Marketing Elements Application by Old Navy - Essay Example

Table of Contents Executive Summary Product 2 Place 5 Promotion 8 Pricing 11 Recommendations 14 Executive Summary In the context of marketing, the four elements of; product, place, promotion and pricing are essential in facilitating effectiveness of sales strategies. This paper examines practical application of the essential elements by Old Navy, a North American clothing company. With respect to the element of product, the company offers clothing and footwear for a wide range of consumers. Typical products include clothing accessories for all occasions, including fashion and sports. As a means of enhancing the product aspects, the company blends techniques such as brand licensing and charitable sponsoring of events. With respect to the element of place, the company has retail stores in every place with target consumers. Proportional presence and wide availability in regional markets enables timely delivery of products to both domestic and international consumers. In order to provide the right product at the right time, Old Navy employs selective distribution techniques in linking producers with consumers through distribution facilities in consumer markets. Theoretically, effective promotion and pricing techniques are among the essential pillars of a strong marketing strategy. Old Navy employs promotional strategies like television advertisements, visual merchandisers, social media marketing and drive-by campaigns using celebrities. All these promotional approaches are meant to not only enhance publicity of the company’s products but also promote the fun side of shoppers’ experience. With respect to the element of pricing, Old Navy uses approaches like pricing flexibility, markups and psychological pricing techniques. These approaches are synchronized with sales-oriented objectives in order to enhance the competitive aspects of Old Navy. Aside from the aforementioned approaches, Old Navy also employs pricing incentives like discounting, credit card rewards and coupons. All pricing approaches are meant to entice customers into buying Old Navy products. Product Old Navy is a brand that has become well known throughout most of Northern America. As an apparel company, it serves the needs of its clients by providing quality goods at an affordable price. Such apparel consists of maternity clothing, footwear, and clothes for newborns. Not only does Old Navy focus on apparel, but it also offers a wide range of accessories for customers to choose from when shopping. The company, a subsidiary of Gap Inc., tries to stay at the forefront of current fashion trends in order to retain its customer’s interests. Old Navy’s goal is to make “current American fashion essentials accessible for every family” as according to their official company website. They achieve this by providing products at a low cost and by attracting customer of all age. Old Navy is just one of The Gap, Inc.’s multiple brands that provides customers comfortable apparel along with accessories. To attract customers, the company has structured their brands around different images to attract different personalities. From high fashion to basic casual wear, the company aims to provide clothing for any occasion. Pertaining to Old Navy, this is the brand meant to supply casual clothes at a conveniently low price. Essentially these products are convenience products as their low cost allow customers to purchase them without much thought as to material quality. The high diversity in clothing also allows for customers to pick products based on personal preference. From very light to dark colors, there are many opportunities for the customer to find an item tailored to them. This gives customers the chance to find products that they feel unique to them. Touching upon Old Navy’s commitment to remain a trendy place to shop, the company often expands their brand name onto other companies by using their graphics or licenses. For example, in 2013 Old Navy launched a collection that featured Disney’s iconic character, Mickey Mouse. Through partnerships such as these, Old Navy gains the ability to provide new apparel wear for younger as well as older generations who perhaps once enjoyed Disney or other related products. These collaborations allow the extending of their brand name into existing brands and attracting a vast target market. This has also proved to be very successful for them as customers have now become intrigued by vintage icons. Offering licensed products has become a staple in Old Navy’s brand strategy. Emilie Arel, senior director of brand licensing, mentions that Old Navy’s licensing model “has two main components: lifestyle and sports”. The company wishes to excite their customer base by providing numerous ways for buyers to express themselves. Ms. Arel further comments on Old Navy’s licensed products by saying, “we’re committed to offering...great fabric, great art, and great technique...”. The company’s goal is to provide the same level of comfort in the rest of their casual catalog, as well as incorporate stylish and approachable fashion with well-known symbols and logos. This use of licensing also brings new customers who might have never shopped at one of Old Navy’s main retail stores simply because of an item with a favorite image or name on it. The Old Navy brand aims to attract customers by following the latest trends in the fashion world. Other than simply using licensing as a form of customer attraction, the company also produces fashion lines to tailor to specific audiences. For example, there was a surge of interest in wearable technology that began around 2010. This trend resonated with younger generations as it was the next big thing for them. Following this trend came Old Navy as it introduced a brand new line of clothing in its “Techno World Collection”. This line was meant to “please any budget-conscious shopper...and appeal to gadget geeks of all ages…”. Therefore, Old Navy maintains that it provides families with affordable clothing as a solution to other more expensive brands. Old Navy has also partnered with organizations to bring products supporting numerous charities to their customers. One such partnership was with Susan G. Komen which resulted in the availability of products meant to promote awareness for breast cancer. Such products attract customers because of the idea that charities represent. The products provided for charitable causes are often labeled tee shirts along with small accessories. During the 2011 Susan G. Komen partnership, Old Navy offered complimentary pink flip flops when a donation was made by customers. Along with licensing deals, products for charitable causes have become an important staple in Old Navy’s line of fashion. After Old Navy redesigned their shopping experience, calling it the “New Old Navy”, the focus was shifted into attracting customers using a more “fun” form of merchandising. Stores now featured products that represent a fresher look than the company had used previously. Stores are now filled with brightly colored items that revolve around casual wear. Having a wide range of colors available to choose from when shopping gives Old Navy’s customers the ability to choose a product that is tailored to a specific message that they wish to communicate. The Old Navy brand is one that has received wide success both domestically and across U.S borders. The company has strived to provide a product at low costs to shoppers who are budget-conscious and enjoy the latest fashion trends. The company not only supplies traditional jeans and shirts but also shoes, sandals, and clothing for young children. This has helped create a brand the resonates strongly with families due to the wide range of options available. Place When looking from the marketing perspective of place, there are a lot of factors to take into consideration. As stated in the textbook, Basic Marketing: A Marketing Strategy Planning Approach, “Place is concerned with all the decisions involved in getting the “right” product for the target market’s Place. A product isn’t much good to a customer if it isn’t available when and where it’s wanted” (36). Due to this statement it is clear that the main factor in this section is the objective for place, which will lay out how to make a product available in the right amount and in the right location for the target customer. Old Navy is a continuously growing company that has over 1,000 locations worldwide. Many of the distribution centers where their merchandise is held can be found in the United States, Canada, China, Ireland, Italy, Japan, and the United Kingdom. Looking domestically, it is clear that Old Navy needs large distribution centers in order to move products to each location in a timely manner. Since Old Navy was created under GapInc. along with Banana Republic, Piperlime, Athleta, and Intermix, they share several large distribution facilities. One facility in particular is the Clayco Distribution Center in Fishkill, New York. Clayco does business with around 350 Old Navy stores focused in the northeastern region of the United States (Clayco). This is a large 2.5 million square foot distribution facility that works directly for Gap Inc. and the sub-companies, which fall under Gap Inc.Looking at the southern region of the United States, the Gallatin campus is known to be Gap Incorporation’s largest distribution facility center and has been in operation for around 15 years. There is also a large distribution center in Fresno, California,that facilitates the deliveries for Gap Inc. stores throughout the Western Coast. Old Navy manufacturers are located mostly in Asia, but can also be found in North America, Europe, Middle East, and South America. This company’s transportation method used is to import their products from these locations and have it sent to their distribution centers in order to be separated and sent out to the many retail stores surrounding that area. Doing business in other countries can prove problematic when dealing with wages and working conditions. Gap Inc. has always tried to ensure that ethical issues that arise are addressed both in the U.S. and abroad. An example of this was when they hired fire chiefs to conduct inspections of the factories in the Middle East where a warehouse fire broke out. Old Navy is a clothing store that can always be found. There are multiple types of Old Navy stores as well as a variety of locations types that can be reached by the company’s target market. Old Navy stores can be found in countless shopping malls all over the United States in states such as California, Alabama, Oklahoma, Oregon, and Florida. These stores also come in the form of stand-alone buildings where they have few to zero restrictions, such as availability in parking and a decrease in cost per square foot. In addition to physical locations, Old Navy also has a large division online that spans to 80 countries worldwide with the ability for customers to indicate how they want to receive their products. The choices available to customers range from shipping within the store, ordering in the store, and reserving the item for pickup at a later time. These options also give Old Navy customers an element of customer service and convenience that keeps them loyal. Since Old Navy is specific in how they sell their products to the public, the type of marketing exposure used is selective distribution. Distribution through this company focuses on selling exclusively through their stores and their website. Though Old Navy is exclusive in that they only sell through their own store, they cannot be classified as an exclusive distribution company, because they do not sell in a particular geographic area. Old Navy has hundreds of stores all over the world where they are able to connect with their target market in different geographical locations. From conducting business as a selective distribution company, Old Navy is able to receive some of the advantages that companies get from doing business as an exclusive distribution company, such as being able to control prices. Another advantage to companies conducting business through selective distribution is that they have the option of a widespread audience since they do not have a particular geographic area. Logistics are important to the Gap Inc., especially to Old Navy in particular. In order to keep inventory running smoothly as well as keeping prices as low as possible, Old Navy and Gap Inc. as a whole continuously makes sure to identify the “slow moving merchandise” as well as use markdowns in order to keep the flow of inventory moving (Wikiinvest.com). Gap Inc. is proactive in their logistics because it is important to have the right merchandise at the exact location it is needed. A situation in February of this year made it difficult for Old Navy to estimate their inventory due to an unbalance of abnormal cold weather. Even though inventory management was struggling at this time, it turned out to be a great learning experience and helped the company to improve how to better gage and adjust for unforeseen situation such a whether changes. As stated on Forbes.com, as long as the Gap Inc. is able to optimize “its inventory levels, it will be better positioned to deliver trend- and season-relevant merchandise, which will attract customers…” Due to the importance of logistics, the company has put in place as part of their management style a component to track the flow of merchandise in order to make serious decisions on increasing or decreasing products on hand. With this knowledge, profits increase because unnecessary products don’t sit on shelves or in distribution centers. Old Navy is a strong company that continues to grow due to their ability to have the right products at the right location, and at the right time. Without a collaboration between stores and distribution centers, Old Navy would be unable to meet the needs of their customers, which is especially why logistics is an important element within a company. Promotion Old Navy boasts itself on creating a fun and happy shopping environment for their consumers and expect their employees to help create this atmosphere. Sales representatives are chosen from a wide range of applicants. There are certain qualifications that Old Navy requires of their sales people. Depending on your position at the store, you might be required to lift a certain amount of weight, or work during specific hours. Old Navy divides up their sales force into a few different positions so those individualscan excel at each position instead of being mediocre at a specific one. For example, there are Stock Specialists, which are in charge of making sure that every size and every color of all the styles they carry are stocked and ready to be sold. There are also Visual Merchandisers who are in charge of product placement throughout the store and theup keep of the “Old Navy Look”. Another sales position at Old Navy is the “Sellebrity.” According to Gap Inc., which owns Old Navy, “they are the are in charge of connecting with the shoppers and creating an unforgettable buying experience for them.” A part of this experience includes the sales Old Navy offers to their customers in orderto draw them in. Old Navy has had great success in the past using television to promote their brand, but are now looking to expand their marketing campaign to online videos, according to Old Navy CMO Ivan Wicksteed (Rodriguez, 2014, p. 1). This past back-to-school season, Old Navy created, among other things, an online music video titled “Unlimited.” With more and more people using the Internet for everything, including watching television, playing games, and listening to music, the Internet seems to be a great new path for Old Navy. This campaign is focusing mainly on playing off the anxiety of the back-to-school season, which for most kids and parents means new clothing. Old Navy has also launched a big social media campaign on Facebook, Instagram, Twitter and other social media channels. These types of campaigns are specifically geared towards the younger generation who uses social media pretty much all day every day. Their Chief Marketing Officer described to the media that Old Navy is in the process of transitioning itself from focusing most of its money on television and radio advertising to social media advertising (Levy and Weitz, 2008, p. 2) Sales and promotions are a largepart of Old Navy’s continued success. They have a wide variety of promotions and sales that either continueall year, or are seasonal, depending on the specific sale. Old Navy also has discounts if you buy online, seasonal sales in stores, and has also put out a weekly ad with miscellaneous storewide discounts or clearances. With all of these ways to take advantage of their promotions, Old Navy makes itself a great choice for consumers who are looking to save a little money while still getting good quality clothing. These promotions vary throughout the year, but are typically a certain percentage off of whatever you buy. It could range between 5% off to 50% off in stores depending on the time of year and the sale that aregoing on. The savings onlinebecome even greater sinceit is so much easier for Old Navy to send a specific item directly to your door from the warehouse than to send bulk items tothe store. There are alsospecials online for some items that are 60% off. Old Navy, in recent years, has made an effort to boost its publicity by enlisting the help of celebrities such asJimmy Kimmel and Amy Poehler for their advertising campaigns (Daily Mail Reporter, 2014, p. 2). On June 28th, 2014, Old Navy had a sale that docked down the price of their flip-flops to one dollar per pair. Jimmy Kimmel and his writers were chosen to write and perform a skit on the Tonight Show With Jimmy Kimmel that would use the flip-flops in a “unique way” according to a spokeswoman for Old Navy. As a part of the campaign, Old Navy is placing flip flop vending machines in Los Angeles and New York. This makes them accessible to their customers once they have tweeted about it, which increased Old Navy’s tweets by around nine thousand (Kirkpatrick, 2014, p. 1). Having famous celebrities help with marketing strengthens Old Navy’sadvertising campaign so drasticallythat they are evenwilling to spend a great amount of money to hire them.It is worth it for Old Navyto pay a high pricein order togain five or even ten thousand new customers. Old Navy has always had a wide variety of target consumers, but in the past few years, one category has stood out above others. Women rangingin their twenties seem to be the group that visits Old Navy and Old Navy Online most frequently. The company has in recent years geared more advertising campaigns, sales and clothing design to satisfy the needs of women in this age groupover any other category of consumers that they may target. By doing this, Old Navy gives itself the ability to focus its resources and capital on designing more outfits for the target demographic. Pricing Old Navy is a clothing store operated and owned by GAP Company. Both the Old Navy line and the GAP line are dedicated to lower price points of the clothing market. Old Navy is able to achieve this in a variety of ways. For instance, they use different price objectives, markups, pricing flexibility, penetration pricing and psychological pricing techniques. For pricing objectives, Old Navy uses a profit-oriented style. This means they “seek to get as much profit as possible” (Perreault, 2011). Due to Old Navy’s low prices they can often expand the market size better than a company with a high priced product. In addition, competing with other lower priced clothing companies will help keep prices low while keeping profits high. Old Navy would like a faster return on their investment. (Forbes 2011) Using the profit-oriented style is better for Old Navy as opposed to using a sales oriented objective; this is something that wants higher dollar amounts without looking at profit. Since Old Navy is a lower priced, high volume turnover company, being sales oriented would not help them much at all. A markup is, “a dollar amount added to the cost of products to get the selling price.” (Perreault 2011) Old Navy usually likes to mark things down instead of increasing prices many times, for instance, when a new season approaches and they want to get rid of the current inventory. Holding onto merchandise too long might cost companies more since they cannot replace the old merchandise with new merchandise due to storage. Reducing markups can be more beneficial in the long run by selling more units which causes the company to look more profitable at the end of a quarter. The stockturn rate is an important concept for Old Navy because it means, “the number of times the average inventory is sold in a year” (Perreault 2011). This is better for Old Navy since it shows that they have a higher turnover rate, which also lowers costs for their holding inventory. There are a few types of pricing flexibility that Old Navy considers. One is called the one-price policy, which means all customers pay the same price wherever, whenever. It makes pricing for Old Navy easier, but may deter customers because of high or unchanging price points. The method that Old Navy uses is called flexible-price policy. This means that they can give customers a price break, for example weekly specials or discounts. Old Navy uses a lot of channels in order to get their name out in the public such as weekly ads that come with newspapers. Even if Old Navy lowered their price a little, they could still get a lot of profit with lower prices and high volume sales. Dynamic pricing is another strategy Old Navy uses to change prices in order to increase profit. Dynamic pricing “offers products at a price that changes according to the level of demand, the type of customer, or the state of the weather” (Perreault 2011). An example of dynamic pricing could be during seasonal changes.” Seasonal changes are the biggest times when inventory goes into a completely different style for clothing stores, and Old Navy is the same. When it goes from summer to fall, styles rapidly change and Old Navy has to do something with the leftover summer clothing. This is when they lower the price point and encourage people to save for next year by buying now, which can also help people save money by bringing in fall apparel earlier to give more discounts. A big aspect of Old Navy’s pricing is called penetration pricing. Penetration pricing is when a company “gets volume at a low price” (Perreault 2011). This means that Old Navy wants to sell to everyone using one low price. Something else that is effective for Old Navy is the use of all their coupons. Old Navy offers consumers many coupons through ads and online coupons. The company understands that even with their low price points they can still offer more discounts in order to entice customers. Incentives are a big part of marketing your prices, and Old Navy does this well. They use methods such as coupons, sales offers, and rewards through credit cards. Coupons and sales offers can be found online, or through the local newspaper. These show what items are hot and what is on sale that particular week. Credit card rewards are big too, and could be one of the main reasons people would chose to shop at Old Navy frequently. For signing up with the Old Navy credit card, customers get massive bonus points at start up to buy more merchandise, and get rewards points for every purchase. (Old Navy 2014) When you sign up for the card at purchase, customers even get a 10% off discount. (Old Navy 2014) Old Navy offers this card as being free to check your balance online, make payments, and see what rewards customers have earned. Another incentive is how Old Navy partners with other credit card companies outside their own to still offer Old Navy rewards. Customers can earn points off their other cards by shopping at Old Navy, and can get gift cards to redeem at Old Navy locations. (USAA 2014) Recommendations Kirkpatrick, R. (2014, August 6). Old Navy Vending Machine Offers Flip-Flops For Tweets - Event Marketer. Retrieved October 29, 2014, from http://www.eventmarketer.com/article/old-navy-vending-machine-dispenses-free-flip-flops-tweets/ Levy, M., &Weitz, B. (2008, April 1). Retailing Management Newsletter. Retrieved October 29, 2014, from https://warrington.ufl.edu/centers/retailcenter/docs/RetailManagement_2008Apr.pdf Reporter, D. (2014, June 25). Can Jimmy Kimmel make flip-flops funny? Late night host teams up with Old Navy to give away summer shoes in on-air skit . Retrieved October 28, 2014, from http://www.dailymail.co.uk/femail/article-2669487/Can-Jimmy-Kimmel-make-flip-flops-funny-Late-night-host-teams-Old-Navy-away-summer-shoes-air-skit.html Rodriguez, A. (2014, August 11). OLD NAVY EASES RELIANCE ON TV: CMO Wicksteed broadens retailers horizons, puts online music video at center of back-to-school campaign. Retrieved November 1, 2014, from http://search.proquest.com.libproxy.csun.edu/docview/1553183593/abstract?accountid=7285 Old navy, LLC - company capsule. (2014). (). Basingstoke: Progressive Digital Media. Retrieved from http://search.proquest.com/docview/1552739229?accountid=7285 Old navy unveils funnovationsinc. - a magical tour of where the brands fun and quirky ideas are born and tested. (2011, Nov 02). PR Newswire Retrieved fromhttp://search.proquest.com/docview/901326212?accountid=7285 Old navy launches "mickey through the decades" vintage tee collection. (2013, Jul 08). PR Newswire Retrieved fromhttp://search.proquest.com/docview/1398441772?accountid=7285 The New OLD NAVY.(2011). Display & Design Ideas, 23(5), 22-25. Arel, E. (2011). OLD NAVY SETS THE BAR. License! Global, 14(1), 36. Old navy introduces techno world collection. (2011). Entertainment Close - Up, Retrieved from http://search.proquest.com/docview/909095547?accountid=7285 Old navy partners with susan G. komen for the cure in the fight against breast cancer. (2011). 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