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Marketing Innovation for Gap Inc. - Paper


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Innovative integrated marketing solution for Gap, Inc. to increase brand loyalty, consumer engagement and purchases, as well as improve inventory management, profitability and consumer insight.

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Marketing Innovation for Gap Inc. - Paper

  1. 1. University of San Francisco Fall 2012 Team Gap, Inc Game Changers: Chia-mei Liao, Jed McMurry, Mitch Robbins, David Williams Shital Kadakia – smkadakia@usfca.eduPIPERLIME OLD NAVYGAP GPS BANANA REPUBLIC ATHLETA
  2. 2. Table of Contents PageExecutive Summary 3Brief Company Background 5Gap’s Biggest Problems 6 Operating in silos 6 Poor integration and no customization 6 No online to in-store integration 7 Changing consumer trends 7The Solution: Gap Personal Shopper (GPS) 8 What is it? 8 How it works 9 How it solves Gap’s problems 10 No more silos 10 Online integration and customization 10 Online to in store integration 11 In-line with consumer trends 12 The top and bottom lines 12Conclusion 12Appendix 14 Graph 1 14 Graph 2 15 Graph 3 15 Graph 4 16 Graph 5 16 Graph 6 17 Graph 7 17 Graph 8 18 Gap 4 Life, Page 2
  3. 3. Executive Summary Since its founding in 1969, Gap Inc. has built an impressive network of five distinctbrands: Gap, Banana Republic, Old Navy, Athleta, and Piperlime. Each brand targets a differentcustomer demographic and offers different styles to match. Together, the brands give Gap Inc. aunique advantage in the apparel industry: the ability to serve any customer’s needs from the timethey are a baby, until they are a grandparent. Together the brands have the ability to make GapInc. a lifestyle company. However, the brands do not operate together, they operate in silos. In its current structure, Gap Inc. is a brand-centric company: promoting and operating itsbrands independent of one another. Whether online or in store, customers are pigeonholed intoexperiencing one brand at a time and Gap Inc is depending on customers to discover theadvantages of each individual brand themselves. With lost market share and stagnant revenues,Gap Inc. cannot afford to depend on its customers to make this discovery. The company needs tostart taking full advantage of its five brands: incorporating them, cross-selling their products, andgrowing revenues. Gap Inc. needs to shift its focus from being brand centric to customer centric. To transform itself, we suggest Gap Inc. follow these steps: 1. Fully integrate brands and promote ease of shopping online with the Gap Personal Shopper tool; 2. Meet customer needs by cross-selling all brands to registered customers via information provided on their profiles and turn customers into Gap 4 Life customers; and, 3. Drive foot traffic into the store network by extending online experience. Gap 4 Life, Page 3
  4. 4. No other apparel company offers this experience to consumers. By following the aboveaction plan, we believe Gap Inc. will grow revenue among its existing customer base, attract newcustomers, and regain the market position lost to competitors. Gap 4 Life, Page 4
  5. 5. Brief Company Background Gap Inc. is a San Francisco-based global specialty retailer offering clothing, accessories,shoes and other products for men, women, children and babies. The Company was founded in1969, has retail or outlet locations in 39 countries, and offers expanded sales through Gap Direct,its online sales channel to over 90 countries. While the Gap brand has been a core for Gap Inc.,the company has considerably expanded its product offerings and business in the past 30 years,expanding into the five brands it has today: Gap – This brand features classic American style clothing for men, women, children andbabies. While the Gap brand is not trend-setting, it is known for its quality, tasteful clothing in amid-range price category. In addition to the brand’s in-house designs, Gap’s online presenceincorporates collections from outside designers and some third party merchandise. The brand hasretail locations operating under sub-brand categories that include GapKids, BabyGap,GapMaternity, GapBody and Gap Outlet stores. As of the end of the second quarter 2012, theGap brand comprised of 38% of Gap Inc.’s revenue. Banana Republic – Acquired by Gap, Inc. in 1983, the Banana Republic brand hasevolved to offer apparel and accessories. Banana Republic’s target demographic is the youngprofessional, offering chic, modern styles at prices slightly higher than the title brand. Sales arefacilitated through stores, outlets, and online. At the close of the second quarter 2012, BananaRepublic accounted for 18% of Gap, Inc.’s revenue. Old Navy – Opening the first store in 1994, Old Navy is considered to be GAP, Inc.’svalue brand targeting young families with styles consistent with current trends in infant, child,young adult, and adult categories. Store environments are intentionally designed to be open and Gap 4 Life, Page 5
  6. 6. fun to accommodate families with young children. As of the end of 2012’s second quarter, OldNavy comprises approximately 39% of Gap, Inc.’s revenue; slightly surpassing the title brand. Piperlime – Launched in 2006, Piperlime is mostly an online fashion boutique, with onlyone store in New York, targeting both men and women with private label and name brands inapparel and footwear. In addition, Piperlime incorporates a “guest editor”, which allowscustomers to elicit fashion advice from outside sources. Athleta – This brand was acquired in 2008 and features performance and stylish apparelfor all levels of active women. Having expanded to storefronts in 2010, Gap Inc. continues to seegrowth in this brand. At the end of the second quarter 2012, Piperlime and Athleta combined torepresent 2% of Gap, Inc.’s revenue.Gap’s Biggest ProblemsOperating in silos Retailers worldwide have been affected by the global financial crisis that began in 2008.Gap’s competitors have offset some of their losses from Western countries by expanding intoemerging markets. Gap has been a little slow to expand leading them to lose market share (seeAppendix Graph 1). Gap however has one major advantage over competitors that they are notfully taking advantage of: five different brands. However, each brand operates independently ina silo. Gap is focused more on in-store retail operations instead of shifting their focus tocapitalize more online.Poor online integration and no customization Gap Inc. recognizes that its customers shop at multiple Gap brands because it hasintegrated their brands online allowing consumers to toggle from brand to brand (see Appendix, Gap 4 Life, Page 6
  7. 7. Graph 2). Customers enjoy a single checkout and even receive multi-branded products in asingle shipment at home. But, consumers can’t search across multiple brands for a specific item.For example, if a consumer was shopping online for a pair of jeans, they would need to searchfor it under each brand. This would yield over a thousand options among the five brands andfrustrate the consumer (see example search in Appendix, Graph 3). In addition, if a customerjoined each brand’s promotional emails, they would receive emails from each brand separately(see sample inbox, Appendix, Graph 4). This can mean two to five emails a day! Not onlywould this be annoying to a consumer but the likelihood that the customer would open and readthe email is probably low. The online shopping experience is not personal or customized to aconsumer’s need. Gap Inc. could be losing potential sales and customers due to poor websiteintegration and no customization options.No online to in-store integration Customers who shop online don’t have the option of in-store pick-up. This would offerconsumers incentives to receive goods faster and save on shipping costs if their purchase doesn’tqualify for free shipping. If pick-up option was available, this integration could result inincreased foot traffic and possibly increased in-store sales. For example, if a consumerpurchased a shirt online, they may look for pants or a skirt to match in-store. Gap Inc. has alsosiloed their online, and brick and mortar retail operations.Changing consumer trends Consumer shopping trends are changing. More and more consumers are shopping online.According to IBM’s 2012 Holiday Benchmark Infographic, Cyber Monday sales increased30.3% over 2011 and apparel sales were also up 25.3% over 2011 (See Appendix, Graph 5). Gap 4 Life, Page 7
  8. 8. Gap, Inc.’s online sales have also increased year over year and now account for about twelvepercent of total sales (see Appendix, Graph 6). Consumers are less loyal. Since the global economic crisis, consumers have becomeprice shoppers. Brand loyalty for apparel has decreased as competition in the industry has grownand consumers can shop around for the best deals. Consumers want customized products. Consumers favor retailers who can offer a uniqueor customized experience that saves them time, makes them feel more special and caters to theirspecific desires. By not capitalizing on these changing consumer trends, Gap Inc. is losing potentialrevenues, profit and consumer loyalty.The Solution: Gap Personal Shopper (GPS)What is it? Gap Personal Shopper (GPS) is an in-depth Gap Inc. online profile that customers willhave the option to create. The GPS profile will allow customers to input key information abouttheir demographics, lifestyle, interests, sizes, apparel and brand preferences, friend and familynetwork as wells as shipping and payment information (see Appendix, Graph 7). The GPSprofile will allow for customers to be as interactive as they choose. The more informationentered, the more customized a shopper’s experience may be. For example, for measurements, acustomer may simply choose to share their height and weight but if they want highlypersonalized information, they could provide all their information or utilize Me-Ality scanners( to have their exact measurements synched into the Gap system. Gapcould enhance shopper’s experience by partnering with Me-Ality or have in-store measurement Gap 4 Life, Page 8
  9. 9. services in order to improve foot traffic and customer service and loyalty. Each aspect of aconsumer’s profile will allow them to enter additional levels of detail, if they choose. In addition, GPS will also allow customers to give feedback on items purchased or whileshop online. This feedback can be as simple as star ratings used by other online providers suchas Netflix and Amazon. For these providers, when a customer rates a movie or items theyrecently saw or purchased, they receive additional suggestions that align with their previouspurchases and cater to their tastes. GPS could also use the “thumbs up/thumbs down” aspectused by Pandora listeners to give feedback about a song they are listening to. For Gap onlineshoppers the “thumbs up/thumbs down” can be used as a way to easily identify items they like ordon’t like and get back suggestions based on that opinion.How it works? Once the profile is created the shopper will be able to create customized searches acrossone or all brands, track their purchases, rate offerings, create a wish list and purchase items withone click. Currently customers are left to themselves when navigating Gap’s five brands online.With GPS a customer will be able to go to, search for jeans and get customizedresults across brands that fit both their body and their budget. GPS will track their buyingbehavior and allow them to rate items online. Customers will also be able to create wish lists sothat they can easily find what they want at a later date. The wish list also makes it easy for theirnetwork to purchase a gift for them. GPS will allow customers to connect with other GPScustomers facilitating the gifting process. In addition, as a customer searches, they can rateresults based on their personal tastes and preferences. Gap 4 Life, Page 9
  10. 10. GPS turns a frustrated customer into a returning customer. It will greatly improve thecustomer experience by helping them navigate through the thousands of items they don’t want,to find the item they do. It allows for one click shopping for themselves and the people in theirnetwork. Gone are the days of sending your sister-in-law an item that doesn’t fit, that shedoesn’t like and that took you hours scouring the internet to find. GPS will take the stress andconfusion out of the online shopping experience. Technology is at the core of GPS. The use of analytics and machine learning is at theheart of how GPS will facilitate a shopper’s personalized experience. Other online providerssuch as Netflix, Amazon and Pandora have been able to use analytics and machine learning tocustomize a customer’s experience. Investments will need to be made upfront in analytics andmachine technology as well as website interface. Furthermore, merchandise will need to becategorized when it is added to Gap’s online portfolio. Based on customer feedback, analyticsand machine learning adjustments should be flexible enough to accommodate, learn and matchcustomer tastes, preferences, lifestyle and measurements.How it solves Gap’s problemsNo more silos GPS allows Gap to gather important information and learn about their best customers.Gap will be able to send out highly customized marketing materials about products thatcustomers have already expressed interest in purchasing. GPS will allow Gap to cross sell theirbrands during a customer’s online searches or through customized emails based on a consumer’sinformation, tastes and preferences. This allows Gap to spend on more targeted marketingefforts instead of mass marketing. For example, Gap currently sends out 1 to 5 emails a day toregistered customers which has little impact and can be more annoying to customers. GPS will Gap 4 Life, Page 10
  11. 11. allow gap to gather customer’s information and send them one cross-branded email with itemsthat are in line with their taste, preferences and measurement (see Appendix, Graph 8). GPS is an innovative idea that is not being used by other apparel retailers. In addition,Gap can leverage all five brands based on a customer’s lifestyle and lifecycle. For example, acollege graduate who starts their first job may shop more at Banana Republic or Piperlime andsupplement her wardrobe with every day wear from Gap or Old Navy. She may purchase gymclothes from Athleta and may eventually have a family and shop at GapKids and Old Navy. Noother competitor can offer a customer the ability to shop for their life at one company. Gap Inc.has this advantage to truly cross sell their brands depending on a customer’s lifecycle andlifestyle and turn them into a Gap 4 Life customer.Online integration and customization GPS allows Gap Inc. to create a fully integrated shopping experience by changing theway a customer searches and shops for a product. Customization features of a shoppers profile istransferred from the online browser to a customer’s inbox where powered with information andanalytics, a customer receives a more personalized and consolidated email announcing newmerchandise suggestions or promotional items suited specifically for them.Online to in-store integration Additional features such as in-store pickup or measurements can be added to drive trafficto Gap’s brick and mortar stores. Furthermore, the customized experience online can betransferred in store by further developing and integrating a Customer Relationship Managementprogram where a customer can walk into a store, log in at the store to receive in store suggestionsbased on their GPS profile. This not only increases foot traffic into stores but can also developbrand loyalty through this more personalized experience. The use of analytics to suggest Gap 4 Life, Page 11
  12. 12. merchandise to customers can help sales associates take the guesswork out of selections andincrease efficiency.In-line with consumer trends Gap has the chance to be a first mover and change the way consumers shop for clothesonline. GPS will help Gap drive brand loyalty across its brands and also help acquire newcustomers as satisfied customers share their experience with friends and family. GPS is in linewith what customers want: a customized and personalized experience. They could get thisexperience online, in their inbox as well as in store with GPS. Together these benefits will helpGap differentiate their brands, build their customer base and drive revenue!The top and bottom lines Gap Inc. will benefit both by increased revenues and income with GPS. Satisfiedcustomers will become Gap 4 Life shoppers and drive increased revenues. The customizationand personalization allows Gap to help customers improve their search results for products andtherefore aid increased revenues for the company. In addition, the analytics can be used toimprove merchandise and inventory that can directly translate to increased margins andinventory turnover.Conclusion Gap has a tremendous opportunity and competitive advantage to capitalize on onlinesales by cross-selling and upselling their customer base that is unique to Gap. Gap has theopportunity to harness ideas that have proven online success in other industries but have yet to beemployed in retail apparel. Customers desire an integrated, personalized and social onlineshopping experience. Gap has a unique opportunity to be leader in the way retail apparel is sold.From a customer’s perspective, GPS helps improve their overall shopping experience. From Gap 4 Life, Page 12
  13. 13. Gap Inc.’s perspective, the company greatly improves customer intelligence and analyticscapabilities that translate to increased revenues and income margins. The five brands leveragedtogether can truly create Gap 4 Life customers that are loyal and profitable and give the companya tremendous competitive advantage. This can truly revolutionize the retail game. Gap 4 Life, Page 13
  14. 14. AppendixGraph 1: Global apparel company market share position from 2007 to 2011source: Euromonitor International, Passport, Gap Inc, The In Apparel (World), September 2012,p 10 Gap 4 Life, Page 14
  15. 15. Graph 2: Integrated webpage for all five Gap, Inc. brands Consumers can toggle between brands and shop using a single checkout. Goods are even received in one shipment.Graph 3: Sample “jeans” search results from Piperlime, Gap and Banana Repulic online. Gap 4 Life, Page 15
  16. 16. Graph 4: Sample promotional emails receivedGraph 5: IBM 2012 Cyber Monday online salesSource: IBM Benchmark Cyber Monday Gap 4 Life, Page 16
  17. 17. Graph 6: Gap, Inc. revenue trends Gap, Inc.s Year over Year Revenue Trends 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% 2008 2009 2010 2011 2012 -10.00% Total Growth % Online Online GrowthGraph 7: Example Gap Personal Shopper Profile Star rating used to Improves give feedback analytics, machine about purchases learning for future Gap 4 Life, Page 17
  18. 18. Graph 8: Example Email Graph 7 customer would receive Improves analytics, machine learning for future suggestions Gap 4 Life, Page 18