Archive for November, 2017

Most Marketers Have Restructured to Take Advantage of New Technologies

November 15, 2017 Leave a comment




Most Marketers Have Restructured to Take Advantage of New Technologies

They have also created explicit roles that deal with martech

November 15, 2017 | Marketing Technology

A new study from Chief Marketing Technologist underscores just how important marketing technology has become to many marketing leaders.

More than a quarter (26.9%) of respondents polled in September said they are completely restructuring their marketing and IT departments to make better use of marketing technology. What’s more, 14.9% hadn’t yet started such an undertaking, but planned to do so within the next 12 months.

Marketing Leaders Worldwide Who Have Restructured Their Marketing and/or IT Departments to Better Leverage Marketing Technology, Sep 2017 (% of respondents)

Meanwhile, others are ahead of the curve. Nearly 19% of marketing leaders polled had restructured their marketing and IT departments within the past year, while another 12.4% did so more than a year ago.

But reorganizing a department is just one way that marketers are investing in marketing technology. Having someone explicitly in charge of leveraging the technology is another.

In the study, 52.7% of respondents said they already had taken steps to name a martech leader. And while 21.5% said they didn’t have anyone in such a role yet, they had plans to within the year.

By and large, marketing technology has become a standard part of managing a business, and many companies are already shifting away from their initial focus on platforms to focus more on data.

—Rimma Kats

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Can Collaboration Shore Up Brick-and-Mortar Retail?

November 15, 2017 Leave a comment



Mall developer Westfield and others push for data sharing

Author: Andria Cheng

November 13, 2017

Brick-and-mortar retailers often gripe that they are at a competitive disadvantage against online retailers because of their relative inability to map a more complete view of who their customers are and their traffic, browsing and purchasing behavior.

As malls, department stores and other retailers struggle to drive traffic, some players are considering sharing data.

Mall developer Westfield, the owner of 35 shopping centers, is seeking to persuade retailers, brands and even competing malls to share data such as what consumers have just bought to allow partners/rivals to better target potential customers for related sales.

“In order for us to be successful we have to collaborate across different partners and partner with competitors too,” said Lindsey Thomas, who heads marketing at Westfield’s newly rebranded OneMarket unit, formerly known as Westfield Retail Solutions. “Seamless integration is what we are preaching. If you want to get a well-rounded view of consumers, you need to know the ins and outs about the consumer.”

Data sharing isn’t the only mission of this OneMarket network. The idea is also to get the participants to invest in tech initiatives from natural language to AI, with the goal of becoming more competitive with digital leaders and keeping up with consumer expectations.

Retailers are struggling to innovate at a pace that allows them to keep up with consumers’ shifting expectations, Thomas said.

The goals of better targeting and personalization certainly maps to what retailers have said they want to do. A Boston Retail Partners survey found that retailers’ top customer engagement priority this year involved customer identification and personalization.

However, while the goal of the collaboration makes sense theoretically, Thomas admitted it’s not an “easy task” to win cooperation among rivals.

“You are asking retailers to share data, which they’ve never done before,” she said in an interview. “There are a lot of sensitivities.”


Let’s connect more shoppers to things they need and love.

In retail today, the advantage goes to those with access to large-scale data assets. That’s why, according to a report conducted by Forbes Insights and Criteo, nearly 75% of top brand and retailer executives saw pooled data as a way to compete, connect, and win.

Learn more

Some industry veterans are skeptical. “Though well intentioned, the data collection is going to be fragmented and limited–and the data analysis, therefore, is going to be essentially meaningless,” Mark Cohen, a Columbia Business School Professor and a former retail industry top executive, told eMarketer Retail. “I remain highly cynical.”

But OneMarket, which has met with more than 60 potential global partners in just the past six weeks alone, said it has found widespread interest in the concept. “There’s not one that’s not interested,” Thomas said. “Trying to do this five years ago would have been quite impossible.  Physical retail is fragmented. Retail is about going from slow to fast, not about going from big to bigger anymore.”

She said OneMarket is testing sharing of “live” digital receipts to “enable a conversation within the network” about post purchase interactions to “incorporate more seamless experience” for consumers.

Another “key offering” of the network is a Shopper Exchange digital ad marketplace that will give brands “unprecedented access” to retailers’ shopper data so brands have the ability to “engage with the exact consumers at the right stores where their products are sold,” Thomas said, adding that’s generated “significant incremental sales like never before.”

She declined to give details about the network’s participants but said about 20 department store chains in the US and UK have expressed “commitments” to join the network, and said conversations have begun with other shopping malls.

Westfield isn’t the only one pushing for data sharing. Criteo, a marketing tech firm, this year  introduced a “commerce marketing ecosystem” to help “level the playing field” for retailers and brands in their battle against the likes of Amazon and Alibaba “in a world where shoppers are extremely demanding and volatile” and where retailers and brands are required to offer “seamless” and “relevant” shopping experiences across “all devices and channels and at all stages of the journey.”

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Making it in America: Revitalizing US manufacturing

November 14, 2017 Leave a comment



By Sree Ramaswamy, James Manyika, Gary Pinkus, Katy George, Jonathan Law, Tony Gambell, and Andrea Serafino

The erosion of US manufacturing isn’t a foregone conclusion. The decade ahead—with increased demand, new technology, and value chain optimization—will give the sector a chance to turn around.

US manufacturing is not what it was a generation ago. Its contraction has been felt by firms, suppliers, workers, and entire communities. In fact, the erosion of manufacturing has contributed two-thirds of the fall in labor’s share of US GDP.

But the decline has played out unevenly. In the past two decades, output growth in US manufacturing has been concentrated in only a few industries, including pharmaceuticals, electronics, and aerospace. Most other manufacturing industries have experienced slower growth or real declines in value added. The largest US manufacturers have managed to thrive despite growing headwinds, while small and midsize firms have been hit hard. Large firms have a stake in addressing this issue, since they face more risk without a healthy ecosystem of domestic suppliers to provide more agility and opportunities for collaboration.

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Today the prevailing narrative says that nothing can be done to stop the ongoing decline of US manufacturing at the hands of globalization and technology. But continued losses are not a foregone conclusion.

The decade ahead will reshape global manufacturing as demand grows, technology unlocks productivity gains, and companies find growth in new parts of the value chain—all of which creates an opening for US manufacturing to turn things around. After combining demand projections with an analysis of specific industry trends and historic performance, the McKinsey Global Institute finds that the United States could boost annual manufacturing value added by up to $530 billion (20 percent) over current trends by 2025. Given the importance of manufacturing to the broader economy, capturing these opportunities should be a national priority. Rather than attempting to re-create the past or preserve the status quo, the United States will need to focus on positioning its manufacturing sector to compete in the future.

  1. A wave of change presents manufacturers with new opportunities and imperatives
  2. The United States has an opportunity to boost manufacturing GDP by up to $530 billion over current trends
  3. US manufacturing needs to scale up efforts on multiple fronts to compete in the future


1. A wave of change presents manufacturers with new opportunities and imperatives

Manufacturing is being reshaped by three major trends: rising demand, the convergence of multiple new technologies, and shifting global value chains.

Demand is rising—and fragmenting

One fundamental advantage for US manufacturing remains unchanged: the United States is still one of the most lucrative markets in the world. While consumer demand may be muted by lackluster income growth, access to the US market remains a powerful lure for domestic and foreign manufacturers alike. US demand for heavy machinery, equipment, and building materials could also increase if public investment revives from its 50-year lows.

But the US market is not the same familiar ground it was in the past. The uneven nature of regional income growth translates into wide market variations. US consumers are more diverse and tech-savvy than in the past—and they have high expectations for quality, low prices, and variety. One global food manufacturer reports that the SKU count of its North American business unit rose by 66 percent in just three years.

Beyond the domestic market, demand is soaring in emerging economies around the world. Over the next decade, another one billion urban residents will begin earning enough discretionary income to make significant purchases of goods and services. By 2025, according to McKinsey estimations, consumption in emerging markets will hit $30 trillion. But tapping into demand growth in emerging economies requires knowing exactly where and how to compete. Markets such as Africa, Brazil, China, and India represent an enormous prize, but they have dizzying regional, ethnic, linguistic, and income diversity.

All of this means that manufacturers must navigate greater complexity than ever before. They are being challenged to produce a wider range of product models with differing features, price points, and marketing approaches. From fast fashion to new car models, products now have shorter life cycles, and customers are beginning to demand more choice and customization.

Industry 4.0 technologies are beginning to transform manufacturing

The US manufacturing sector needs an injection of productivity, and companies cannot capture the demand opportunities described above unless they step up their game. New technologies will play a large role in determining whether they can compete.

Today multiple technology advances are converging. This new wave, referred to as Industry 4.0, is driven by an explosion in the volume of available data, developments in analytics and machine learning, new forms of human–machine interaction (such as touch interfaces and augmented-reality systems), and the ability to transmit digital instructions to the physical world. Such complementary technologies can run smart, cost-efficient, and automated plants that produce large volumes—or, conversely, plants that turn out highly customized products.

These technologies touch on every aspect of manufacturing (see the interactive). New design and simulation tools can create “digital twins” of physical products and production processes, validating product designs and using virtual simulations to iron out the production process before it goes live. One aircraft manufacturer that implemented a rapid-simulation platform has reduced design time, cut design rework by 20 percent, and boosted engineering productivity. Internet of Thingssensors can feed real-time data into analytics systems, which can adjust machinery remotely to minimize defects, improve yield, and reduce downtime and waste. Collaborative robots can handle dangerous tasks and eliminate safety risks, while 3-D printing can now produce intricate, multimaterial components and final goods. Beyond the factory floor, new applications for coordinating distributed supplier networks improve the flow and tracking of raw materials and manufactured parts.

Manufacturing involves market research, demand forecasting, product development, distribution, and services—activities that may take place in multiple locations or involve outside providers. Companies will soon be able to connect their entire value chain, including customers, with a seamless flow of data. This “digital thread” may lead to new sources of productivity and revenue.

Click the segments of the circle for more on Industry 4.0

Value is shifting, leading companies to rethink their business models, footprint, and sourcing

Manufacturers are finding ways to capture value beyond traditional production activities—whether upstream in design and product development or downstream in services. Some aerospace firms, for instance, provide leased aviation services, including pilots, aerial refueling, and “power by the hour.” John Deere has added sensors to the farm machinery it sells. The data it captures enable the company to offer farmers new types of user-sourced, real-time information on planting, soil health, and other best practices. Nvidia, a maker of graphics-processing units and chips, has established a developer platform, increasing the sales and reach of its core products.

Input costs are also changing. The gap between labor costs in the United States and those available overseas has narrowed, while the cost of industrial robots continues to fall. These trends have led some manufacturers to return production to the United States, albeit in more automated form. Finally, the dramatic increase in US shale-energy production provides ongoing assurance of low natural-gas costs for US-based plants, and it has made cost-effective raw inputs available to US producers of refined petroleum products, petrochemicals, and fertilizers.

Labor costs will continue to be paramount for low-margin and tradable products, but companies in many industries are reassessing the downsides of offshoring and lengthy supply chains. More firms are making footprint decisions using a “total factor performance” approach that considers logistics, lead time, productivity, and risk—as well as proximity to suppliers, other company operations, and final demand.


The United States has an opportunity to boost manufacturing GDP by up to $530 billion over current trends

Translating the trends described above into opportunities, MGI has created three scenarios for 2025. They combine consumption forecasts with industry-by-industry analysis that considers the probability and potential impact of higher technology adoption, export growth, and share of domestic content in finished goods.

Real value added in US manufacturing stood at $2.2 trillion in 2015. In the “current trend” scenario, we assume that the share of domestically produced content continues its trajectory of decline across most industries. Even in this case, manufacturing GDP would increase over the next decade by $350 billion in real terms. This can be attributed to rising demand that lifts output across all industries, plus new output from petrochemical, fertilizer, and energy-processing plants coming online in the next decade.

We also consider a “new normal” scenario in which the United States maintains the current level of domestic content in finished goods in most industries, arresting the decline. In this case, value added across the manufacturing sector would hit $2.8 trillion by 2025, an increase of some $300 billion over the current trend.

Finally, we consider a “stretch” scenario in which GDP in some industries returns to a recent peak (exhibit). It is based on an analysis of global trends and each industry’s health in the United States; it also assumes greater technology diffusion and incorporates the higher-end projection for energy-intensive production output. By maximizing all of the opportunities, US manufacturing GDP would climb to $3 trillion in 2025—a boost of $530 billion, or 20 percent, above the current trend.

The biggest upside potential is found in advanced manufacturing industries—areas in which the United States should have a competitive advantage but instead runs a large trade deficit. With Asian, European, and luxury carmakers gaining market share and domestic OEMs sourcing more heavily from Mexico for SUVs and pickup trucks sold in the United States, imports have risen in recent years. But foreign carmakers are expanding some US production of both parts and finished cars—and since car production is already starting from a large base, even a small percentage increase adds significant value. Aerospace is another industry with significant potential. Its domestic production remains strong, global market growth is expected to be robust, and import competition remains relatively weak. Computer and electronics industries could also make a contribution, given that domestic content has stabilized recently and demand is expected to stay strong. By contrast, we find limited prospects for growth in industries such as basic consumer goods, where domestic production has already been hollowed out.

In addition to boosting its value added by $530 billion, the manufacturing sector could add 2.4 million jobs on top of current trends by realizing the stretch scenario. Furthermore, the positive effects would ripple into services and other industries, potentially creating another $170 billion of direct value added and almost one million jobs in industries that provide inputs to manufacturing. Adding together the manufacturing and upstream effects, the total potential benefit to the economy could be $700 billion in additional annual value added and 3.3 million net new jobs.


3. US manufacturing needs to scale up efforts on multiple fronts to compete in the future

The opportunities outlined above are real and substantial, but the United States will have to make up lost ground. No one should underestimate the effort it will take to turn things around.

Strengthen the US supplier base

In contrast to the institutional support enjoyed by Germany’s Mittelstand (medium-size firms), small and midsize US manufacturers typically lack financial, technical, and business-development help. The German approach may not translate into the US context, but there are ideas to extract from it about the value of greater coordination.

Keeping suppliers at arm’s length affects the bottom line of large manufacturers. Inefficiencies in OEM–supplier interactions can add up to 5 percent of development, tooling, and product costs in the auto industry. These costs are significantly higher for US carmakers than for their Asian counterparts. Similar inefficiencies affect other industries, and they are likely to multiply as manufacturers seek to expand product portfolios and reduce turnaround times. Firms that work closely with their tier-one suppliers may have little visibility into their tier-two and tier-three suppliers, especially if they are overseas.

Over time, seeking out ever-lower bids from suppliers produces diminishing returns. Procurement can be a source of value rather than simply a place to cut costs, but this mind-set requires large firms to change incentive structures among their own purchasing teams. Large firms can benefit from identifying which of their suppliers provide critical, high-value components; these may not be the largest suppliers. Instead of just monitoring them, large firms could solicit their ideas, invest in their capabilities, and build trust to create a preferred relationship. Beyond their current suppliers, large companies also need to be engaged in strengthening the entire base of smaller manufacturers.

Policy can play a role in modernizing smaller manufacturers through financing programs, business accelerators, or tax incentives. The US federal government has established the Manufacturing Extension Partnership for small and medium-size firms, but it does not have the scale for maximum impact. Smaller firms need expanded access to advanced technology, whether at federal labs, universities, or public–private hubs.

Pursue growth through deeper global engagement

Emerging markets present crucial opportunities to win brand loyalty from huge new customer bases. But less than 1 percent of US companies sell abroad, a far lower share than in other large advanced economies. Small and midsize US manufacturers need more mentorship and strategic guidance to understand the market opportunities at stake, and they need more of the networking opportunities that their counterparts enjoy in many other advanced economies. They also need access to capital in order to handle the additional costs associated with exporting. But trade finance remains a major barrier for them; in fact, access to capital has generally been tighter for small firms in the United States than in other countries of the Organisation for Economic Cooperation and Development since the Great Recession.

The United States is already the largest recipient of foreign direct investment (FDI) globally, but it can attract more greenfield FDI, particularly from China and India. The federal government can play a bigger role in facilitating these matches and directing investment where it is most needed, as investment promotion agencies do in other countries around the world.

Improve digital adoption to boost productivity

The US manufacturing sector’s relatively slow pace of digital adoptionhas been a drag on its productivity performance. The intensity of industrial robot usage remains lower in the United States than in countries such as Germany, Japan, and South Korea. While US plants turning out vehicles and electronics are generally highly automated, robots have relatively little penetration in large US industries such as metals and food processing.

To capitalize on technology, companies have to start by capturing, integrating, and analyzing data flows from across their operations and ecosystems. Building the right structures for exchanging and safeguarding information is critical. Some machinery will have to be upgraded or replaced. More fundamentally, manufacturers will need to identify strategic use cases, link their digital initiatives to their broader business strategy, and consider how to begin working alongside machines in a more automated and data-driven environment.

Develop the manufacturing workforce of the future

Many manufacturers, particularly in advanced industries, report difficulties filling open positions. Over the longer term, these issues seem likely to worsen. The manufacturing workforce is aging, and highly specialized skills will be lost to retirement. The median age of a US worker in the aerospace supply chain, for instance, is 50 years old.

Tomorrow’s manufacturing jobs may have very different and more digital skill requirements. Education systems alone cannot be expected to solve all the potential mismatches beyond providing basic math and digital skills. Workforce apprenticeships are gaining traction in the United States, but now these efforts need to happen on a much larger scale and with a system of established, transferable credentials. MGI estimates that ramping up a program to apprentice roughly one million workers annually might cost $40 billion a year.

Think—and invest—for the long term

Faced with competitive headwinds, financial constraints, or shareholders driven by short-term expectations, US manufacturers have deferred investment and focused on cutting costs. The average US factory was 16 years old in 1980, but today it is 25 years old. Inside the plant, the average piece of equipment was seven years old in 1980 but is nine years old today. Production assets are even older in metals, machinery, and equipment manufacturing. MGI estimates that upgrading the capital base would require $115 billion in annual investment—and companies that put off investing will not be positioned to capitalize when growth picks up.

The federal government has multiple programs already in existence, such as the Manufacturing Extension Partnership for small and medium-size firms and SelectUSA for attracting FDI. But these and other efforts generally have smaller budgets, less certainty of ongoing funding, and more constraints on their mandates than comparable programs in other countries. Policy makers should examine which existing initiatives are producing the most promising results, then scale up those efforts and commit to them for the long term.

Local policy makers, too, can fall into a short-term mind-set. Announcing a brand-new manufacturing plant to their constituents is a political win, but it is too often accomplished by awarding poorly designed subsidies to individual companies without ensuring a sufficient return. Incentives are most effective as part of a solid and more holistic economic-development plan targeting growth industries that complement a region’s legacy strengths. Most subsidies are geared to greenfield investment, but incentives for brownfield investment could help existing firms upgrade and stay productive. Local regions have to sustain investment in workforce skills, infrastructure, institutions, and quality of life over the long haul.

It is not hard to find industry success stories and promising initiatives in US manufacturing, but isolated examples have not created broad momentum. Revitalizing the entire sector will require dramatically scaling up what works—and the task is too big for any single entity. Manufacturing needs supportive government programs and policies with long-term certainty and funding. It also needs regional coalitions with everyone at the table: large and small manufacturers, workers, technology experts, educators, public officials, and investors.

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How The Gap got started by a real estate broker in 1969

November 1, 2017 Leave a comment

A true story reprinted with permission from “Guaranteed to Shrink, Wrinkle, and Fade” by Bud Robinson former President of Levi Strauss International who actually enabled the birth of the GAP’

Falling Into The Gap
Wally Haas, my boss at Levi’s when I was Ad Director, liked to have me be the ‘Bad Cop’ who dismissed all crazy advertising ideas or favors that friends wanted Levi’s to do for them. That way he did not have to strain their friendships.

One day in 1969, Wally asked me to meet with Don Fisher, a real estate broker, and fellow member of the private, largely Jewish Concordia Argonaut Club. Don had told Wally of some sort of crazy sounding new retail idea so I was very curious to hear what he might want from Levi’s that I, as Advertising Director, could influence or reject.
Later, I realized that this meeting had been one of the most productive of my young career.
Levi’s was now sold in virtually all the major department and specialty apparel stores, and had also held on to its loyal small retailers throughout this hectic expansion. All sorts of other retailers, like Sears, Wards, Penney’s, K-mart, Mervyns, and Target put tremendous pressure on us to sell them Levi’s branded lines, but we refused. Discounters constantly tried to get product from any source they could to run large loss-leader Levi’s ads to draw traffic. We thought we had reached a point of near-maximum distribution in the type of store we wanted and were devoting more effort on new styles and product lines like, Levi’s for Gals, Big & Tall men’s sizes, shirts, sweaters, belts etc., and improving service to existing customers for the bulk of our future domestic growth.

So after Wally’s friend described his idea to me in detail, I was intrigued.

Don was a minor partner in an expanding regional furniture chain, to which he primarily brought his commercial expertise of retail store location selection. He was definitely not a merchant, but, he had been recently intrigued by a successful new shoe retailer named the Tower of Shoes in Sacramento, CA. which had
broken all three sacred tenets of real estate…Location…Location…Location, and yet was wildly successful.

The Tower had rented a cheap and decrepit Quonset hut in a Sacramento valley Industrial area, well away from any other retail stores, and stocked it with all the current styles and sizes of a good selection of top brand name women’s shoes. And, the Tower of Shoes was drawing record crowds to this cheap, remote location. How? Simply by spending large sums of his vendors’ co-op money on TV advertising that no matter what size or style of top brand name shoe a woman might want , she was sure to find it at The Tower of Shoes. Price cutting was not a part of the business plan. And there was a Tower of Clothing on the starting blocks.

Don’s real estate location expertise led him to think that a chain of small free- standing stores in low rent strip malls, adapting this new concept to the booming Levi’s teenage market, would be a winner. His store research showed that even a large Levi’s customer, like Macy’s California, had a relatively small selection of product in each branch, and the style, sizes and colors became “broken” as soon as the most popular ones were sold, resulting in unhappy customers and lost sales. On top of this, the department stores’ slow re-ordering cycle took weeks to replace the sold “heart” sizes of the bestselling products, resulting in even more unhappy customers, who, if they returned soon still couldn’t find their size! In addition, he saw that while most of these “prestige” stores didn’t yet understand how to cater to teenagers, they were learning fast.

Don’s stores would not only welcome this generation, they would cater to them exclusively, employing teens as sale clerks, and operating only from 3pm when school was out until 11pm when they had to get home (a single 8 hour shift!). And, as a drawing card, he would sell all the latest rock & roll records, allowing the customer to stay and listen to their hearts content! In fact he planned to devote exactly 50% of his floor space to records and listening booths.

But the most important element of his idea was in the total variety and depth of Levi’s he would stock, which was sure to satisfy every customer’s “right now” demands. He would carry every style, color, and size that Levi Strauss made for both men and women and have them available at all times. This would be at least
20 times the product variety and depth of a typical Macy’s departments for both boys and girls combined.

Another brilliant feature was that all merchandise would be stocked by size grouping, vs. the department standard display of a single style on a rack with all of its sizes together. Don’s sales clerks, (a fast disappearing species in department stores) need only ask what size a customer wanted and lead them to a virtual store-within-a store size section of a multitude of Levi’s styles and colors.
Also, every item in the store would have a special tear-off tag that showed style, size and color of the item. The clerks would be required to tear this tag off each item they sold for proper commission credit to them, and turn in all tag stubs each evening.

A clerk trained in an early version of the fax machine would summarize and transcribe that day’s exact sales directly to the Levi’s order entry desk in the warehouse over a night phone line to be automatically replenished in the next day’s shipments to Don.
Don’s expansion plan for the stores was pretty much based on the Mc Donald’s concept. Each new store would be exactly like all the others in design, layout, location, signing, etc. Store employees would be high school students and they would be promoted to management as soon as new stores were opened. All training would be uniform so that employees could walk into a new store and be immediately effective.

He would have a store opening team trained to move around the country and get new stores operational in record time.

What a brilliant idea! The more I heard, the more I was determined to find a way to make it work. Levi’s would virtually have their own stores, yet not own them, completely circumventing the existing apparel industry cardinal rule that wholesalers of brand name apparel could never have their own retail stores, and still hope to keep department stores as customers..
My first main obstacle was that Don wanted Levi’s to share all his large market-wide advertising and promotion costs 50/50 up front before the first store opened.
And then he needed a guarantee of first priority on his daily re-order shipments to keep his promise of a “never-out” inventory.

The ad money request was the kind we could legally justify for a large department store chain opening a new store, but never for a radical unproven single store that didn’t even exist yet. And to ask that his orders be placed in front of Macy’s on the priority list was heresy! Still… What an idea!
Spending the next several hours examining ways to make it work, we came up with the following tentative agreement:
1. We solved the legal issue by Levi’s agreeing to offer the same ad co-op terms to any retailer in the Bay Area (and any in other markets Don opened) if they would agree to stock only Levi’s products, and in all styles, colors and sizes. This was the birth of the “Levi’s Only” category of stores, a concept that spread like wildfire and eventually threatened the capacity of US denim mills.
2. TV’s high costs were prohibitive, so we agreed that Don would use
only top-40 radio. Don’s and Levi’s target market
was tuned into the hot new rock and roll radio
stations more than television anyway. Plus Levi’s
agency had become expert at producing very
effective radio commercials and promotions with
top 40 radio stations. These stations were eager to
negotiate much lower rates for local advertisers like Don, than they charged national advertisers like Levi’s.
3. To ensure that Don’s radio ads were of the same high quality as Levi’s, I agreed to introduce him to my agency’s chief radio commercial writer/producer and look the other way as he moonlighted as Don’s first ad manager. But only if Don would limit our mutual ad spending to radio and merely mention that he sold all the latest the latest records as long as he didn’t specify titles.
4. Levi’s initial dollar commitment to Don was set at 50% of a budget sufficient to buy a 3 month saturation afternoon radio schedule on all Bay area rock stations. These ads would run every weekday and Saturday during school sessions and on weekends during the summer. This program would bombard every hearing Bay Area teenager with Levi’s messages at saturation levels and surely drive them to the store.
5. Don knew the stores couldn’t use the Levi’s name and promised to come up with a catchy new name.
With this agreement firmly in hand, I spent the next morning in a hastily called management meeting to outline this new concept. I assured Wally that we could afford to test the concept by reducing Levi’s own radio ads in the Bay Area proportionately, at least until Don’s store was open and we could gauge its appeal. The Sales Manager eagerly supported the test and agreed to personally handle the account, so that no salesman commissions need be paid for the new store(s), since there was no “selling” involved. Wally approved the test and, in turn, arranged for Levi’s extremely tough new account credit terms to be suspended (with a lien on Don’s opening inventory), and a promise to give the store top shipment priority for all re-orders received overnight .

Don planned to open the first store in San Francisco and expand in the Bay Area to saturation before moving the concept to a second metro area. This controlled my initial co-op offer to the Bay area metro area, making it legal to refuse a similar deal to anyone else in another market, and it allowed our advertising dollars to achieve maximum efficiency. Don had decided on National Football League markets first, reaching saturation as soon as he could, before tackling the smaller American Football League Markets. Don’s logic was that the NFL had already done the research and picked off the best markets to reach men, so why should he argue with success?
Don not only got Honig Cooper’s radio wizard to moonlight for him by paying him well, but he eventually hired him as his first ad manager. The first radio spots he produced for Don were every bit as good as the ones he had done for Levi’s, and they did an excellent job of brand image advertising for us.
By late summer 1969, Don was ready for his very first store opening, a San Francisco State University commercial neighborhood storefront on the same side of the street as the local movie theater. Of course, Don had already negotiated several other leases for his next Bay Area locations, and his master store plan was ready to duplicated at a moment’s notice. The new store was named the Gap by Don’s wife Doris, (after the Generation Gap) and the first radio commercial had shouted to the blare of acid rock…”Fall into the Gap”, a clarion call that was heeded by the multitudes!

I attended the Grand Opening mob scene of teens and Levi’s on an August night and, reminded of the early Fillmore frenzies, I was certain that The Gap and Levi’s had an amazing future together. Very soon, The Gap stopped selling records completely to maximize the floor space for the far more profitable Levi’s, which needed no extraneous “draw” to attract teen customer. The Gap was rapidly opened wide indeed.

Who could imagine that a scant 5 years later I would become Executive Vice President of The Gap’s 350 stores in 1975, and that The Gap’s various divisions would eventually grow to over 3,000 worldwide locations with revenues of $15 billion (over three times the size of Levi Strauss!).


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