JCPenney’s Failed Pricing Strategy to Change

JCP CEO Ron Johnson Changes Direction – Again

Let the Sales Begin

JCPenney Sale

Photo courtesy JCPenney

The biggest sale at JCPenney has been the 55% drop in the stock price since January 2012 when new CEO Ron Johnson rolled out an everyday low price strategy by eliminating sale events. In announcing that the floundering department store will resume discounting, Johnson confessed that the company's core customer “enjoyed coupons much more than I understood.”

Johnson took over the reins at JCPenney over a year ago after notable success at Target and in launching Apple's retail stores. The dramatic shift from discounting to Johnson's “Fair and Square” pricing underwhelmed the market, and JCP's cutting edge advertising didn't improve customer traffic. If anything these moves drove away and turned off the traditional value seeking apparel customers that had made up Penney's customer base.

We've written several blogs following JCPenney since the new strategy was rolled out. See below:

JCPenney new retail strategy is missing something-customers

Why JCPenney's new strategy is failing

Vote on JCPenney new pricing strategy

There is a story about a pet food company that created and brought to market a new dog food. After a year of intense marketing, the CEO bemoaned the fact that sales were abysmally low. He could not understand how this massive effort was such a failure. They just couldn't sell this dog food. Finally, an honest employee told the CEO, “The dog's hate it!”

No matter how bold, how innovative, and how appealing JCPenney's new direction was; no matter how much was written about Johnson's past success; the JCPenney customer just hated the new approach.

The question now is will JCPenney be able to recover? Your thoughts?

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2 Responses to JCPenney’s Failed Pricing Strategy to Change

  1. Jeff Jones says:

    JCP may be able to recover but doing so is totally dependent on the direction taken. I’m not sure that JCPenny, though, has a definite focus as is evidenced by the way the CEO walked in and made immediate changes based on prior successes alone. Sometimes folks get so focused on either the future or the past that they trip over the present. This is, from my perspective, what JCP has done thus far.

    It seemed to me that JCP focused solely on pricing rather than one of three different fundamental strategies. There 3 strategies are Customer Focus, Outstanding Operations, or having the best Product.

    JCP doesn’t build or develop its wares so product excellence is out of the picture unless its wares stand above like stores in quality.

    Outstanding operations is feasible if JCP follows the lead of Walmart in the way products are warehoused and distributed along with ensuring that in-store products are appropriate for the region in which a store resides. Remote or online sales can be shipped immediately as is done by such companies as Cabelas or Duluth Trading.

    Customer Focus was clearly misjudged with the year-old pricing strategy. It would seem that customer focus group surveys were not conducted prior to the CEO putting his scent on JCP. Now it’s clear that the customers desire to avail themselves of “sales.”

    JCP needs to redefine itself to adopt a primary fundamental strategy and implement it across the entire organization. If it’s outstanding operations, processes designed to supply quality products simply and in a timely manner ought to save costs and allow for “sales” to be conducted. If it’s customer focus, then the firm definitely needs to listen to its target demographic to ensure that their “wants” are satisfied.

    So will JCP pull their fat out of the fire, only time will tell.
    Thus endth my 02 cents.

  2. JCP has always been a good retailer. It’s unfortunate that the new CEO didn’t understand the company’s core customer. I hope this is a lesson learned. In the meantime, it might be good to put in a buy order on JCP stock!

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