Now there’s a snippet of advice you will rarely hear from an ad agency or marketing consultant. However, that’s just what Gap, that historically ubiquitous purveyor or tragically hip TV advertising (here’s a fun spoof ), has done.
Few brands invested as heavily in television and print advertising as Gap. According to Ad Age , "Marketing expenditure at Gap Inc. was trimmed 18% during the quarter, driven by the absence of TV ads for the Gap brand, company executives said. That contributed to a 40% jump in profits at Gap Inc., compared to the same period a year ago."
What’s behind this shift? For one thing, the economy. In these shaky times, Gap found that aggressive brand advertising was not driving as much foot traffic. Instead, they shifted their marketing focus on capturing revenue in-store via merchandising to the folks who were already moving through their aisles.
"It’s a waste of money [for the Gap brand to advertise right now]," said retail analyst Jennifer Black. "In this kind of an economic environment, traffic is slow anyway, and there’s so much competition with advertising. … If there was a time for them to do this, it’s not that bad of a time. You really want to yell and shout and scream about the product when it’s really fantastic."
Which leads us to the second reason Gap pulled back: their brand is well-known, but suffering. Fashion brands are notoriously fickle, and the Gap has been limping for a while now. Why blow tons of advertising dollars until the brand is fixed?
Note that during this time, Gap’s revenue has declined while profits went up. There is a clear trade-off. Gap is not building for the future with this strategy, it is simply watching the bottom line. Is this smart for any company in difficult economic times, or for those facing financial pressure?
Not necessarily, but it is worth summarizing the lessons from Gap’s experience:
- If you drop advertising, prepare to face a drop in new customers and overall revenue.
- Cutting advertising will boost profit, but probably only in the short-term.
- Don’t burn advertising dollars if your brand and value proposition are not effective; you’ll only be adding to the noise in the marketplace and will most likely not drive a healthy return on investment. (Note the retail consultant’s reference to "…there’s so much competition with advertising." If you’re brand can’t break through, you’re probably wasting major dollars.
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