Branding And Marketing Strategy of GAP Inc Case Study

Introduction of Branding And Marketing Strategy of GAP Inc Case Study

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Branding plays a significant role in promoting corporate and brand images to the customers. Gap Inc is an emblematic brand that offers perfect clothing to men, women and children. This is an iconic brand mostly preferred by all people. Branding in the current competitive business ambience plays a vital role in attracting potential consumers to its organisation. The branding strategies implemented by the organisation focus on the identification of the target needs of the consumers to gain a competitive advantage. The study will further focus on the detailed analysis of the brand Gap Inc. and the branding strategies implemented by the organisation in the current competitive ambience.

GAP Inc: Overview

GAP Inc is one of the famous American multinational “retail” companies and operates its business across the world with fashion brands. The company is offering apparel, personal care products for women, kids, and men, clothing, accessories, and many more. GAP operates through various market segments like, “Old Navy Global”, “Athleta”, “Gap Global”, and others. Doris F. Fisher and Donald G. Fisher, has founded the company in the year 1969. The company headquarter is in CA, San Francisco. According to the present record for the year 2021, GAP Inc is operating across the world with about 97.00K employees. A huge employee turnover has been observed within five consecutive years in the company.

 Employees turnover rate [2017-2021]

(Source: gapinc, 2021)

The recorded evidence also denotes that in the case of shareholders GAP Inc, includes 85.49% of “Individual stakeholders”, 27.36% of other external and institutional stakeholders, and Mutual “fund holders” of about 37.87% (gapinc, 2021). The present president, director, and CEO of the company is Sonai Syngal. John F. Strain is the present technology and chief digital officer of GAP Inc.

 Financial summary [2015-2019]

(Source: gapinc, 2021)

The above chart highlights the five-year financial record of GAP Inc, where it can be seen that in 2015 the company generated total revenue of 5 billion, which was increased to 15 billion in the year 2019. The company is currently earning about $2.59 dollars and more per share since the year 2019.

Brands Strategy of GAP Inc: Analysis

Fashion branding

Brand strategy is one of the fundamental things in the company. Brand strategy refers to the long term policy and goals of the company to achieve the identification and preferences of the customer towards the brand of the company. As stated by Kim et al. (2018), meaning full, eye-catching and memorable brand components contribute to increased attention and recognition of the customers. Brand strategy is important because, through it, the customer purchases understand and eventually rely on the particular brand.

Gap Inc is an international retail brand which is known for its special marketing strategies. In the particular context of Gap Inc, the company follows a specific and effective policy. Diversification is considered one of the key elements that help the brand to be in the top four positions in the market of the US. This particular brand mainly focuses on lively and “youth centric clothing” (Hunt, 2019). This made the brand one of the finest around the world. There are some specific features and strategies that help the company to promote its brand and attract customers.

In the context of Gap Inc, the company uses various brand strategies that further help the customer to attract towards brand and product. The target audience and the marketing mix help to promote the brand of a particular company. The company applies the 4ps of the marketing mix such as product, price, place and promotion. The product provided by the company is of superior quality, which attracts the customer to its brand (Widyana et al. 2021). The main target audience of Gap is youngsters, and for this reason, the company sets a sustainable price rate. It allows them to purchase their desired products. Gap has many distribution channels, and it provides the facility of offline as well as online services to the customers (Gatrell et al. 2018). In the context of promotional strategies, Gap relies upon social media platforms for exhibiting its brand new collection to its potential consumers.

Brand identity and brand value are the most important factors regarding the fashion branding of a particular company. In the context of Gap, the company cultivates its brand identity as the classic and casual American styling. Gap sets its brand image as one of the beloved retailers and is known for its "classic denim" and "laid-back basics". However, in the current competitive ambience, it becomes crucial for the organisation to implement innovative strategies for enhancing the brand image of the company.

GAP.Inc: Performance in Recent Years

In the year 2020, various fashion organizations like GAP.INc have faced a huge business loss due to the global pandemic. A sharp decline in margins has been observed due to scale loss that gross margin fell to 12.7% from 36.3% in 2020 and this has also affected the future business of GAP Inc. In previous years pre-covid the gross profit rate of the company was about $ 268 million and during the covid, it has fallen to 80% Y/Y (Seekingalpha, 2022). This has negatively impacted the charges of the inventory impairment due to a decline in retail traffic and store for a prolonged period of time.

 Performance of GAP.Inc declined in recent years

(Source: Seekingalpha, 2022)

The operating expenses increased by 47% and this also affected the company’s revenue. Operational costs are also impacted by the charges of impairment for operating leases which are around $ 360 million and for storing nearly $ 124 million. In the case of liquidity, GAP Inc. ended the year with nearly $ 1.1 billion in securities and revenue which has declined from $ 1.2 billion in the year’s pre-covid.

The authenticity of Fashion Branding

When marketers or fashion experts talk about the “authenticity of fashion branding”, they actually mean to provide their customers with “genuine products” opposing counterfeits. The fashion experts conferred “authenticity” to the company’s products where they think to incorporate legal force, banding, and protection of trademark by DNA markers (Birkey et al. 2018). Presently, customer has a tendency to determine the authenticity of every product they use and pay for. For every famous fashion brand, authenticity matters highly. It is something the customer desire first. Brand choices are the extension of customers’ self-desires and they use some specific brands’ products to achieve “self-authentication”. “Consumer psychology” journal states nowadays the customers generally choose a brand which has always remained faithful to their customers and also motivates them with responsibility and care is referred to as “authentic branding”. Brand authenticity also supports and enhances customer loyalty which helps to increase the brand value and customer base.

In order to explain various dimensions of brand authenticity with respect to GAP.Inc branding, it can be mentioned that stylistic consistency, aims to maintain the style consistency of a fashion brand mainly in its clothing, and accessories. As opined by Amengual et al. (2020), the next dimension is pedigree and heritage, where brand history and culture are preserved and continued in the present era. Cultural style and design are also maintained and reflected in the items of modern centuries. Authority is also denoted as authenticity where the brand can be easily recognised and approved socially. The authentic brand has a national identity known to the entire world. In order to raise the value and be more popularized the company need to become innovative and incorporate new products with new styles and design in its target market segments. GAP Inc also needs to care about environmental sustainability to grow as a leading brand across the world.

Factors affecting the branding strategy of GAP

GAP.Inc is an American retail brand which is famous for its unique marketing strategies. One of the key factors that have kept GAP among the top 4 fashion brands in the market U.S is diversification. The company mainly target youngsters and focuses on youth-centric and lively clothes. This is one of the major facts of why the company is one of the finest fashion brands in the U.S as well as across the globe. GAP.Inc is popular because of its high-quality products and its unique style and designs. There are various factors that are constantly affecting the consumer behaviours of the company as stated below.

In the context of Personal factors, it can be stated that the social-economic status of the consumers highly affects the profitability and productivity of the company. The company tries to satisfy their customers by providing them with prime products at affordable rates. GAP mainly targets the youngsters and middle-aged working professionals who have varieties of clothing tastes. Some of the personal care products have been mainly designed for middle-aged women like skin rejuvenating creams, and age revitalize which have satisfied women above 30 years with glowing skin (Zhang, 2021). In context to cultural factors, it can be mentioned that the company products' saleability is greatly influenced by variation in culture, religion, and race. People like to dress up according to their culture. Sometimes, the clothes’ style and colours are also being selected by the customers according to their skin colour and religious norms.

 Factors affecting Consumer behaviours of GAP.Inc

(Source: Zhang, 2021)

In context to social factors, it can be highlighted that GAP that the products types and quality also affect the consumer behaviours, where household products can be categorized by age group preference. Modern minds mainly prefer household products with modern technologies incorporated in them and aged customers prefer traditional household items which reflect historical style and cultures. Buyers’ response also affects the company's business profitability and productivity across the world and in their target market. There is a tendency among the buyers to constantly change their brand preference and in that case, the company need to change and improve their branding strategy and products according to the current trend.

Pyramid and galaxy model of brand expansion

The brand strategy that every fashion company as GAP Inc follows to enhance its growth in the share market is called brand expansion or extension. New customers' touch-points, both in the mortar or traditional and online stores helps the company to increase the brand value and revenue rates in the share market. Brand extension mainly occurs in established and new market segments that the company has incorporated. Expansion in branding can also benefit the company by creating a high sense of “loyalty or authenticity”. It also helps to reaffirm the customers’ brands perception and brand promise. Sustainability in branding and the establishment of new brand positions can also be enhanced by brand extension. Proper branding can be done by incorporating four effective steps target audience determination, positioning of the company’s business and products, the definition of the brand’s personality, and selection of an attractive logo or slogan (Arrigo, 2018). Before explaining the effectiveness of the pyramid and galaxy model of brand expansion it is important to know that brand extension has two major divisions like vertical and horizontal extensions. The model that is vertical stretching is the “pyramid model”. This model is mainly used by GAP in order to display all their products in a place that can either be in traditional stores or online stores.

This pyramid model mainly determines brand coherence. A luxury brand usually expands from a parent brand and generally positions itself in various positions in a pyramid position on the basis of its financial results and business or marketing strategies. In such cases, the anime of sub-brands are being chosen in order to compensate for legitimacy handicaps or lower creativity levels. As opined by Gautam et al. (2017), there is no obvious legitimacy that passes from threads and needle mastery to the molecule which can preserve its eternal beauty. The pyramid model also offers the company increases in business profitability and turnover rates (Shen et al. 2017). At the bottom of this pyramid model, impoverishment risks are also there at three different levels such as excellence, selectivity, and creativity that can enhance the brand value and popularize it more across the world.

 Pyramid and Galaxy models for brand extension

(Source: Zhang, 2021)

In the case of the galaxy model, all the sub-brands that have originated from the parent brands have equal branding strategies. According to this galaxy model, it can be stated that the features of all sub-brands of the fashion industry must have a unique brand logo, must maintain the traditional cultural style, and design. The sub-brands of GAP Inc must provide their customers with prime products at an affordable price. This can enhance the brand image and value across the world’s fashion industries. The sub-brands must maintain environmental sustainability which is one of the major criteria in the competitive market.

GAP Inc: Using Pyramid Model

Various companies in the fashion industry rely on the galaxy model and the pyramid model to enhance their key positioning and value proposition levels in the target market segments. GAP Inc mainly uses the Pyramid model to enhance its business operation and also for assortment, speed and channels of supply chain and to decide their pricing strategy. The pyramid model of each company helps them to keep it unique from other companies. The segmentation of the company brand is mainly illustrated on this pyramid where a comparison is also made with other leading brands.

 Pyramid Model

(Source: Ausrød et al. 2017)

Higher price generally corresponds to higher fabric quality that the companies use to make their clothes or garments. In this pyramid model exclusive customer service, “made-to-made garments”, and various other attributes are also mentioned (Ausrød et al. 2017). All the brands in the fashion industry are mainly positioned according to their conglomerates or corporations. Most of the companies compete with each other in some accessible segments by selling demanding categories like perfumes, clothes, eyewear, and so on.

Role of social media in Brand growth

In this modern era, social media and digital marketing are contributing highly to enhancing the brand value of every fashion company. Social media marketing has also influenced a large group of customers as they have high knowledge of various budding brands across the world. The customers can differentiate among the brands by reviewing the post's comments before buying their products online. From the social media accounts, it has been found that GAPInc is a forty-five years old retail company in the fashion industry that has carefully cultivated a “web presence” mainly focused on “feminism”, progressive values, and equal pay. Through several effective social media platforms like Facebook, Twitter, and Instagram, the company also give updates on job opportunities mainly for females, to support the equal rights mission of the retail industry. With the brand extension, the fashion companies like GAP Inc has successfully provided 77% of women jobs in the fashion world (Hoffman et al. 2018). Deirdre Hussey, the digital marketing director of GAP Inc stated that the company is operating its business across the world successfully with a positive workforce culture where 73% of employees are women and are equally paid like men. All these business strategies and company norms and policies are introduced to this modern world via social media platforms to enhance the brand value in competitive markets.

GAP: Data Insights

Brand growth

The shares of GAP Inc have experienced huge growth after apparel retailers have offered the company an upbeat forecast. This upbeat forecast has benefited the company with greater profits in the current year, 2022. As opined by Atwal et al. (2017), the logistic and inflation challenges that the company used to face previous have reduced to a certain level. Sonia Syngal, the director and the CEO of GAP Inc has mentioned in a press conference that the company has faced “near-term” disruptions during its fourth fiscal quarter which has “muted” the company’s entire performance and business profitability. In the fashion market GAP Inc is competing with other leading retailers like Old Navy brands, and the Banana republic. In recent years the company has thought of improving the shipping issues and trying to incorporate various advanced technologies that can improve their logic and delivery systems.

 Revenue growth of GAP.Inc [2007- 2021]

(Source: Israeli et al. 2017)

It has been observed that in the first quarter, the company has experienced its revenue contracting by medium to high and at a rate of single-digit than the prior years (Israeli et al. 2017). There is a smaller drop in its review which is 3.8%. In the fourth quarter, the company has experienced revenue growth of nearly $4.53 billion where it has expected only $4.49 billion. It has observed a revenue growth of 2% in the year 2020 if compared to a revenue loss in the year 2019, which is of 3% loss. In the case of same-store sales, the track's revenue which has been open for only 12 months has a profit of 3% to 3.7% more than in previous years.

YOY Growth Chart: GAP. Inc

In the year 2021, the famous fashion company, GAP.Inc has experienced a decline in its business growth. Due to the effect of the Covid pandemic, a huge loss in marketing and sales has been observed in the fashion industry. The sales rate of GAP.Inc has fallen over 40% in the year 2020 and the year 2021. There was a cash burn of nearly $1 billion, and this is due to a huge operating loss (Macrotrends, 2022). New debt had been raised by the company to fund itself as a higher rate of cash burn affect the company’s revenue, and liquidity, and could have forced it to raise more “debt”.

 YOY Growth Chart

(Source: Macrotrends, 2022)

In the years 2020 and 2021, the company’s stock also fell down nearly 45% and this issue is still affecting the business operation of GAP.Inc across the national and international levels. Within 13 weeks the sales rate of the company has fallen in the year 2020, and the company has faced a loss of about $ 3.9 billion in revenue. 

Performance of Brand

The brand GAP Inc is one of the leading and popular brands in the fashion industry across the world for its high quality and stylish products. The company has gradually developed a superior concept of providing its customers with fashionable clothes and personal care products mainly for Americans. The company has the potential for growing substantially as it has a record of serving a huge target audience including middle-aged, youngsters, and mature adults. The sub-brands of GAP Inc has similar features are the competition level among them is quite less. From the years 2020 to 2021, the sales of the company have declined to nearly $13.8 billion due to the effects of the covid-19 pandemic. As opined by Leeet al. (2018), from the official website of GAP Inc it has been understood that the company's performance has decreased in previous years due to which it has experienced a loss of $665 million from nearly $16.4 billion. Recently after recovering from Covid pandemic impacts, the company’s business performance has increased which has resulted in a profit of nearly $351 million.

Competitors in the market

(Source: Israeli et al. 2017)

In order to maintain uniqueness in the fashion industry GAP Inc in its traditional and online stores across the world has starred selling Athleta. The company is gradually growing “its athletic apparel” line for women, which has had revenue growth of 42% within 2 consecutive years. The director of the company has mentioned that “Athleta” is still in high demand and will very soon hit $2 billion in yearly sales by the year 2023 (Ko et al. 2019). For the entire year 2021, the company has expected to earn between the revenue of $1.85 to $2.05 dollars in every share. Its sales started growing at a slow rate from the year 2021 and the company’s business performance has decreased. GAP Inc has experienced a loss of 2% in its shares and its revenue rate decreased from $4.53 to $4.42 billion in that year. The gross margin of GAPInc is contacted by 33.7% in its fourth quarter. The company has experienced fluctuating revenue growth in the years 2020 and 2021 due to the global pandemic of covid-19. The pandemic has highly impacted most fashion organizations across the world by decreasing their supply chain and business performance, sales rates, and productivity.

Approaches have been undertaken for brand expansion

Various branding strategies like “branded house strategy”, “house of brands” strategy, and competitive “multi-brand” strategy, help the company of the fashion industry to establish unique products and introduced them to its target market segments. As opined by Janssen et al. (2017), incorporating a power branding strategy can help the company to grow and become mature in the competitive market, it will also help in enhancing the business operation, productivity, and profitability of the organization. Creating smart branding decisions can help the company to remain in the leading position for a longer period of time.

 Brand extension

(Source: Shen et al. 2017)

Most of the fashion organizations like GAP.Inc follows four main branding approaches to expand its sub-brand's value and popularized them across the globe. Those four branding approaches are line extension, new branding strategies, fight or flanker banding strategy, and band extension. The three main approaches that the company use to build its brand image and value in the competitive market are the traditional “marketing mix”, which mainly includes the consumer-based approach, brand identity approach, and brand personality approach (Shen et al. 2017). Brand extension is mainly divided into two parts that are vertical extension and horizontal extension. The vertical extension is further divided into the up-scale and down-scale performance of the company and the horizontal extension is further divided into line and sub-brand extensions.

Conclusion

Brand performance in the context of GAP highlights the organization conducting market research to implement strategies that would provide them with competitive data. Furthermore, in order to enhance brand loyalty, the organisation implements innovative pricing and promotional strategies to meet consumer requirements while ensuring its productivity.

References

Journals

Amengual, M. and Distelhorst, G., 2020. Cooperation and Punishment in Regulating Labor Standards: Evidence from the Gap Inc Supply Chain. Available at SSRN 3466936.

Arrigo, E., 2018. Social media marketing in luxury brands: A systematic literature review and implications for management research. Management Research Review.

Atwal, G. and Williams, A., 2017. Luxury brand marketing–the experience is everything!. In Advances in luxury brand management (pp. 43-57). Palgrave Macmillan, Cham.

Birkey, R.N., Guidry, R.P., Islam, M.A. and Patten, D.M., 2018. Mandated social disclosure: An analysis of the response to the California Transparency in Supply Chains Act of 2010. Journal of Business Ethics, 152(3), pp.827-841.

Gatrell, J., Reid, N. and Steiger, T.L., 2018. Branding spaces: Place, region, sustainability and the American craft beer industry. Applied Geography, 90, pp.360-370.

Gautam, V. and Sharma, V., 2017. The mediating role of customer relationship on the social media marketing and purchase intention relationship with special reference to luxury fashion brands. Journal of Promotion Management, 23(6), pp.872-888.

Hoffman, D.L. and Novak, T.P., 2018. Consumer and object experience in the internet of things: An assemblage theory approach. Journal of Consumer Research, 44(6), pp.1178-1204.

Hunt, S.D., 2019. The ethics of branding, customer-brand relationships, brand-equity strategy, and branding as a societal institution. Journal of Business Research, 95, pp.408-416.

Israeli, A. and Avery, J., 2017. Predicting consumer tastes with big data at Gap. Harvard Business School Publication (July 10).

Janssen, C., Vanhamme, J. and Leblanc, S., 2017. Should luxury brands say it out loud? Brand conspicuousness and consumer perceptions of responsible luxury. Journal of Business Research, 77, pp.167-174.

Kim, R.B., Park, J.M. and Yoon, D.H., 2018. Marketing accountability of Korea corporate: The relationship between branding investments and financial performance. Engineering Economics, 29(3), pp.332-340.

Ko, E., Costello, J.P. and Taylor, C.R., 2019. What is a luxury brand? A new definition and review of the literature. Journal of Business Research, 99, pp.405-413.

Lee, J. and Lee, Y., 2018. Effects of multi-brand company’s CSR activities on purchase intention through a mediating role of corporate image and brand image. Journal of Fashion Marketing and Management: An International Journal.

Shen, B., Choi, T.M. and Chow, P.S., 2017. Brand loyalties in designer luxury and fast fashion co-branding alliances. Journal of Business Research, 81, pp.173-180.

Widyana, S.F., Yuniarsih, T. and Ahman, E., 2021, September. Employer branding strategy to increase employee engagement. In 5th Global Conference on Business, Management and Entrepreneurship (GCBME 2020) (pp. 614-617). Atlantis Press.

Zhang, Q., 2021. Developing segments with high-profit margins–the Case of Gap Inc. in the United States. Journal of Asia-Pacific and European Business, 1(01).

Websites

Ausrød, V.L., Sinha, V. and Widding, Ø., 2017. Business model design at the base of the pyramid. Journal of cleaner production, 162, pp.982-996.

gapinc.com, 2021. “We Grow Purpose-Led, Billion-Dollar Brands That Shape Peoples' Way Of Life.”. Available at: https://www.gapinc.com/en-us/about [Accessed on 20th April 2022]

Macrotrends, 2022. About Gap Revenue 2010-2022 | GPS. Available from: https://www.macrotrends.net/stocks/charts/GPS/gap/revenue [Accessed on: April 30, 2022] 

Seekingalpha, 2022. About Gap's Decline Could Continue.Available from:https://seekingalpha.com/article/4354395-gaps-decline-continue [Accessed on: April 30, 2022]