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JCP: From Catalogues to Denim Bars!?!

The most experienced and effective marketing professionals will usually agree that keeping the client in the press and on the public’s mind is beneficial to promoting brand identity, especially in an institutional fashion.  Frequent articles and stories can help grow a brands identity across marketing segments and expose the brand to new potential customers who may be inspired by the information and may be motivated to test, what is to them, an unfamiliar brand.  In the case of good news, it can create excitement and motivation, after all we all love being part of a good success story.  But when it comes to polishing the brand, attracting new converts and growing a business; too much bad news can be really, really bad news for a struggling business!

News continues to trickle out of the troubled retailer, J.C. Penney.  It’s bad news for its business partners and investors, bad news for thousands of its associates, and particularly bad news for its loyal customers.

We all look to our business leaders, the CEO’s, the Presidents, the Board Directors and the COO’s for lessons and inspiration, unfortunately as is the case in life’s many best learned lessons,  we often learn the most profound lessons from our failures.  The leadership at J.C. Penny has contributed more than its fair share of lessons over the past two years.

The Board of Directors of J.C. Penney Company, Inc. [NYSE: JCP], recently announced that Myron E. (Mike) Ullman, III has rejoined the Company as  Chief Executive Officer, effective immediately.  He has also been elected to the Board of Directors.  Mr. Ullman is a highly accomplished retail industry executive, who served as CEO of J.C. Penney until late 2011.  He succeeds Ron Johnson, who is stepping down and leaving the Company.

This most recent departure of leadership makes J.C. Penny America’s most cautionary tale and follows a plot line of mass exodus of loyal customers and a 25% reduction in company revenues.  Penney lost almost a billion dollars, half a billion of it in the final quarter alone. The company’s stock price, which jumped twenty-four percent after Johnson announced his plans, has since fallen almost sixty percent and twenty-one thousand jobs have been lost.

Upon his departure, Johnson has become the target of unrelenting criticism. “There is nothing good to say about what he’s done,” Mark Cohen, a former C.E.O. of Sears Canada, who is now a professor at Columbia, “Penney had been run into a ditch when he took it over. But, rather than getting it back on the road, he’s essentially set it on fire.  Johnson, and his previous compatriots in failed leadership, seemed determined on implementing wide sweeping, revolutionary marketing strategies that appeared to be destined from the outset to miss the target when it came to the largest segment of its customer base.  The new revolutionary strategy’s only success was to frustrate and confuse the company’s loyal fans and left everyone to ponder three questions.   Where did their familiar retailer go?  Who were they trying to become?  And where were they going?

Turning a major company away from its past identity and moving it forward with a strategy that brings a sleepy and complacent giant into the new business market reality is difficult, really difficult.  But large brand remodeling and revolutionary, untested marketing strategies most often bring about decline and failure not success.  Michael Roberto, a management professor at Bryant University, put it this way. “Small wins help you build support both internally and externally, and they make it easier for people to buy in.”

Penney’s board no doubt believed that Johnson’s record with former employers, Target and Apple, all but guaranteed that he’d succeed at J.C. Penney.  But this perception probably reflects what psychologists call “the fundamental attribution error”, our tendency to ignore context and attribute an individual’s success or failure solely to inherent qualities.   Ron Johnson has become an example of what Warren Buffet believes, “When a manager with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.” At the onset, Johnson brought an Apple-minded focus on reinventing business innovations whilst losing site of the core fundamentals of the business.  Perhaps the most profound lesson from Ron Johnson’s missteps can be attributed solely to J.C. Penny’s Board for its decision to select Johnson for the leadership role to begin with.

While Penney can’t erase the last 14-months, there is inherent value in the lessons learned.  Vision is not always a recipe for success.  As marketers, we keep our thumb on the pulse of what is trending in all social, local, and mobile.  Our ideas are fueled by advancements in technology.   However, success is a result of systematically assessing the wants, needs, motivations, and expectations of those we serve not those that lead.  Penney needs to get back to the fundamentals of its core business and the customers it serves.

The Cost of Forgetting Who You Are

In the summer of 2012, we learned of turmoil at JC Penney following the company’s unveiling of a completely overhauled strategy. After a devastating sales year, JC Penney is announcing that they are bringing back the sales campaigns that were scrapped in an attempt to rebrand and reposition the once proud and venerable department store. Initially, Michael Francis, the former Target executive behind the change, sought to add customers and steal away business from competition, rolled out the new strategy shortly after taking the CEO in October 2011. Despite the forward-thinking plan to eliminate the roughly 600 sales and discount coupons that the company used to lure customers into their stores every year and replace them with everyday low prices, the strategy failed on many levels, causing profits to plunge and Mr. Francis to resign.

The pricing strategy was a key element in the companies plan to reinvent the department store from the ground up by adding new up-scale fashion lines and in-store boutiques, replacing the stores traditional rack, upon racks of clothing. The results of the new strategy led new CEO Ron Johnson to once remark, “Our sales have gone backward a little more than we expected, but that doesn’t change the vision or the strategy.” Really? For the first nine months of its current fiscal year, JC Penney lost upwards of $433 million, with total sales dropping 23.1 percent. Analysts expect losses at similar negative levels in the fourth quarter and total sales plunge of 25 percent for the year. Coupled with intense market scrutiny concerning the company’s overall financial health and stock performance, the strategic miss has produced a landslide that will be difficult to turn away.

In addition to adding back an undisclosed number of sales events, JC Penney has now decided to add tags or signs on much of its merchandise showing the manufactures suggested retail price in comparison to its own, an effort to help shoppers recognize savings. Considering the level of sophistication of today’s savvy, price smart consumers it may be a miscalculation to assume that shoppers will identify a manufactures suggested retail price as anything other than an arbitrary number, rather than a basis for establishing a product’s real value, perceived or otherwise.

Johnson expects his company to return to growth sometime in 2013, but in a shrinking economy and increased competition it is hard to believe that merely tweaking an already badly failed marketing strategy will produce new growth anytime soon. To lure customers back, JC Penney will need to offer customers features, benefits, and new incentives that they are not currently getting from the competition. Otherwise, why should they return?

Whether the new JCP can come ‘back to life’ for customers or simply succumbs to its missteps is yet to be determined. Either way, it is clear that in an attempt to reinvent itself, JC Penney has forgotten the best attributes of who they were in an attempt to be something they weren’t meant to be. The entire experience has demonstrated the importance of strategy – real strategy. Understanding customer’s motivations, behaviors and brand reputation is critical in shaping a relevant strategy for the business. Otherwise, those companies who fail to recognize this value will pay the price.