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02/07/2012

RESEARCH PROPOSAL ON SALES PROMOTION BY GAP INC.


SALES PROMOTION BY GAP INC.

INTRODUCTION

 

Background and Justification

Gap Inc. is a leading international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic and Old Navy brand names. (Fest and Turner, 2002) Gap operates more than 4,100 stores in the United States, the United Kingdom, Canada, France, Japan and Germany and employs nearly 165,000 employees worldwide.  Over the past two years, however, the Gap has gone from one of the largest specialty retail chains in the US with $13.7 billion in annual sales, to a period of 24 consecutive months with sales declines and considerable stock depreciation. To respond to these recent difficulties, there are opportunities for the Gap to increase unit sales and rebuild the brand loyalty they once possessed. Moreover, Gap’s corporate strategy has included major global expansion by increasing retail space, increasing its portfolio and expanding into diversified markets; in essence Gap’s goal is to become a “megabrand” like Coca-Cola or Nike.

Don and Doris Fisher founded Gap Inc. in 1969 in San Francisco, California with a single store and only a handful of employees. (Khokhar, 2001) Today, Gap Inc. is an international company with three district brands and over 140,000 employees worldwide.  In conjunction with other countries such as the United Kingdom, Canada, and Japan, just to name a few, customers can shop worldwide for the brand they love. Gap, Banana Republic, and Old Navy differ in areas such as assorted customer target groups, mixing merchandise, and different marketing approaches for each store.  Although these stores differ in certain respects they all have the same goal, which is to deliver the best product to the customer with style and grace.  New marketing styles and great employees help Gap Inc. run their business.

The company, Gap Inc., an American-based company, is amongst the leaders of specialty retailers around the world. (http://artsweb.uwaterloo.ca) Consumers contribute to the company's profits by making purchases from one or more of these highly recognized stores: Banana Republic, Gap (including GapKids, babyGap, etc.), and Old Navy. Although each brand name, and thus, a distinctive store, belongs to the same company (Gap Inc.), the three stores target different audiences. Although primarily retailing in clothing, Gap Inc. also offer accessories and personal care products, with every brand in its own style and quality. Most consumers would agree that Banana Republic holds the highest quality, sophistication and class in fashion, whereas the middle to lower end of the line is attributed to Gap and Old Navy respectively. Product differentiation is reflected in various areas of store and promotional design. Generally, designs for Old Navy are geared towards the younger generation, and gradually progresses toward the career-oriented consumers with Banana Republic products. Thereby, Gap Inc. is a product family, as one can grow up with products from its company. On the other hand, product differentiation is not only reflected in Gap Inc.'s retail stores, but is also seen across their online stores through design choices. As with most websites, each has areas of weaknesses in design and usability. However, to counterbalance minor drawbacks, attributes and strengths contribute to the rhetorical effectiveness in communicating information of the sites. Design choices will be analyzed in separate sections to discuss the three sites in greater detail.

Statement of the Problem

This study seeks to examine the sales promotion of Gap Inc., particularly the impact of television and print ads on the company’s income. Specifically the study seeks to answer the following questions:

1.            What are the marketing strategies utilized by Gap Inc.?

2.            What promotional campaigns did gap used to strengthen its sales?

3.            What are the effects of the print and television advertisements on Gap Inc.?

4.            How much of Gap Inc.’s budget is allocated in the promotion of its merchandise? 

Objectives

The purposes of the study are to explore how marketing strategies. Specifically sales promotion has influenced the success of Gap. Gap had great success in its sales at one time, which means that its sales promotions were very effective. In the present study the researcher will investigate why they were so effective, how they have been changed, why does it not
work as effectively now, and finally, what is the effective sales promotion.

Assumptions

Gap Inc., as discussed earlier, is one of the leading retailers of apparel in international scene. This study rests on the assumption that the company is currently and continues to be in a stable position and maintain its corporate identity.

Limitations

This study would be limited to a case study, specifically the case of Gap Inc.’s sales promotion in the American market. Since this would be a case study, the study would only be basing its conclusions and recommendations on past and current literature and studies relating to the economic performance of Gap Inc. Moreover, in over three decades of the company’s existence, the study will only be covering the last ten years.

 

REVIEW OF THE LITERATURE

MARKETING

According to McNamara (1999), marketing is the wide range of activities involved in making sure that you're continuing to meet the needs of your customers and getting value in return. These activities include market research to find out, for example, what groups of potential customers exist, what their needs are, which of those needs you can meet, how you should meet them, etc. Marketing also includes analyzing the competition, positioning your new product or service (finding your market niche), pricing your products and services, and promoting them through continued advertising, promotions, public relations and sales.

On the other hand, Kyle (2000) stated that Basic, traditional marketing is as relevant as ever. The Four P's - product, price, place (distribution), and promotion - are still very much alive. Strategic thinking, segmenting, and targeting can still earn you a competitive advantage. Marketing is still a process of a) determining what our customers need and want, b) planning how we are going to meet those needs and wants, and then c) implementing our plan. The market still has products, services, and ideas to sell at some price. Some individuals still deliver to our customers via some means of distribution. We still promote and we still advertise. Those are the basics. The basics still exist and always will.

 

Moreover, the existence of change could not be discounted.  In the definition of marketing, the thing that has changed is the business environment. Companies compete with more efficient technologies. (Kyle, 2000) Customers have better access to their cost options and they communicate to each other in a way never before possible. In some industries, the Internet has lowered the cost of entry so that entrepreneurs, with little more than a home office, have entered the competition. The changes in competitive environment are numerous. Likewise, what have also changed are the specific marketing strategies and the tactics we take to implement those strategies. These have changed, but basic marketing has not. Superior marketing is and always has been analysis, then action. It is strategy development, then logical and thought-out tactical implementation.

 

SALES PROMOTION

McNamara (1999) defined promotion as the concept that keeps the product in the minds of the customer and helps stimulate demand for the product. Promotion involves ongoing advertising and publicity (mention in the press). The ongoing activities of advertising, sales and public relations are often considered aspects of promotions. On the other hand, he defined sales as a concept that involves most or many of the following activities, including cultivating prospective buyers (or leads) in a market segment; conveying the features, advantages and benefits of a product or service to the lead; and closing the sale (or coming to agreement on pricing and services).

 

Thus, sales promotion is defined as a means to stimulate the transactions of specific merchandise. In order to realize this, Knight (2003) provided several measures.  He stated that sales promotion needs to relate to and be part of your overall marketing program/theme/campaign, so it is consistent. He added that the promotion must be a limited time offer, which expires on a set date. He also expressed the importance of testing the price points and examining the price elasticity of the marketplace. He also stated the need to ensure the readiness of the personnel, service, and product for the promotion process. Moreover, he also provided the importance of having a plan before embarking into a promotion.

 

IMPORTANCE OF SALES PROMOTION TO THE SUCCESS RETAILER

An American marketing academic, Philip Kotler (1967), estimated that even as short a time ago as 10 years the ratio of advertising expenditure to sales promotion spending was roughly 60:40. By 1997, the ratio had altered dramatically. Now, sales promotion is spending something in the region of 65–70% of the total. In real terms, sales promotion expenditure has been growing rapidly over the past 20 years. Furthermore, more proof of the importance of the function and versatility of sales promotion is forthcoming in the oft-quoted Harris International Marketing Marketing Week (1987) survey, which showed that well over 70% of the population, had participated in competitions or games relating to products or services. Over a third had done so within the last month, over 40% had sent off a packet top or token for a free gift within the last four weeks, and an amazing 54% had used a money-off coupon. Although this survey is dated 1986, there is little reason to suggest that participation in any form of sales promotion has in any way diminished, even though the style or some of the techniques employed today may have different emphases placed upon them. Indeed, if the above figures are taken together, then as many as 60% of the population actively participates in some form of promotional activity in any one-month. This makes sales promotion one of the biggest leisure activities or pastimes in current times.

 

On the other hand, to put sales promotion into even sharper focus as to its importance, it is as extensive as visiting a pub once a month or more. From these comparisons, one can therefore gauge the size and extent of promotional activity. (Horchover, 1967) It is almost impossible to put a figure on the exact amount that businesses and other organizations spend because the task falls down when deciding on definitions of sales promotion and ways of measuring the physical amounts. Sales promotion, however, does not lend itself to any easy way of estimating its annual expenditure, as it extends to such a wide variety of activities. This means that every organization, whether trading for profit or “not for profit,” will need to study, understand, create, and implement sales promotion in all its diverse facets if they are to stay around, let alone succeed, in such a tough business environment.   

METHODOLOGY

This study will employ the qualitative method of research. Particularly, the researcher shall use the case study approach in analyzing the sales promotion of Gap Inc.

The case study is an ideal methodology when a holistic, in-depth investigation is needed (Feagin, Orum, & Sjoberg, 1991). Case studies have been used in varied investigations, particularly in sociological studies, but increasingly, in instruction. Yin, Stake, and others who have wide experience in this methodology have developed robust procedures. When these procedures are followed, the researcher will be following methods as well developed and tested as any in the scientific field. Whether the study is experimental or quasi-experimental, the data collection and analysis methods are known to hide some details (Stake, 1995). Case studies, on the other hand, are designed to bring out the details from the viewpoint of the participants by using multiple sources of data. Moreover, Yin (1993) has identified some specific types of case studies: Exploratory, Explanatory, and Descriptive. Likewise, Stake (1995) included three others: Intrinsic - when the researcher has an interest in the case; Instrumental - when the case is used to understand more than what is obvious to the observer; Collective - when a group of cases is studied. Exploratory cases are sometimes considered as a prelude to social research. Explanatory case studies may be used for doing causal investigations. Descriptive cases require a descriptive theory to be developed before starting the project. Pyecha (1988) used this methodology in a special education study, using a pattern-matching procedure. In all of the above types of case studies, there can be single-case or multiple-case applications.

The unit of analysis is a critical factor in the case study. It is typically a system of action rather than an individual or group of individuals. Case studies tend to be selective, focusing on one or two issues that are fundamental to understanding the system being examined. Case studies are multi-perspectival analyses. This means that the researcher considers not just the voice and perspective of the actors, but also of the relevant groups of actors and the interaction between them. This one aspect is a salient point in the characteristic that case studies possess. They give a voice to the powerless and voiceless. When sociological investigations present many studies of the homeless and powerless, they do so from the viewpoint of the "elite" (Feagin, Orum, & Sjoberg, 1991).

The researcher thus will rely on experience and the literature to present the evidence in various ways, using various interpretations. This becomes necessary because statistical analysis is not necessarily used in all case studies.

 

Sources

 

Kyle, Bobette. (2000) So you think marketing has changed. Available: http://www.websitemarketingplan.com/Arts/MktgChange.htm. [Accessed 01/02/03]

 

McNamara, Carter. (1999) Basic Definitions: advertising, marketing, promotion, public relations and publicity, and sales. The Management Assistance Program for Nonprofits. St. Paul, Minnesota.

 

 

Knight, Christopher. (2003) Top 7 successful ingredients for a successful sales promotion. Available: http://www.christopher-knight.com/resources/articles/sales-selling-advice/042998.html. [Accessed 04/02/03]

 

Horchover, David. (2002) Sales Promotion. Express Exec: Marketing Vol. 04.06. Capstone Publishing

 

Kotler, P. (1967) Marketing Management: Analysis, planning and control, 9th ed. Prentice Hall, Englewood Cliffs, NJ.

 

Marketing Week, February 20, 1987

 

Feagin, J., Orum, A., & Sjoberg, G. (Eds.). (1991). A case for case study. Chapel Hill, NC: University of North Carolina Press.

 

Stake, R. (1995). The art of case research. Newbury Park, CA: Sage Publications.

 

Yin, R. (1993). Applications of case study research. Newbury Park, CA: Sage Publishing

 

Pyecha, J. (1988). A case study of the application of noncategorical special education in two states. Chapel Hill, NC: Research Triangle Institute.

 

On Gap Inc. Retail Stores. Available: http://artsweb.uwaterloo.ca/~ehlaw/gap.html. [Accessed 04/01/03

 

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