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The Gap Inc., its core Gap stores facing the challenges of maturity, plans a major marketing facelift.

Ad spending next year will be increasing across the company's three main retail brands-The Gap, Banana Republic and Old Navy-with wider use of TV and first-ever use of new media for The Gap stores.

While marketing for The Gap and GapKids stores and BabyGap brand continues to be handled in-house, Old Navy is considering adding outside agency help and Banana Republic is near a decision on a new agency.


Once reliant on traffic drawn by department store anchors and its store window displays, The Gap is telling Wall Street analysts it will increase its ad budget substantially next year. The goal is to turn its specialty shops into destination stores.

The company didn't disclose 1996 ad spending, but it has been climbing in recent years: from $38 million in 1993 to $64 million in '95. Even with the increase, Gap ad spending pales beside the 10% of sales typical for many marketers. The Gap Inc. sales hit $4.4 billion in 1995.


VP-Marketing Michael McCadden-named last summer as marketing chief for The Gap and GapKids stores and BabyGap-is accelerating their move into TV, new media and other venues.

"We are in a re-evaluation mode on everything," Mr. McCadden said. "I'm very open to new ideas. I would love to partner with other vendors beyond the media world

. . . companies with new ideas, new formats and new ways of doing things."

But The Gap stores themselves will remain handled in-house.

The Gap has focused its advertising on outdoor and print for more than a dozen years. In 1991, Atlas Citron Haligman & Bedecarre, San Francisco (now Citron Haligman Bedecarre), produced a holiday spot tagged "For every generation, a Gap," which has been rerun intermittently.

From that spot, Mr. McCadden's team has evolved a new tagline that begins with the word "every" followed by a product or statement such as "age" or "stage" and then "only Gap."


Already, Mr. McCadden is moving The Gap stores deeper into TV with the first spots for BabyGap scheduled to break nationally over Thanksgiving. He's also considering creative for a TV campaign for the core Gap stores that could break as early as the first quarter of next year.

Under Mr. McCadden, The Gap stores are reassessing their print media mix and doubling the number of magazine executions from 25 to 50. The Gap is also broadening its New York Times Magazine campaign, described by one retail analyst as being more aimed at Wall Street than consumers. The retailer is adding books such as Surfer and Vibe and even the back of DC Comic books to target what Mr. McCadden calls "a reach person."

The Gap this fall also will launch its first Web site, a 200-page effort done in-house.

Under a corporate marketing reorganization plan, Mr. McCadden has assumed responsibility for the core Gap chain and its 935 stores as well as GapKids with its 486 stores and the BabyGap brand.

Other marketing responsibilities in the company have been divided among Richard Crisman, VP-marketing for Old Navy Clothing Co., with 180 stores, and Amy Schoening, VP-marketing for Banana Republic, with 222 stores.


Mr. Crisman this Thanksgiving breaks Old Navy's first national TV ad, a spoof of game shows featuring the company dog, "Magic." The spot, varied to feature sale merchandise, also will run in spot markets.

"We'll probably look outside for a creative and media partner," Mr. Crisman said. Old Navy this year spent $5.5 million on advertising through August, vs. $4.9 million for all of '95.

"As we become a bigger division, it's more and more possible we'll leverage our internal staff with some outside help," Mr. Crisman said.

Banana Republic has completed a review for its account, formerly at Arnell Group, New York, and handled this season on a project basis by Mad Dogs & Englishmen.

"We are close to a decision," Ms. Schoening said.

Although Mr. McCadden comes from a package-goods background, where companies would not consider producing advertising in-house, he said he is not at this time headed for agency help.


"The players know the brand inside and out," he said of his 300-plus in-house marketing department. "I'm not saying I need to turn to the outside world . . . Let's see what we can produce with this group."

The Gap's performance in the past year has been led by strong results at its lower-price Old Navy division, while same-store sales at the core Gap stores have remained flat or fallen short of expectations.

"The Gap is a maturing concept," said Alan Millstein, publisher, Fashion Market Report. "They are running out of places to go and hoping to hold onto market share."

Abercrombie & Fitch, with price points between The Gap and the upscale Banana Republic division, "is beginning to become an effective competitor in malls." Mr. Millstein noted.


The growth of the Old Navy chain also may have cannibalized the core Gap chain, which has been attempting to increase same-store sales by augmenting its merchandise with line extensions such as personal-care products, gifts, leather goods, sunglasses, NBA-licensed apparel, a Gap Barbie and, most recently, watches.

"It's one thing to have great stores and great merchandise, but great marketing is oftentimes the thing that's missing," said Richard Baum, VP-investment research, Goldman, Sachs & Co.

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