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.