The document provides a situation analysis for Gap Inc. including background information on the company, industry trends, competitors, financial performance, key issues, SWOT analysis, segmentation of target customer groups, and objectives for marketing. Gap launched brands like Old Navy and Banana Republic and started online retailing. The apparel industry was expected to grow 1.3% in 2001 and 3% in 2002. Key issues for Gap included maintaining market share and brand positioning. Objectives were to maintain sales and acquire new customers while repositioning the brand for all generations.

1. Brian Song Wonmin Hyun Doori Song Sunhwa Jung Pyeong Cheong Ko Li Fei

2. Situation Analysis

3. Situation Analysis Gap Inc. Background Launched Old Navy Started online retailing GapBody (women) Multi shop with own brands Acquired Banana Republic Gap kids, Baby Gap Multi shop Selling Levi’s jeans concept of anti-fashion 1970s 1980s 1990s 2000s

4. Situation Analysis Industry Trend Trend 2001: Apparel sales was $184.366 billion, 1.3% growth 2002: Expected to grow at the same nominal rate Estimate sales: $186.77 billion Store Type Mall-Based Specialty Store: Gap Mass Merchant or Promotional Department Store: K-mart or Target Traditional Department Stores: Marshall Field’s or Macy’s National Chain Stores: J.C Penny, Sears, and Kohl’s

5. Situation Analysis Competitors Style Classic, Basic J.Crew JC Penny Target AE Gap Younger Older Old Navy Aeropostale A&F Trendy

6. Situation Analysis Competitors Gap J. Crew A&F Aeropostale AE JC Penny 20.6 3.1% 1.2% 69.9% 5.1%

7. What is the Problem?

8. Situation Analysis Balance sheet for the Years 2000 and 2001 Add 000 to all figures except earnings per share.

9. Situation Analysis Four Division Sales – 2000, 2001 5 % Figures in billions.

10. Situation Analysis Gap Domestic Performance 12 %

11. Key Issues

12. Key Issues Key Issues Urgency L Market Share Profit Importance H L Short-term Sales Brand Re-Positioning H

13. SWOT

14. SWOT S.W.O.T.

15. STP

17. Household income: $57,695

18. Spending power: $2.1 trillion

21. Average household income: $45,498

22. Best educated generation

23. Spending Power: $736 billion

24. Price is the leading motivator when shop for fashion items

28. Baby boomer

30. Generation YTrendy High Loyalty Low Loyalty

31. positioning Style Classic, Basic Gap J.Crew JC Penny Target AE Gap Younger Older Old Navy Aeropostale A&F Trendy

32. Alter- natives

33. Alternatives Alternative 1: Product line Advertising Alternative 2: Brand Image Advertising Alternative 3: Mixed Advertising

34. Alternatives Alternative 1: Product line Advertising

35. Alternatives Alternative 2: Brand Image Advertising

36. Alternatives Alternative 3: Mixed Advertising

37. Objectives

38. Objectives Marketing Objectives Short-term To maintain last year net sales ($5.2M) and market share, acquiring new core customers (the older generation and Xers) in the customer mix by 15% in first year while re- positioning the brand as ‘all of generation’ Long-term To recover the Gap’s brand reputation of the basic casual cloth and position as market leader in five years

39. Objectives The Ostrow Model Media Objectives 1 7 -2 2 Within one year, aim to communicate the target customers with level of frequency 7 Source: the Ostrow Model 5 7 7

40. Objectives Media Objectives 1 Within one year, aim to communicate the target customers with level of frequency 7 2 Inform 2/3 of the “reached” customers that the Gap will bring benefits for style 3 Convince 2/3 of “informed” customers that the Gap is American style apparel for everyone 4 Stimulate desire within 2/3 the “convinced” customers for try the Gap apparel

41. Budget & Allocation Media Budget Maintain market share from 2002 (Domestic)  2.90% $5.61Billion Domestic sales , $102.3 million on Advertising  1.8% of the Domestic sales 2003 The Total Sales of the Industry is estimated by the same growth rate as 2002  3%  $ 189.19 billion 2002 $ 5.48 Billion (Estimated Domestic sales)  1.8% of sales and 8.9% of annual advertising cost growth  Estimated spend for Advertising: $106.43 million Estimated Gap Domestic sales  5.48 Billion 2003 8.9%* $106.43 (Estimated spend for Advertising 2002)  115.9 Million

42. Budget & Allocation Budget Allocation

43. Budget & Allocation Budget Allocation

44. Budget & Allocation Media Flow Chart

45. Media Planning

46. Television

47. TV Reason for Selection Good Mass Market Coverage The Gap’s Broad Target Audience Appealing to the Senses Brand Image Advertising (The Gap’s new campaign)

48. TV Budget

49. TV Budget Total Budget for TV: $60,919,370 (52.56%) 70% 90% Primary Target National Network TV $ 42,643,559 $ 54,827,433 30% 10% Secondary Target Cable TV $ 18,275,811 $6,091,937

50. TV National Network TV Vehicles selected by Rating/ Target Demographics/ Costs May Mar. Aug. Jul. Nov. Oct. Dec. $ 42,643,559

51. TV Vehicle Selection ABC CBS UPN NBC FOX Mon. Prison Break CSI: Miami $229,000 $160,669 Tue. America’s Next Top Model Law & Order $32,669 $191,776 CSI: NY Wed. $163,000 NBC Saturday Night Movie ABC Movie of the Week Sat. $53,175 $94,300 $1,474,068 per Week Desperate Housewives Sun. 60 Minutes $439,499 $109,980 Source: Advertising Age FactPack

52. TV Cable TV Vehicles selected by Rating/ Target/ Vehicles characteristics Feb. Jan. Apr. Mar. Jun. Aug. Dec. Nov. Sep. $ 18,275,811

53. TV Vehicle Selection – for Baby boomers & Generation X (%) P.T S.T P.T S.T A.R A.R A&E CNN 6.87 2.08 4.47 5.57 1.56 3.57 2.47 1.98 2.27 7.22 1.08 4.15 0.88 1.33 1.11 0.28 0.42 0.35 4.66 2.42 3.54 0.41 0.23 0.32 3.85 2.28 3.06 0.67 0.62 0.64 3.79 2.54 3.17 5.81 4.66 5.23 BET Discovery AMC MSNBC Lifetime CNBC Fox family ESPN Food History P.T: Primary Target S.T: Secondary Target A.R: Average Rates Source: Simmons Choice3

54. TV Vehicle Selection – for Generation Y P.T S.T A.R 2.58 2.02 2.30 0.08 0.08 0.08 2.13 0.74 1.44 1.37 1.20 1.29 Animal Planet MTV FX Time E! Entertainment P.T: Primary Target S.T: Secondary Target A.R: Average Rates Source: Simmons Choice3

55. TV Execution

56. Radio

57. RadIO Reason for Selection Increases effectiveness when using with TV Ideal for refreshing recall of product names and utilities immediately prior to purchase Brand Image Advertising

58. RadIO Budget

59. RadIO Radio Vehicles selected by Rating/ Target Demographics/ Close to Sales May. Dec. $ 8,117,087

60. RadIO Vehicle Selection Intensive between 7 am and 10 am. Immediately after that, between 10 am and 11.30 am, an initial wave of purchasing follows. On returning home, the audience again turns its attention to the radio between 11.30 am and 2 pm, before a second shopping wave from 2 pm to 4 pm. Source: Source: Radio advertising effectiveness, Uwe Domke and Christoph World Advertising Research Center 2005

61. Most population located in US states & cities: 21 states & 47 cities (268 stations) RadIO Vehicle Selection http://www.gaebler.com/Radio-Ad-Rates.htm http://www.radioandrecords.com/RRWebSite20/Members/Ratings.aspx http://www.arbitron.com/radio_stations/prodsched.htm

62. Internet

63. Internet Reason for Selection & Budget Effective to target Generation Y Product line Advertising

64. Internet IAB Internet Advertising Revenue Report conducted by PricewaterhouseCoopers (PWC)

65. Internet Budget

66. Internet Key Websites The Most Commonly Used Media of Generation Y: Top 5 general web sites visited: 1. eBay.com-banner 2. Amazon.com-banner 3. CNN-Keyword Search 4. MTV-banner 5. KaZaA-banner (*Source: www.volunteertoday.com/archives%202004/Aug04recruit.htm#ManagingY) Top Search Engines (Keyword Search) Google 60.94% Yahoo! 22.34% MSN 10.72% Source: Hitwise Press Releases 2006 The Top 3 fashion websites

67. Internet Keyword Yahoo, MSN, CNN Pay-For-Performance Premium Advertising ; Advertising in premium listings enables you to appear on more search sites and reach 80% of active internet users Cost (bid): monthly fee min $20, Per-click through min $0.10 Site match ; Pay-per-click program Cost (bid): $49 annual + bid cost per click($0.15~$0.30) Source: This report was compiled by TriDigital Inc. from a series of acticles appearing on SearchEngineWatch.com

68. Internet Keyword Google Adwords ; premium listings program Cost (bid): activation $5, pay per $0.10 Source: This report was compiled by TriDigital Inc. from a series of acticles appearing on SearchEngineWatch.com

69. Internet Execution – Keyword Search

70. Internet Budget & Execution -Banner

71. Internet Budget & Execution -Sponsorship Source: http://www.lovetoknow.com/top10/fashions.html

72. Internet Budget & Execution -Sponsorship Source: http://www.lovetoknow.com/top10/fashions.html

73. Internet Budget & Execution -Sponsorship Source: http://www.lovetoknow.com/top10/fashions.html

74. Newspaper

75. News paper Reason for Selection Cheapest way to reach a mass audience Timing is fast Easy to change ads High Reliability Brand Image Advertising

76. News paper Budget

78. Wide coverage

80. NY Daily News

81. Star-Ledger

82. California Daily News

83. The Atlanta Journal-Constitution

84. Austin American-Statesman

85. Morning News

86. Based on the states have the largest percentage of baby boomer and Xers:

87. New York, and adjacent states

88. California

89. Texas

91. NY Daily News

92. Star-Ledger

93. California Daily News

94. The Atlanta Journal-Constitution

95. Austin American-Statesman

96. Morning News

97. Based on the states have the largest percentage of baby boomer and Xers:

98. New York, and adjacent states

99. California

100. Texas

102. News paper Budget

103. Magazine

104. Magazine Most Reach the whole target + specific segment, fashion buffs and men Primary Target Baby boomer and X generation Brand Image Advertising Secondary Target Y generation Product line Advertising Total Budget for Magazines: 20,972,172 (18.10%)

105. Magazine Magazines selection I

106. Magazine Magazines selection I The percentage of the people b/w 25 and 54 age who enjoy clothes shopping among readers of each magazine. - Choose the magazines having over .90%. The percentage of female and male who enjoy clothes shopping among readers of a magazine - Choose over .40% for male / over 1.20% for women

107. Magazine Magazines selection I

108. Magazine Magazines selection 2

109. Magazine Magazines selection 2

110. Magazine Magazines selection 2 Source: Simmons Choices 3, 2002

111. Magazine MAGAZINES BUGET ALLOCATION Source: Simmons Choices 3, 2002; SRDS Consumer Magazine Advertising Resource 2008

112. Outdoor

113. OUT DOOR Reason for Selection Low CPM Easy to change ads Creative Idea

114. OUT DOOR $9,029,797 (7.79%) Budget Baby Boomer / X- Generation Target Population Of target Area Big 50 Cities Target Area

115. OUT DOOR Coverage of Outdoor advertising Main target Area Budget of major Area Reference: U.S. CensusBureau, 2003

116. OUT DOOR Type of advertising 12’3”h x 24’6”w 10’5”h x 22’8” 10’5”h x 22’8”w 67”h x 46”w 30”h x 144”w (88”) 14’h x 48’w

117. OUT DOOR Examples of advertising

118. CONTIGENCY PLAN

119. OUT DOOR Evaluation of Plan Evaluate Plan by the end every quarter (Research) Step 1 A -3% 0% +3% +6% Sales Brand Loyalty -1% 0% +1% +3% B -2% 0% +3% +7% Profit Step 2 If ) Below the criteria  Start Contingency Plan

120. OUT DOOR Change Advertising concept Focus on Product Line Current Plan Product Line Mixed Focus on Brand Image Brand Image Maintain current Media & Vehicles Step 1 Focus on alternative Advertising concept Step 2

121. OUT DOOR Budget Re-allocation Reduce Advertising Budget from all target by 10% $115,900,000  $ 104,310,000 Reduce Advertising Budget from Y-generation by 50% $115,900,000  $ 104,549,886

122. Question !