Posted 6/3/2013 12:00 am
Updated 11 months ago
The square has come full circle. Perhaps you’ll recall our two columns last year about the changes J.C. Penney was making by adopting a so-called “fair and square” pricing strategy, or everyday low prices.
Commenting in September on a previous column, we said, “What we opined in April  about the change was that, ‘… we’re simply not sure about the new fair and square pricing strategy in the department store category.’ We all understand everyday low prices in the discount store model. But at department stores? We weren’t sure then and we’re not sure now.”
Well, consumers were sure as they quickly decided the fate of the new approach, and ultimately the employment of J.C. Penney CEO Ron Johnson. After losing 25 percent of its overall business in 2012, and posting a first-quarter sales drop of 16 percent over the same period last year, the JCP board brought to an end Johnson’s 17-month tenure and his revamped pricing strategy.
Understand Who You Are
J.C. Penney is a department store. That is its brand. And an element of the brand communicated by the 110-year-old retailer for all these years has been that consumers are rewarded with sales, specials and coupons. Hundreds of them. It’s what the department store customer expects. And J.C. Penney stopped giving it to them. The result? Customers left in droves.
Dillard’s, Macy’s, Kohl’s — all understand the dance with their customers. New branded merchandise is introduced, marked up, marked down and promoted. The process creates value in the eyes of the department store shopper. And what ultimately informs the purchase decision is not necessarily the perception of a good price, but a good deal. Price is a feature. A good deal is the benefit. J.C. Penney’s Johnson apparently forgot the authority of this simple marketing dictum.
Now, what does the future hold for JCP? To say the least, there has been an interesting turn of events. We liken it to a form of crisis management — recognizing a dire situation, and moving swiftly to address it and correct it.
The first step the company took was to reinstate the sales and couponing strategy. This step was designed to effectively re-support the flagging brand and to say to former customers, “This is who we are, and this is who we intend to stay.”
Next, through advertising and social media, the company admitted mistakes were made and apologized. Apologized! A bold and effective statement to its customers in particular, and to the marketplace in general. “Recently J.C. Penney changed. Some changes you liked, and some you didn’t. But what matters with mistakes is what we learn. We learned a very simple thing: to listen to you.” So went the voiceover announcer on the nationally broadcasted television spot.
The third step in the crisis management plan was to ask customers to come back, and to thank them for returning to the stores. “We brought back the things you like about J.C. Penney … and now, we’re happy to say, you’ve come back to us. We’re speechless, except for two little words. Thank you.” Only time and an aggressive re-alignment marketing strategy will tell whether the expression of appreciation is premature.
What the Customer Wants
Mistakes were made at J.C. Penney. What is important to realize, however, is the motive driving the flawed corporate strategy. It seems to us it was company-driven, rather than customer-driven.
Hundreds of annual sales require a great deal of internal staffing to make price changes. It also plays havoc with budgets, margins and sales forecasting. So why not change to a less intensive, more operationally efficient and predictable pricing strategy. Why not? Because that’s not what the department store customer wants. Research indicates customers want to be loyal. They want to be rewarded for that loyalty, to be recognized and courted. The markdown, coupled with well-known, quality brands — house brands and marketplace brands — is that reward.
Fair and square pricing? The consumer determines what’s fair, not the store. With that realization, we’ve come full circle on the J.C. Penney saga. And the consumer wins again!
Craig Douglass is a Little Rock advertising agency owner and marketing and research consultant. He is president of Craig Douglass Communications Inc. Email him at Craig@CraigDouglass.com.