Demand Analysis Market Segmentation Term Paper

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Mark Ames, an expatriate living in Moscow, Russia, had only heard of Old Navy from friends. "The Old Navy store chain is one of those cultural events that I missed out on, having spent almost all of the 1990s abroad," he claimed. However, upon visiting one of the stores for the first time in January of 2003, he was able to percieve the class differences at play between Old Navy, the Gap, and Banana Republic, the sister retail clothing companies that are owned by Old Navy's parent company, Gap Incorporated. These three companies, in addition to Gap Kids and Baby Gap, provide an excellent example of market segmentation.

The old saying goes that 'the clothes make the man,' and our concept of 'materialism' is most expressively represented in the material, or fabric, that we chose to wear. Although internalized demographic notions affect most of the patterns of consumption that are analytically distinguishable, no market except maybe housing reflects self-identification based on internalized forms of class-consciousness more than clothing. From the Spartan work clothes of the working poor to the casual elegance of the upper middle class to the high fashion of the latest designers from Italy and around the world, people define themselves by the way that they dress. Rather than micro-individuating clothing styles, however, buyers tend to select clothes based on what is considered desirable in the community in which they live. Even perceived miscreants and social out-liars such as punks and goths follow discernible mandates in terms of attire; most consumers will develop a sense of brand loyalty with respect to clothes if given a chance.

As Ames puts it, Gap Inc.'s strategy has been to "make middle-class clothes available to the lower classes at Old Navy; solid middle to upper-middle class-type clothes at struggling middle-class prices at The Gap; and yuppie/upper-middle-class-level clothing at solid middle-class prices at its "high-end" store, Banana Republic." Even conservative analysts agree that this strategy has met with a great deal of success.

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IWon.com's market profile of Gap Inc. describes the strategy succintly: "Rather than integrating the various customers, income levels and lifestyles that the Gap, Banana Republic and Old Navy collectively target, each has thrived as a distinct entity - while avoiding the constant rumor of a sell-off." This allows Gap, Inc. To reach out to the entire retail clothing industry rather than tying itself to one demographic; iWon describes these as "three sales avenues, three growth strategies and three different audiences; putting Gap Inc. In equal competition with the sophisticated style of Ann Taylor and the bargain clothing at J.C. Penney." Iwon goes on to say, "The Company now operates over 3,500 stores worldwide, and has crept into nearly every apparel niche. Its signature chain store occupies the tasteful "middle market," and may be found in no less than 1,767 North American locations; 393 in Canada, Europe, and Japan."

According to Parija Bhatnagar of CNN, A breakdown of the company's sales results for last year shows that for the first time sales at its Old Navy chain -- offering trendy, affordable items such as cotton T-shirts for $10 -- outpaced those at Gap, which was struggling to define its product mix." Old Navy is Gap, Inc.'s most profitable division, with sales of 5.8 billion in 2002, compared with nearly 5.1 billion in sales for Gap Domestic, 1.7 billion in sales for Gap International, and 1.9 billion for Banana Republic. As a division that targets a lower income group that consists of, as Ames says, lower or working class people that, in Ames' words, allow the division's target demographic to 'purchase something like a middle-class life at a lower-middle-class' price. When Ames observed Old Navy shoppers at the retail giant's outlet in Santa Monica, California, he observed that "The store that day was full, but I was the only white person. Mostly young Latino couples and a few blacks." Other typical Old Navy customers include students and young people living.....

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