- June 8th, 2015
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The New Force at Old Navy: Four Loyalty Lessons from a Retail Revival
Like a smattering of rhinestones on a pair of skinny jeans, Old Navy has emerged as the unexpected sparkle in Gap Inc.’s performance these days. And while the low-cost retailer’s turnaround story is rich in messaging about merchandising, it is equally stocked with lessons in loyalty marketing.
Sales at Old Navy rose to $1.4 billion in the fiscal first quarter, from $1.35 billion in the same period a year before. That compares with $735 million at Gap and $515 million at the higher-priced Banana Republic, each of which posted declining year-over-year sales. In 2014, the low-cost Old Navy rang up almost $6 billion in sales, nearly as much as Gap and Banana Republic combined.
“It’s a thing of beauty when Old Navy is firing on all cylinders and has now for several seasons running,” Gap CEO Art Peck said in a recent conference call. In a press release, Peck called Old Navy a top priority “as we focus on reestablishing the brand’s aesthetic to bring to life an optimistic and elevated sense of American style.”
Key to Old Navy’s elevation is the addition of retail executive Stefan Larsson, who had headed global sales at H&M before joining Old Navy three years ago. In a recent New York Times interview, he said that he saw in Old Navy an “unpolished diamond.”
The polish it needed came not only in the form of Old Navy’s new pixie pants and boldly patterned shift dresses; it came in the form of internal strategies that easily apply to marketing and brand loyalty. Below are four loyalty lessons I’ve learned from Old Navy’s turn:
Dress for the role you want
Perhaps his single-most important decision, Larsson aims for what Old Navy’s customers aspire to, not what they will settle for. This can be a dramatic change of philosophy for a low-cost brand, but as Larsson put it, the “clothes by the pound” approach snubs the desires of its shoppers. It’s akin to marketing sweaters as if they are potatoes.
When the customer is instead viewed in the context of her friends, family, job and activities (in other words, as something beyond a consumer), what she wears assumes a significantly different purpose. Most retailers have access to the kinds of information to help inform these decisions, though it does take an investment in talent to analyze and understand the data. Lots of schools are adding data analytics programs, and the experts they turn out may determine a company’s future.
Work the outfit, and outfit the workers
New recruits should come not only in the form of freshly educated data analysts, however. All employees, regardless of function, should be dedicated to the company’s mission, and that often requires pouring a new foundation. Fresh talent should be considered for all traditional functions, and all traditional functions should be reconsidered.
At Old Navy, this meant creating workspaces that are more inspirational and work approaches that ignored convention. In addition to having the office remodeled, Larsson refreshed the team, recruiting chief marketing officer Ivan Wicksteed, formerly of Coca-Cola, Converse and Cole Haan. He also brought in designers from Coach, North Face and Nike to usher in a sense of new style and ambition. The marketing takeaway is to ensure all staff, especially customer-facing members, are notified of change and encouraged to be an integral part of it. In this case, for example, employees can submit their own apparel ideas, or ask shoppers to share theirs.
Don’t hem us in
Old Navy is considered the low-priced sister in the Gap Inc. family, but no reason it should not borrow from the others. Larsson tapped into the Gap’s supply chain so his designers could more nimbly test different fabrics, prints and styles, even sizes. After trialing these new concepts in limited runs to determine their appeal, the most promising fashions are rolled out more broadly.
In marketing, we have a similar approach to leveraging an asset across multiple parts of a business to benefit the whole. Called enterprise loyalty, it entails sharing customer insights across all organizational departments (even finance, even HR) so each team can fashion the information to better serve its role, which ultimately is to create enhanced customer experiences.
Risk is the new black
In addition to switching from predictable pullovers and blue jeans to glossier, embellished fashions, Old Navy is investing in performance fabrics for active wear, serving the emerging proclivity among consumers to don athletic apparel for everyday tasks. These changes may not be what shoppers expect from Old Navy, and it may turn some off, but risk is a natural element of evolution.
We gain customer loyalty when we prove we are willing to dive in the deep end for them, and occasionally that may mean shaking up what we are known for. The key is shifting in step with our best customers, sometimes even suggesting the way, and using the information they share to keep in time with their preferences and aspirations.
Shoppers expect this today. They are intensely aware of their capacity in the retail relationship, and just how intimate – yet public, thanks to social media – their role has become. Like rhinestones in a bin at a clothing manufacturer, each person has the power to make the ordinary brand sparkle, but it is up to the retailer to provide the inspiration.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.