A couple months ago, I wrote an article supporting JC Penney’s new brand strategy and creative execution, indicating that it was the right thing to do to get the store back on track and differentiate itself in the marketplace. With the dismal performance in revenue and profits, the declining stock price, and the exit of some key top executives, many of you have questioned my wisdom and have asked me “What now?” for the beleaguered retailer.
With the political campaigns at full speed, I’m reminded of a famous quote from the 1964 Republican candidate 
Barry Goldwater who defended his views when he said “Extremism in the pursuit of liberty is no vice.” Although I couldn’t vote then, I do remember that the voters rejected his extreme right views and with the exception of Goldwater’s home state and the Deep South, he was soundly rejected in favor of Lyndon Johnson. The pendulum would swing too far right and they would not accept that much change.
Retailers face the same challenge when they go through a re-branding process and eliminate every way they promoted in the past to go for the new strategy. Food retailers have done this when they have decided to give up on weekly ad and in-store specials and coupons for EDLP only to discover that the customers still want those specials in the store with the signs telling them how much they are saving. Since POP promotions generate over 80% of the sales, it’s no wonder that the average market basket goes down quickly and the customer doesn’t think she is getting the best prices. EDLP does work, but the stores need to keep some promotional excitement at the store and in their ads.
I still believe that going to an everyday pricing strategy works. After all, look at Wal-Mart and the success they have had. However, even the world’s largest retailer still runs a monthly circular to feature those low prices on the most wanted items at that time of year. Their in-store price reductions have long generated sales and a stronger low price position with their customers, and they continue to do that successfully with their shopping list comparisons for food today.
JCP should have made a strong, logical pitch to its customers about a new everyday pricing strategy supported by an edited down version of their aggressive print sales circulars and mailers. However, the confusing sometimes lower prices and sometimes clearance events coupled with less in-store signing excitement seems to have convinced their loyal customers (and some of those Kohl’s shoppers) that their specials weren’t as good as before. With the aggressive media campaign and break-through creative, they reached a lot of customers with that message.
I still think JCP’s new print creative is outstanding, their broadcast cuts through the clutter, and their stores are better merchandised. However, they went to extremes by downplaying their price points graphically and not defending themselves against Kohl’s and Macy’s who increased their aggressive sales promotion. The solution? Michael Francis, JCP’s deposed President who came from Target, should have stuck with what worked at his former store. Great creative, excellent everyday pricing, and aggressive and well-presented print promotions. Going to extremes didn’t work in 1964 and didn’t work in the malls of 2012
UPDATE 8/8–AL RIES JUST WROTE A GREAT ARTICLE ON THE SUBJECT IN AD AGE ON JCP. CHECK IT OUT AT http://adage.com/article/al-ries/al-ries-prescription-fix-jc-penney-retail-reinvention/236564/?utm_source=cmo_strategy&utm_medium=newsletter&utm_campaign=adage
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