WWD.com/retail-news/retail-features/using-intuition-instinct-to-turn-around-gap-593247/
government-trade
government-trade

Using Intuition and Instinct to Turn Around Gap

Paul Pressler has a story to tell. <BR><BR>The president and chief executive officer of Gap Inc. is using the lessons he learned during his 15 years at the Walt Disney Co. to return the specialty store chain to solid footing. <BR><BR>“Deep...

“Research reports and analytics have their place, but they’re not a replacement for understanding the story behind all the data.”— Paul Pressler, Gap Inc.

“Research reports and analytics have their place, but they’re not a replacement for understanding the story behind all the data.”— Paul Pressler, Gap Inc.

John Calabrese

Paul Pressler has a story to tell.

The president and chief executive officer of Gap Inc. is using the lessons he learned during his 15 years at the Walt Disney Co. to return the specialty store chain to solid footing.

“Deep emotional connections are made through consistent, integrated storytelling,” Pressler said in a keynote address. “Gaining insights can help you build a compelling story, one your customers can see themselves in, are passionate about and want to be part of. We need to bring more theatrics, storytelling and consistency [to retail]. If you can’t tell me what a Gap dinner party, Banana Republic car or Old Navy vacation looks like, then we haven’t built our stories.”

Pressler honed his skills at storytelling while running the parks and resorts for Disney, which he said was “maniacal about consistency.” He told a story about how founder Walt Disney once spied a truck making repairs at Frontierland. “Walt said to [the driver]: ‘There were no trucks on the frontier in 1820.’ For Walt, a maintenance truck in Frontierland broke the story.”

It was with this background that Pressler joined Gap in September 2002. Although his experience in apparel was limited — his father had spent 21 years with men’s retailer Robert Hall as head of store operations and Pressler often took weekly sales figures over the phone on Saturday nights — the first thing he did at Gap was to learn “everything I could about the company’s culture and our customers.”

He soon gleaned that Gap employees were “incredibly passionate and creative,” but their decisions “were based almost 100 percent on intuition — from design, to merchandising to marketing. Overall, we were really good at it. And when we had a miss, we quickly recovered.”

This strategy worked extremely well for Gap for the first 30 years, he added, but as the company grew — sales at the corporation’s 3,000-plus stores in fiscal 2003 were $15.9 billion — “the stakes became too high for a miss.”

“A bad day in my last job was disappointing a child who didn’t get to meet Cinderella. A bad day at Gap is the wrong color palette in a seasonal assortment resulting in $7 million in missed margin,” he said.

So in a move to get it right more often, Pressler said Gap needed to “better understand our customers and to use that knowledge as a filter when interpreting trends and developing ideas.”

He realized the spark of all new ideas starts with solid instincts and managers are still, in fact, hired for their intuition. “Their ability to make critical gut decisions depends on their innate taste, their experiences and their knowledge of our customers,” he said. “So today, when we make decisions at Gap, it’s a balance of 50 percent intuition and 50 percent consumer insight.”

This shift, however, didn’t happen overnight, since it meant that 150,000 employees needed to “have a shared understanding of who we are as a company and ultimately bringing more science and discipline to what we do. It’s not about stifling creativity; it’s about inspiring and informing it.”

And so Pressler set out to learn everything possible about what he calls “consumer insights. You’ll notice I use the term insights rather than research,” he said. “Research reports and analytics have their place, but they’re not a replacement for understanding the story behind all the data.”

Of course, not every insight is revolutionary, Pressler said. In fact, “many times they validate what you already know to be true.” But every once in a while, he said, you’ll stumble across an “insight that shatters an assumption or brings something to light that you’ve never considered.”

For example, he said, Gap Inc. recently launched a new cross-brand credit card that allows the holder to use one card at any of the company’s chains — Gap, Old Navy or Banana Republic. “At first, there was internal resistance to the idea based on concerns that cross-brand association would dilute the individual brand images and encourage cannibalization. Conventional wisdom is that it was taboo to combine our brands for just about anything.”

However, by asking customers what they thought of the idea, Pressler said Gap learned that “in the minds of our cardholders our brands are clearly separate. Most of them already shop across our brands and more than half of them feel the card adds value, making it easier for them to shop.”

Another way to gain insights is by using “front-line employees” who work with customers on a daily basis at the stores. Every quarter, Pressler said, the company receives over 80,000 comments from a pass-it-on survey program. As a result of these customer suggestions, significant changes have been instituted, Pressler said, citing the change to the sizing of Old Navy’s T-shirts. “We learned that different female customers wanted to wear our T-shirts — from teens to moms — but we can’t serve them all with a single fit.” In order to serve all customer types, Old Navy introduced different options including Easy Fit, the original Perfect Fit and the more trendy Tiny Fit, he said, and it has been a great success.

Research has also shown that “there’s a fine line between what people say they want and what they really want.” For example, Pressler said, Gap customers told the company they wanted to feel “individual and unique and not wear a uniform.” So Gap launched its “How Do You Wear It?” ad campaign for fall with Sarah Jessica Parker that encouraged personal style. However, when customers walked into the stores, “they didn’t ask our store associates for help creating their own look. Instead they all pointed to the Sarah Jessica Parker ad and all definitively said: ‘I want that.’”

Pressler also learned that “not all customers are created equal. We can’t rely on generalized understanding of consumer behavior.” First and foremost, he said, men and women have different motivations for shopping. “Most women view it as an emotional, social experience, and opportunity for self-improvement,” he said. “A majority of men are rationally motivated to shop. It’s all about the mission: stocking up and replacing.”

The company used these insights to focus its merchandising, visual merchandising, advertising and product flow specifically for each customer segment.

Pressler also learned the importance of “knowing when to evolve for your customer and when to stop.” Over the past two years, he said, the company has worked to more clearly differentiate its divisions by upgrading the “style aesthetic” at Gap, making Old Navy “a more formidable player in the value sector” and elevating the “designer expression” at Banana Republic.

When he joined the company, Pressler said, “our brands sat on top of one another. You could find khaki pants in all three [divisions] and our consumer told us price was the only differentiator. Today, there’s a tremendous difference.”

There’s also an opportunity to make the assortments more localized, he noted. “This has not been the hallmark for Gap, which has been one single presentation everywhere in the world.” However, the company is learning from its international experience “to contour and skew our assortments to local markets.” Today, Gap is successful in the U.K., France and Japan, but struggled in Germany, where the high cost of doing business caused the company to pull out.

The trick around the world is to “maintain relevance with your core customer without stretching the brand too far. Your customer will tell you when you get it wrong and when you get it right.”

A few years ago, Pressler said Gap customers informed the company they “felt abandoned when the product became too young and too trendy.” While the company realized it had “strayed too far from what Gap stood for, we also recognized that we can’t be all things to all people.” So it adjusted the assortment, but rather than “reposition the brand for older customers who grew up for Gap,” the company opted to create an entirely new division targeting women over the age of 35.

Nine to 10 test stores will open in the fall of 2005, he said, in two unidentified markets. Pressler said the company will undoubtedly “spend a year or two tinkering” with the concept “to create an experience that’s unique and different than what you see in the market.” The stores will be clustered in different real estate formats including traditional malls, strip malls and lifestyle centers.

At this new division, and all its store groups, Pressler said it’s essential to create an emotional connection with the customer. “This is really the Holy Grail,” he said. “For most people, buying clothes isn’t just a transaction, it’s a personal emotional experience. It’s one thing to collect reams of data from POS, it’s another to use the information in a way that adds value to customer experience.”

He pointed to Harrah’s casinos as a prime example. “If you use a loyalty card in their slot machine, don’t be surprised if Harrah’s sends you free show tickets for your birthday, or a dinner coupon after you’ve endured a significant loss at the blackjack table. They understand that those kinds of surprises make you feel lucky and casino owners know that customers who feel lucky will be back.”

He also singled out Harley Davidson. “Any customer who is passionate enough to tattoo the company logo on their body isn’t likely to shift their loyalty any time soon,” he said. “For Harley customers, it’s not about the motorcycle. It’s about the spirit of freedom and adventure and being part of a community.”

The same can be true for Gap, he said. Last spring, the company introduced khakis for men that didn’t wrinkle or stain. However, the advertising didn’t focus on these features. Instead, it showed the customer “wearing the pants in his everyday life. That’s the essence of the Gap brand, individuals being themselves. connected to culture and what’s current. While customers may not emotionally connect with the pants, they do connect with how they’re going to live their lives in them.”

He returned to the lessons he learned at the Disney theme parks. Although the company’s advertising initially focused on the rides offered at the parks, the ads did nothing to increase attendance. So Disney further explored what drove people to visit the parks and discovered that they came to “create family memories. And when Disney changed its advertising to focus on that broader experience, it struck an emotional chord.”

Another example was when the Disney cruise line stopped at Castaway Key, “a private island with white, sandy beaches and blue lagoons. When kids dug into the sand, they came up with handfuls of perfectly polished, unbroken seashells. We knew they would find these shells on the beach because we planted them there every week. You can bet every kid went home with a pocket full of shells, reminders of a lasting memory for their families.”

At Gap, he said, it’s not about being the country’s largest specialty apparel retailer or selling style to the masses. Instead, “we’re here to be of service to our customers and give them the confidence to express themselves,” he said.

And although Pressler acknowledged that he has been successful in turning around the company since joining, he said he hopes “we always stay in turnaround mode. There’s a pressing call to get things done in an urgent way, an exciting way. We think we have a better separation of our brands today. That’s our biggest focus.”