Brand Positioning and Market Segmentation

Brand positioning is an important strategy for achieving differential advantage.

Essentially, positioning reflects “the place” a product occupies in a market or segments. GAP
has a wide range of products that are reflected in multi-segments. Initially, as a specialty
clothing retailer, GAP segmented the market using price as the sole criterion. GAP
strategically decided to serve three major segments, which can be seen from price differences
among GAP’s three brands: Old Navy (discount/value), Gap (mid-price), and Banana
Republic (high-end). In the past decades GAP’s differential strategy worked successfully, and
this allowed GAP to enjoy phenomenon growth. Part of the success was clearly to due to
GAP’s ability to play on its brand names. As stated by Grant, “brand names and the
advertising that supports them are especially important as signals of quality and consistency”.
GAP brand names provide a guarantee by GAP to customers of the quality of GAP products.
Nevertheless, in the recent years competition intensified as new players also targets some of
the same market segments aimed by GAP brands. GAP’s major competitors included vast
array of companies from three market segments. In the discount/value market the main
competitor is Wal-Mart, who is capturing shares in the apparel market as it is striving to
target more fashion-conscious consumers. In the mid-priced market, the major players that
Gap faces are Abercrombie & Fitch and American Eagles Outfitters. All three brands target
the same age group. Thirdly, in the high-end apparel segments, J. Crew and Urban Outfitters
are Banana Republic’s biggest opponents. Based on the information, a positioning map can
be constructed to show GAP’s current position relative to its competitors. EXHIBT is a
diagram that shows GAP’s three brands and its competitors in terms of the price and the
targeted age group.
Beside the three original market segments, GAP also explored a new segment: more
mature group of customers, who were underserved before. The creation of Forth & Towne
allows GAP to transfer brand equity from the three original brands to this new brand. In
addition, GAP would also be able to relate its previous brands’ experiences to the new brand
in order to increase the chances of success. However, the ability of Forth & Towne to
contribute to the overall financial condition of GAP is still questionable.

Brand Extension

Brand extensions refer to the use of successful brand name to launch a new or modified
product in a same broad market. Successful brands help a company to enter new product
categories more easily. GAP broadened its focus by introducing brand extension for different
product lines. For instance, GAP developed GAPKid, babyGAP, GAPBody, GAPMaternity,
GAPAccessories, and GAPMen. Essentially, GAP wants to capitalize on its brand equity in
order to capture more shares in the apparel industry. Brand extension can also be considered
as GAP strategy to diversify. The intense competitions lead to a limited room for growth
which increases GAP’s business risk. By putting “eggs in different baskets”, GAP effectively
reduces the amount of business risk.
Old Navy
Target Segments

Selling Points

Opportunities

Threats

Gap

Target Segments
Although people of various ages shops at Gap, but Gap specifically targets 18- to 30-year-
old. The sub-brands of Gap also targets shoppers for shop for intimate apparels, babies, and
kids.
Selling Points
Gap products include modern and stylish wardrobes for work or going and casual weekend
wear. It appealed to people who want to have sense of modern fashion.
Opportunities
Gap has competent people in both of its management and design team. They all have strong
business experience prior to joining Gap. This increases the likelihood that the two teams
would lead Gap into the right direction. The redesigning of stores has a favorable impact on
customers’ shopping experience, which can ultimately maximize sales. China served as a
both demand of supply market for Gap, which also true for the other two brands. The
international market is risky as was shown in Gap’s exit of the German market, but at the
same time it is rewarding. If Gap is able to capture the opportunities in China, it just opened
the door for huge growth.
Threats
Continuous research and customer surveys are needed in order to keep pace with the apparel
industry. Customers feedback to Gap’s offering are really important. Gap is risking losing
businesses to competitors if it ignores customer feedbacks and insights. Also, maintaining
Gap’s identity can also be an issue as some people believed that Old Navy was cannibalizing
Gap. If customers see no difference between Gap and Old Navy, they would be indifferent
between two brands and simply buy the cheaper one. In that case maintaining separate brand
would be a complete waste.