Problems at The Gap

With The Gap in brand freefall it is ironic that the reasons for its current problems are related to the original reasons for its success in the 70's.

First comes the Christmas shopping. Then the January sales. And now we get excuses from all the brands that underperformed during this all-important festive period.

Chief executives will blame anything from global warming to the price of oil to the popularity of flat-screen TVs for their seasonal failure to sell more goods. Anything, that is, other than the real reason: their marketing sucked.

Only the brands that are really in trouble actually admit the truth. At Gap, chief executive Paul Pressler confessed that he was 'deeply disappointed' with another dismal trading period and laid the blame squarely on problems with the brand. Pressler went on to announce an immediate review of the company's brand strategy.

The problem for Pressler is that he has already done this. Barely six months ago, Gap tried to revitalise its brand under the slogan 'Back to basics'. Stores were updated, windows redesigned, product design revisited and the ad campaign refreshed.

In fact, Pressler has done almost everything he can to fix Gap's gradually declining fortunes over the past two years. Working with its agency, Leo Burnett USA, the firm has conducted extensive focus-group and survey research to understand the market's needs. Based on this, it has segmented the market into behavioural segments including 'updated classic' and 'style-conscious' shoppers. There have been widespread changes in store layout and product design. It's an almost textbook approach. So why does the brand continue to decline?

Gap has failed in one of the most fundamental but often overlooked stages in the marketing process: targeting. The purpose of segmenting a market is not to then target all the segments. Targeting means focusing on a few customers and rejecting the rest. Visit any Gap store and it becomes clear that the brand is built on an impossible premise: to be all things to all people all the time. The result is not successful sales figures and market domination; it's the opposite.

To sell more, a retailer almost always has to target fewer people. That is a gutsy move for any company, but especially one with declining traffic and stockpiles of excess stock. Nonetheless, it is a marketing imperative.

Ironically, this was the founding principle of Gap when it was created in 1969. Co-founder Donald Fisher identified a new generation of consumers who were not being given what they wanted by the older generation who ran the clothing stores. Gap, which was named after the gulf between these demographic groups, built its initial success on very clearly targeting one specific market segment while excluding another.

It is also a guiding principle for many of Gap's more successful rivals today. Abercrombie & Fitch has gradually supplanted Gap as a destination store for young Americans in search of casual clothing. When chief executive Mike Jeffries was asked about A&F's target customers, he was brutally clear. 'In every school there are the cool and popular kids, and then there are the not-so-cool kids,' he said. 'We go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don't belong (in our clothes), and they can't belong. Are we exclusionary? Absolutely.'

It may not be the most socially inclusive statement, but it is absolutely the right marketing message. Jeffries was almost certainly referring to Gap when he pointed out that there was no alternative to this kind of focus. 'Companies that are in trouble are trying to target everybody: young, old, fat, skinny,' he said. 'Then you become totally vanilla. You don't alienate anybody, but you don't excite anybody, either.'

The Black Amex & The Black BA Card

Ultimate exclusivity means customers no even knowing that you exist. Amex gets it wrong. British Airways gets it right.

Can you name the iconic luxury brand that began life as an urban legend and only later became a reality?

The answer is the American Express Centurion card or, to use its more colloquial title, the Black Amex. During the 90s, a rumour spread about a fabled black Amex card that had an unlimited credit limit and was available only to an ultra-rich, uber-exclusive membership. The rumour became so prevalent and powerful that American Express eventually decided to capitalise on it. In 1999, it launched the Centurion card, by invitation only, to its highest-spending and biggest-earning customers.

To qualify for the Black Amex, customers must spend about £100,000 a year on their existing Amex, have a perfect credit record and travel extensively. If the member is offered the card and agrees to pay the annual £650 fee, they receive the titanium card in a mahogany box. The additional benefits of the Black Amex are almost as legendary as the card itself. Aside from an unlimited credit limit, cardholders can enjoy a complimentary business-class ticket for their partner whenever they fly, a personal 24-hour concierge service, free personal shoppers in many of the world's major department stores and additional free nights of accommodation at top hotels - simply by paying with their cool black card.

The card has, not surprisingly, attracted a stellar membership. Celebrities such as Nelly, Jay-Z and Paris Hilton have all recently name-checked the card in music and film. Kanye West even included his experiences with the card in a recent song: 'She was like, "Oh my God, is that a black card?" I turned around and replied "Why yes, but I prefer the term African American Express"'.

Most marketers can only dream of this kind of celebrity endorsement and buzz. But the Black Amex's ongoing success depends on it maintaining its ultra-exclusive membership and secretive profile. If the card becomes ubiquitous, it risks losing its target market and the partner companies that offer freebies in return for access to the world's elite customers.

Amex has not helped the situation. A direct marketing blunder last year saw a top-secret mailing sent to 250,000 regular Amex customers, rather than the 10,000 Black Card holders it was intended for. Amex has also got sloppy with its websites, with many openly revealing the existence of the card. Worse still, it recently featured in the most mass-marketing vehicle of all - a Bond product placement. When Daniel Craig's Bond checks into The Ocean Club in Casino Royale he pays for his room with his Black card.

The greatest strength of the card, initially at least, was that most people did not know it existed. It does not get any more exclusive than that.

Take the British Airways Black Card, for example. BA has three tiers in its frequent-flyer programme: blue, silver and gold. But above gold, and in almost complete secrecy, there is also a black card, reserved for the 200 customers BA deems to have 'status'.

It is so secret even some of BAs staff don't recognise it. See this story from an observer in a BA lounge

http://www.flyertalk.com/forum/archive/index.php/t-32612.html 

 If you are the chief executive of a firm whose employees fly a lot with BA, a key member of parliament or a super-celebrity, the card is yours. Owning the BA black card means you no longer need to worry about customs or seat reservations; you will be whisked straight to First Class. If you are running a little late, BA can hold the plane back for you.

Unlike Amex's efforts, BA has got it right. A card with exclusive benefits, available to only the select few, and an amazingly secretive service that no one in the general market even knows about. Oops.