Case Study - Gap

Critically analyze the repositioning strategy adopted by Gap Inc. and discuss if their strategy should be altered, improved, or completely change course by considering the following factors. Provide in-depth research and logical conclusion.

Gap’s repositioning strategy helped the brand become relevant with young consumers. Their execution led to a successful turnaround that brought back customers and rebuilt profit margins (Gill, 2013). After working hard to create a product line that appeals to Millennials, the company reported a rise in quarterly profits while some of their competitors continue to struggle (Fowlkes, 2013). Their main competitors include Abercrombie & Fitch, American Eagle, Aeropostale, and Urban Outfitters. Gap Inc. currently owns six major brands that exposes them to various market segments, while Urban Outfitters owns five brands, Abercrombie owns four brands, American Eagle has three brands, and Aeropostale has two brands (After Earnings, 2013).

What sets Gap apart from their competition is their ability to cater to different niches with the diverse product lineup from their other brands. Gap Inc. uses differentiated marketing to target different audiences for each brand, segmenting their target market by age and income. The Old Navy brand is the least expensive of the other brands, thus positioned by price, offering low cost clothes to teens and college age consumers along with a concept of fun, family, and value. Banana Republic is positioned by user by providing high-end business attire for men and women in the professional demographic age 25-45. The Gap brand is in the middle, also positioned by user, with an emphasis on clean, classic American design (Gap Inc. Outlines, 2008).

As one of the largest specialty retailers in the US, Gap Inc. has been targeting the youth segment since its launch in 1969. The brand maintained a strong relationship with the youth of that era, the Baby Boomers, and unwittingly aged along with them, leading the retailer to become victim of the “positioning drift” (Petro, 2012). With an average age of 39, this group of customers will not deliver the growth the company is seeking in order to secure its staying power (Lewis, 2012).

To reshape the brand’s image, the company turned to targeting the new face of commerce, the Millennials (Petro, 2012). According to the census, these 18-34 year olds make up about 20 percent of the US population, representing a huge opportunity for a comeback (Lutz, 2011). The Millennial generation is the most optimistic and energetic, spending more on apparel than any other age group (Davis, 2012). Born into the digital age and being the first generation to grow up with mobile phones and the internet, these consumers value a sense of community and embrace brands that embrace them (Petro, 2012). They are very connected and can be reached in a variety of ways on social platforms (Townsend, 2012).

The company launched an ad campaign using fashion blogs, social media, mobile shopping, and merchandise that revolves around lifestyles that are popular with Millennials. To evoke an image of artistry and creativity, videos were posted online to showcase the denim manufacturing process, since Millennials demand transparency and embrace sustainability (Lewis, 2012). Additionally, a mobile strategy is necessary to engage with Millennials. The company used SMS and Passbook to engage with these consumers and make coupon redemption easier for iPhone users (Wright, 2014).

To better connect with these consumers, the brand tossed out the neutral workplace attire and replaced it with new looks that include basic tshirts, skinny jeans, and bright, colorful scarves and blouses. Print ads featured actual residents of young, hip towns like Austin or Brooklyn wearing the new looks to reflect the revamped image. In the stores, customers are able to watch videos on their phones that explain how their garment was designed. Also, customers wearing the Gap label get free food from taco trucks and can have their picture taken and posted on Facebook or Twitter (Lutz, 2012).

This repositioning strategy has set the company on track to restoring their hip identity and reconnecting with youth consumers. By segmenting the market by demographics, including age, generation, and income, the retailer was better able to determine the best group of consumers to target. Millennials are often misunderstood, however, not understanding them, engaging them, or adapting to them is a sure way for a brand to fail (Spenner, 2014).

Reaching this generation can be difficult, but Gap Inc. was able to connect with them by understanding their values and lifestyles and by allowing them to become involved with building their brand equity. They gave consumers control of the brand by stepping back and letting them experience the brand in a way that is meaningful to them (Davis, 2012). The future looks bright for this retailer, but only time will tell if they will fall back into the “positioning drift.”

References

After Earnings Can Gap Inc. Still Match Up To The Competition? (2013). Seeking Alpha. Retrieved from http://seekingalpha.com/article/1474161-after-earnings-can-gap-inc-still-match-up-to-the-competition.

Davis, S. (2012). Minding 'The Gap ': How the Retail Giant Is Transforming Itself. Forbes. Retrieved from http://www.forbes.com/sites/scottdavis/2012/10/10/minding-the-gap-how-the-retail-giant-is-transforming-itself/.

Fowlkes, M. (2013). Gap wins where it’s competitors lose. Market Intelligence Center. Retrieved from http://www.marketintelligencecenter.com/articles/314028.

Gap Inc. Outlines Business Strategies for Brands and Highlights Growth Opportunities in Online and International Categories. (2008). Business Wire. Retrieved from http://www.businesswire.com/news/home/20081016005839/en/Gap-Outlines-Business-Strategies-Brands-Highlights-Growth#.U8ndGihOTww.

Gill, D. (2013). Gap, Up 32% YTD, Still Cheap vs. Competition. Forbes. Retrieved from http://www.forbes.com/sites/ycharts/2013/06/13/gap-up-32-ytd-still-cheap-vs-competition/.

Lewis, R. (2012). Re-Gapping The Gap…Millennials in The Cross-Hairs. The Robin Report. Retrieved from http://therobinreport.com/re-gapping-the-gap-millennials-in-the-cross-hairs/.
Lutz, A. (2011). Gap’s Fall Campaign Changes Core Customer. Bloomberg. Retrieved from http://www.bloomberg.com/news/2011-08-01/gap-s-fall-campaign-changes-core-customer-in-moment-of-truth-.html.

Petro, G. (2012). Desperately Seeking Millennials: Why Retailers Like Gap and Macy’s Are Courting Generation Y. First Insight. Retrieved from http://www.firstinsight.com/blog/bid/246261/Desperately-Seeking-Millennials-Why-Retailers-Like-Gap-and-Macy-s-Are-Courting-Generation-Y.

Spenner, P. (2014). Inside the Millennial Mind: The Do 's & Don 'ts of Marketing to this Powerful Generation. Forbes. Retrieved from http://www.forbes.com/sites/patrickspenner/2014/04/16/inside-the-millennial-mind-the-dos-donts-of-marketing-to-this-powerful-generation-3/.

Townsend, M. (2012). Young Consumers Pinch Their Pennies. Bloomberg Businessweek. Retrieved from http://www.businessweek.com/articles/2012-03-22/young-consumers-pinch-their-pennies.

Wright, M. (2014). How Gap Is Winning With Mobile Millenials. PSFK. Retrieved from http://www.psfk.com/2014/01/gap-mobile-millenial-passbook.html#!bh3BnW.

References: After Earnings Can Gap Inc. Still Match Up To The Competition? (2013). Seeking Alpha. Retrieved from http://seekingalpha.com/article/1474161-after-earnings-can-gap-inc-still-match-up-to-the-competition. Davis, S Fowlkes, M. (2013). Gap wins where it’s competitors lose. Market Intelligence Center. Retrieved from http://www.marketintelligencecenter.com/articles/314028. Gap Inc Gill, D. (2013). Gap, Up 32% YTD, Still Cheap vs. Competition. Forbes. Retrieved from http://www.forbes.com/sites/ycharts/2013/06/13/gap-up-32-ytd-still-cheap-vs-competition/. Lewis, R Lutz, A. (2011). Gap’s Fall Campaign Changes Core Customer. Bloomberg. Retrieved from http://www.bloomberg.com/news/2011-08-01/gap-s-fall-campaign-changes-core-customer-in-moment-of-truth-.html. Petro, G Wright, M. (2014). How Gap Is Winning With Mobile Millenials. PSFK. Retrieved from http://www.psfk.com/2014/01/gap-mobile-millenial-passbook.html#!bh3BnW.