market and serve a function for consumers who already view the brand in a positive light. This tightened messaging and segmenting will allow the Gap to more effectively reach its market and better utilize its vast resources.
SITUATION ANALYSIS
State of the Business
The retail industry is facing a variety of new pressures in today's marketplace. Within the industry itself, the increased cachet of luxury brands has forced the rest of the market to adapt, resulting in discount shoppers "trading up" from discount stores, while expecting discount prices. This causes the profit margins at such retailers to shrink. Combined with the nation's uncertain economic future and the increasingly fragmented media landscape, it is a hard time to be a discount retailer.
The implications of this new pricing strategy are of great importance to the Gap. With the creation of its sister brands, Old Navy and Banana Republic, the Gap reinforced its image as "the middle-of-the-road retailer." However, as consumers' expectations increase, seeking greater quality at a lesser price, the Gap has been forced to engage in a price-slashing strategy, prompting Women's Wear Daily to dub the company "a discount retailer in the mall." For the company to be profitable in this environment, sales would need to increase to make up for the lower profit margins. Unfortunately for the Gap, it has been unable to convert its many visitors into customers.
Another issue the Gap must face is its ubiquity. The number of Gap retail outlets is enormous for a store of its size and selection. Women's Wear Daily, in its analysis of the Gap's woes, recommended scaling the company down. Since one of the goals of this strategic plan is to grow the company, this is not the recommended approach. Still, the sheer size of the Gap presents a challenge for moving forward. The design of the products at the Gap must keep in mind this issue; one of the parameters for the product is a broad design appeal.
State of the Customer
Market
The retail market is one of the least fluid, for branding purposes. Once a company establishes an identity it becomes difficult to alter that perception in the minds of consumers. For a brand as mature with an identity as fixed as the Gap, this would be especially difficult.
Due to these constraints, the Gap has limited options available to it from a market creation perspective.
Strategic Parameters:
Existing Product
New
Product
Existing Market
Market Penetration
Product Development
New Market
Market
Diversification
Market Development
The Gap is dealing with a mature customer who has a fixed emotion towards all the brands out there and especially towards the Gap, so the company can't attempt to create a new product or market. The best option, then, is to appeal to customers that exist (existing market) with the existing merchandise (since the product isn't going to change).
Essentially, the point to be made in the Gap's market strategy is that there is a fixed value on how much money people will spend on clothes- the Gap cannot create a new market or a new product to change that. All the Gap must do is get a greater share of the money already being spent.
At the heart of the issue is the fact that the Gap is in a fight for a declining share of the clothing dollar. This is due to a combination of what consumers are asked to spend combined with what they are willing to spend. The Gap must communicate to its customers that the value of the product is worth the price.
Consumer/Customer Analysis
The Gap's target consumers are middle market families (especially due to the proliferation of babyGap, Gap Kids, etc.). Due to its strong shopping mall presence and its "safe" image, the target skews suburban and is decidedly not fashion forward. This target has selected the Gap as the destination for comfort and safe fashion.
The Gap has, instead, been responding to retail trends and has confused its target by trying to appeal to on-trend shoppers. By producing clothes with trendy details that appear nonsensical on the basic style of the product, such as khaki pants with silver rhinestone trim, and through a communications strategy that has focused on incorporating celebrities that do not align with the brand, the Gap has left its original target confused. Meanwhile, the on-trend shoppers the company is now courting have already established brand affinity elsewhere, and see the Gap's "me-too" positioning as inauthentic.
For the Gap to thrive, it must return its focus to these middle-market, suburban families. These consumers are looking for comfort and safe fashion, two elements of its brand the Gap has downplayed in recent years. Because this market only seeks to meet a minimum threshold for fashion, the Gap is freed from the confines of trying to design on-trend items that will sell at its massive number of retail outlets. All the company must do to win back this target is to communicate this positioning to them, since the brand has equity to begin with, and prove that it can provide quality clothes at a good value.
Reach
The Gap's advertising and marketing communications strategy has been muddled in recent years, to say the least. As a mature company with an enormous amount of brand equity, the Gap's decision to overhaul its image was ill advised.
Most of the Gap's marketing has been celebrity-driven, featuring stars known for their personal style in Gap basics. This image- celebrities in safe fashion- caused immense confusion among the Gap's target. The messaging seemed to say that the Gap is both classic and fashion-forward, a message that is both confusing and meaningless.
The results of this shift in positioning have had an impact on sales- while spending on traditional media by the company is increasing; customer visits to the stores are down. The Gap has created a climate of customer confusion. To remedy this, the Gap must return to a clear and consistent messaging strategy, emphasizing the brand's ability to provide everyday fashion.
Products
The problem with the Gap's product lines in recent years boils down to the fact that the company is trying to produce clothes that do not align with their messaging or their consumers' perceptions of the brand.
The traditional fashion focus for the Gap has been the emphasis on time-tested style, simple design and trend-resilient merchandise. This model was immensely successful, however, the company felt pressure from newer "on-trend" competition, such as H&M, and moved away from this model. By trying to move into the on-trend space while still positioning itself, and still being perceived as, trend resilient, the Gap created confusion.
Another trend in retail is an emphasis on brand as opposed to quality. Abercrombie, a brand that has ridden its brand to enormous success, is an example of a company that employs a successful emotional, aspirational positioning strategy. This is a trend the Gap cannot hope to seize upon. For the company to succeed, it must buck the trend of perceptual branding and focus on the functionality of its merchandise, which has always been their strongest selling point.
State of the Competition
Categories and Competition
When the Gap first entered the retail marketplace, it redefined the category of casual-wear and even, to some extent, transformed American fashion. To this day, the Gap is, in consumers' minds, the definition of everyday fashion. Because this has gone out of style in recent years, the Gap has shied away from this positioning and has tried to move into a new, on-trend category. Rather than trying to conform to the new standards, the Gap should once again champion everyday fashion and own the category consumers associate it with.
Part of the reason the Gap felt pressured to evolve its positioning is due to the proliferation of retail boutiques, similar in offering to the Gap, that were able to create a more focused identity. Companies such as J. Crew, Abercrombie and American Eagle have adopted strong positioning and carved out specific niche markets. This strong group of competitors presents a challenge for the Gap.
The following grid shows how the Gap compares to its competitors in the minds of consumers on a variety of attributes.
As shown, the Gap's performance is average on the attributers of price, brand and store experience. It underperforms in the areas of fashion-forwardness and selection, which shows that consumers don't consider the Gap's efforts to be on-trend to be successful, and also that consumers don't feel the Gap is offering them anything new or remarkable.
The Gap differs from its competition in that each of the other retailers is either consistent (J. Crew or American Eagle) across all attributes, or stands for something in the consumer's minds (Abercrombie with brand, H&M with fashion-forwardness). American Eagle and J. Crew have been able to communicate an image of consistency, whereas A&F and H&M have targeted a specific brand attribute and emphasized it.
Of these competitors, the Gap should not focus on H&M or A&F, who have both built brands around qualities the Gap is not recognized for. The more consistent competitors, J. Crew and American Eagle, present more of a challenge because they are currently providing a better over-all experience.
CORE STRATEGY
For the Gap to succeed moving forward, it must adopt a strategy wherein it creates a new brand appeal for consumers. The company should move away from competing with the Abercrombie's and J. Crew's of the world on an emotional level; and instead look across a functional appeal to buyers.
The Gap has never been an emotional brand. Abercrombie constructed its brand around sex. J. Crew created a brand around Connecticut-chic. As the Gap began losing market share, it attempted to mimic these brands by building its brand around popular celebrities' own brand equity. However, this positioning was at odds with the Gap's roots, and its fixed image among consumers, as a timeless, trend-resilient brand.
Thus, a far more effective strategy for the Gap would be to shift gears entirely and focus on the functional appeal of its merchandise. The products the Gap is known for are those everyday basics, which, though they may not be glamorous or trendy, are certainly essential. In addition, the middle-market consumer that most identifies with the brand has an unfulfilled need for this sort of low-maintenance, timeless fashion.
For the Gap to re-claim its place as king of the everyday fashion category, it must create a communications plan that reinforces the importance of these basics at different points, or moments, in life, and it must communicate this message to its target. Identifying those times at which a suburban dad would need a no-brainer ensemble to watch his son play football, or a mom would be looking for something to throw on to do her grocery shopping, will remind the Gap's target that the brand serves a valuable role in their life, and will return the Gap into their evoked set for a casual-wear destination.
SWOT
Strength
• Price is affordable
• Availability/distribution
• Market position
• Iconic image Opportunities
• Comfort leader?
• Emphasize selection/design w/regards to comfort
• BASICS
Weaknesses
• Strong, focused brand competitors
• Unfocused messaging
• Mature brand ?doesn't make a statement "I'm basic"
• Inconsistency Threats
• Quality ? to keep discounted/low prices, quality may diminish
• Downward pricing spiral
The Gap's past successes afford the company some important strengths. Due to the volume of merchandise produced, the Gap is able to manufacture a quality product at an affordable price. Meanwhile, the company's multitude retail outlets make the brand accessible to almost every consumer. This is one strength the brand has over its competition- convenience and accessibility, both logistically and style-wise. The brand also retains some of its intangible equity as well. Though it has been derided in recent years, as the company has struggled with its identity, the Gap remains a force to be reckoned with. Its brand is one of the most recognizable in the world and still represents to consumers the iconic San Francisco style it developed years ago.
Unfortunately, the Gap is diluting the brand by trying to follow the successes of new brands that have excelled at manufacturing cheap, trendy clothes. Because this is antithetical to what the Gap has represented for decades, consumers have rejected their new messaging and are confused by the disconnect between how they perceive the brand and the messages the company is sending them. The brand has lost its focused and become inconsistent, in the face of a marketplace full of strong and focused competition that has stolen much of the Gap's core consumer base. Because of a lack of focused messaging, the once-loyal Gap consumer feels there is nothing new for them in the store. The Gap, in failing to take a stand and represent something, has come to represent nothing to consumers and has essentially become a generic brand.
These strengths can be leveraged into opportunities for the brand to reclaim its position
as a destination retailer. The company has the chance to shift its focus away from chasing trends and towards an emphasis on comfort and quality. Essentially, the Gap has the opportunity to become the champion of basic, everyday fashion.
The threats to the Gap in this strategy include the market trend of "trading up," which has diminished the price consumers are willing to pay for clothes at retailers such as the Gap. In order to authentically communicate the company's positioning as a champion of comfort and everyday fashion, the Gap must not succumb to pressures to sacrifice quality for the sake of pricing, which will lead to a downward pricing spiral. Instead, the Gap must emphasize the value of its merchandise in its communications.
TARGET PROFILE
In order to succeed in today's marketplace, the Gap must stop trying to be all things to all consumers and should instead focus on a core customer base that will provide the greatest return on a marketing investment.
The best approach for the Gap is to appeal to a suburban, middle-market consumer. This market is not trend-focused and the cheap, seasonal merchandise available at many of today's popular retailers does not appeal to them. Rather, this consumer is seeking reliable, consistent quality and everyday, hassle-free clothing.
Not only is this group the most receptive to the Gap brand, considering it was once their most loyal customer, it is also the market that the Gap's positioning will resonate with most strongly.
STRATEGY CANVAS/VALUE CURVES
The following grid shows the Gap's performance against consumers' value index on several attributes.
The Gap is underperforming in many areas, from fashion-forward-ness, to brand to store experience. It is meeting customers' expectations for price and quality. There is no area in which the Gap is exceeding expectations.
For the Gap to compete, it must create a differentiator that can make it stand out in the landscape. The one area the Gap receives high marks for is quality. Although the Gap's competitors received high marks on this attribute as well, the Gap could successfully leverage this perception and emphasize it as a differentiation point.
This gives the Gap the opportunity to communicate its new position around comfort and quality. These two factors are independent of seasonal trends and give the Gap the freedom to design the basic casual-wear it is known for.
The Gap will now be fulfilling a utility that its core customer base needs, and can create messaging and communications around the moments in life that require comfortable, high-quality everyday fashion.
GRIDS
Eliminate
• Complexity of trend-sensitive apparel Raise
• Awareness of the simplicity to the consumer
Create
• Good quality at a decent price
• Right fashion at the right moment Reduce
• The concept that casual clothing equals complexity
• Don't need to think hard to get dressed
As this grid shows, the Gap needs to create its brand around comfort and about consistency, and forget about trends.
The Gap can position itself as fashion/apparel, at the right price, for the right moment. Then, the company can incorporate messaging to enforce theme of what moment is right.
Since closing stores is not an option, keeping shareholders in mind, and because the retail landscape is an external factor out of the company's control, the Gap must create its strategy around what it does control: communications and positioning. The company must become less trend sensitive, more moment focused and more integrated into the customer's life.
