TV Ads 'a Waste of Money' for the Back-in-Black Gap

40% Jump in Profits Indicates that spending your advertising/media budget on improving your product and experience delivers better ROI than advertising

By shunning TV, Gap looks to turn itself around.

The brand once known for its peppy, elaborate commercials has struggled in recent years to attract consumers in an increasingly competitive retail environment. But now that it's shelved TV advertising -- the brand has been off the airwaves for several quarters -- and is focusing on merchandising initiatives, Gap seems to be on the right financial track.

Marketing expenditure at Gap Inc. was trimmed 18% during the quarter, driven by the absence of TV ads for the Gap brand, company executives said. That contributed to a 40% jump in profits at Gap Inc., compared to the same period a year ago.

"At Gap brand ... they are on a journey," Gap Inc. Chairman-CEO Glenn Murphy said during a conference call with analysts last week. "They are moving the brand in the right direction, and we are delivering on driving our healthier margin dollars."

The move revives the old argument of whether it's wiser for a troubled company to spend on advertising or hunker down to protect the bottom line -- one all the more vociferous today given the state of the economy.

Reducing adspend has not hurt like for like sales YOY which only fell 7% while Old Navy (who is still advertising) fell 18%. Gap reports a 40% boot in profitability, compared to JC Penney (down 50%), Kohl's (down 27%) and Macy's, which posted a $59 million loss

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Conclusion: GAP is following in the path of Jeff Bezos, who's own test for Amazon revealed that using their ad/media budget gave better return when used to subsidise shipping (ie reducing the cost of the product)