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- 3. Price Personality History Place & Presentation Product Promotion Conclusion • At the turn of the century, JCPenney celebrated 100 years in the retail industry • Founded in 1902 by James Cash Penney when he was just 27-years-old A focus on understanding the JCPenney brand Catering to the needs of their customers Offering fashionable, high-quality merchandise at affordable prices A retail legend born 1 2 3 Grew its success by following 3 key principles:
- 4. “A merchant who approaches business with the idea of serving the public well has nothing to fear from the competition.” — James Cash Penney
- 5. Price Personality History Place & Presentation Product Promotion Conclusion Growth period Sales had reached $250 million and JCPenney had 1,496 stores, in nearly every state Reached 2,053 active stores, 300 of which were full-line establishments Positioned itself a department store, and discontinued all product lines outside of fashion apparel and home goods Successfully transitioned to become one of the biggest names in department store apparel 1936 1973 1985 1982
- 7. Price Personality History Place & Presentation Product Promotion Conclusion • JCPenney’s success could not be sustained in the 1990s • Management lost focus on the company fundamentals and lost its brand identity • For the first time in the company’s history, a decline in sales occurred • Historically, the retailer attracted middle-income families and had a strong private label program. • In the late 1990s, the retailer modified its inventory to appeal to higher-end department store customers and put more emphasis on brand names 1990s—Growing stale D E C L I N G S A L E S
- 9. Price Personality History Place & Presentation Product Promotion Conclusion • Heading into the new millennium, growth further declined for the retailing giant • In order to compete, JCPenney launched hundreds of sales per year. • Executives believed loss of volume was due to location, and underperforming stores were relocated from mall locations. • New stores opened with at-the-door parking to contend with discount competitors Kohl’s, TJ Maxx and Target. • Despite these efforts, from 2003 to 2011, JC Penney’s sales declined by a whopping 45% from $32.3 billion to $17.8 billion. Priced to move
- 10. Price Personality History Place & Presentation Product Promotion Conclusion • In November 2011, JCPenney’s CEO Mike Ullman was ousted and replaced by Ron Johnson • The man who brought high-end designer wares to Target and who made Apple’s retail stores into an unexpected phenomenon. • Believed that rebranding JCPenney’s image to be more “hip” would save the company. Changing of the guard Ron Johnson
- 11. "The first and most encouraging thing to me is I am completely convinced that our transformation is on track. We are making extraordinary progress in everything we’re doing.” — Ron Johnson
- 12. Price Personality History Place & Presentation Product Promotion Conclusion Personality - “Focusing strategic initiatives around the elevation of JCPenney brand” Price - “Establishing “fair and square” approach across all platforms” Place and Presentation - “Creating a relevant and inspiring shopping experience” Product - “Obtaining market share by appealing to every American” Promotion - “Capturing customers’ attention through amplified messaging and media” 5 Point Project Scope 1 Johnson broke down his plan into the retailing P's: 2 3 4 5
- 14. Price Personality History Place & Presentation Product Promotion Conclusion Elevation of the brand • Rebranded the old-age retail store by removing “Penney” from its name, and reducing its moniker to simply “JCP.” • Came paired with a sleek red, white and blue logo that channeled the feel of the American Flag • The logo shape took on a boxy shape, going hand-in-hand with Johnson’s infamous “Fair and Square” pricing strategy. • New brand name and logo was not tested prior to its launch, the first indicator of the over-confident manner in which Johnson would move throughout his tenure at JCP.
- 15. Price Personality History Place & Presentation Product Promotion Conclusion • Johnson wholeheartedly believed customers would accept the shiny refurbished version of the brand with open arms • In reality, the company had a 113-year brand that was deteriorated in the minds of its customers • The radical rebranding effort was too abrupt, and made loyal customers feel unwelcome. Total flop with customers
- 17. Price Personality History Place & Presentation Product Promotion Conclusion • The second phase of Johnson’s project was “Establishing a “fair and square” approach across all platforms” • Pricing program that completely abolished JCP’s traditional sales strategy which offered customers a never-ending stream of sales, coupons, and rebates. • Implemented three levels of new prices offered to customers: Everyday Price, Month-long Values, and Best Prices • Promotions were reduced to just 12x per year— a drastic change for JCP’s core consumers who were offered 590 promotions in 2011. “Fair and Square” 590 12! reduced
- 20. History Place & Presentation Product Promotion Conclusion • Fair and Square intended to show the company would not play into the popular gimmick of high-low pricing • Johnson drove away and confused customers who were accustomed to coupons, deals and aggressive promotions • He failed to understand that JCP’s established customers enjoyed the thrill and challenge of finding a deal Total flop with customers Personality Price
- 21. History Place & Presentation Product Promotion Conclusion Inflated Confidence Personality Price • Johnson had failed to pilot the new pricing strategy in a smaller region prior to a national rollout. • He had an inflated sense of confidence stemming from his tremendous success at both Target and Apple, which led to implementing ideas without adequate testing.
- 22. Price Personality History Place & Presentation Product Promotion Conclusion Place & Presentation
- 23. Price Personality History Place & Presentation Product Promotion Conclusion Stores-within-a-Store • The third major facet of Johnson’s vision for JCP was “Creating a relevant and inspiring shopping experience.” • Johnson decided to implement stores-within-a-store (SWAS) • Johnson envisioned 80-100 branded retail shops and services placed • Johnson made major investments in new infrastructure, merchandise, and advertising necessary to make his plans come alive
- 25. History Product Promotion Conclusion • They were crippled by hundreds of custom legacy applications whose maintenance took up 95 percent of their $400 million IT budget in 2011 • The Project Management team agrees with the vision of his strategy, however, we believe it should have been implemented over more time. • We believe the partnership with the boutique brands and JCPenney as a retailer is a win-win for both parties Partial flop with customers Personality Price Place & Presentation
- 27. Price Personality History Promotion Conclusion Cotton Kills • The fourth point to Johnson's plan was to “Obtaining market share by appealing to every American” • Johnson wanted to enter the high-end home furnishing and clothing business • Cotton prices would increase dramatically due to flooding and shortages on cotton farms worldwide • Affected consumer purchasing power and increase inventory turnover for the company. Place & Presentation Product
- 29. History Promotion Conclusion • Middle class Americans will not spend $3000 on a couch. • In turn, they will shy away of stores that carry expensive merchandise they cannot afford. • Market analysis and foresight can be used to act quickly in reducing the impact of rising material cost. Total flop with customers Personality Price Place & Presentation Product
- 31. Price Personality History Conclusion Advertising • The fifth and final point to Johnson's plan was to “Capturing customers’ attention through amplified messaging and media” • Using traditional print and TV platforms the company increased advertisings spending to a record $504 million dollars • This led to $289.1 million dollars in TV spending and another $124.5 million on print. Place & Presentation Product Promotion
- 32. History Conclusion • This resulted in an increase in cost of goods sold (COGS) of over 60% of total revenue. • Limited Social Media and online engagement Total flop with customers Personality Price Place & Presentation Product Promotion
- 33. Price Personality History Place & Presentation Product Promotion Conclusion Summary and Conclusion • Johnson’s 5-step program was a major departure from the existing JCPenney business model and represented the largest platform project in the company’s history. • Failed to include appropriate change management activities • leverage a J-shaped project lifecycle that starts slowly , proceed slowly, and then finish rapidly.
Editor's Notes
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- 1936 Sales had reached nearly $250 million and JCPenney had 1,496 stores, in nearly every state 1973 Reached 2,053 active stores, 300 of which were full-line establishments 1982 The company was completely positioned as a department store, and discontinued all product lines outside of fashion apparel and home goods 1982-1992 JCPenney successfully transitioned to become one of the biggest names in department store apparel, especially amongst women and children.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- This in conjunction with an oversupply of company stores forced management to lose focus on the company fundamentals, opening up the market to allow for new competition to capitalize on JCPenney’s declining business. For the first time in the company’s history, a decline in sales occurred, largely due to the fact that JCPenney lost its brand identity, and became too similar to its competitors. Historically, the retailer attracted middle-income families and was the retailer of choice for children’s wear, home goods, and women’s and men’s apparel. Another trademark differentiator for J.C. Penney was a strong private label program. The company brought in well-known brands like Levis Strauss and Jockey to combat the negative consensus among consumers that private label brands were cheap and unattractive.(MASON) However, conforming to the merchandise model of its department store competitors did not drive sales. The strategy of “sameness” cause the retailer lose value and appeal with their core customer base, who were not as affluent as a Macy’s customer and appreciated low prices over brand names. At the same time, more affluent customers were not willing to make the switch to J.C. Penny, a store well-established in the market as a lower-end department store. To make matters worse, during this time period customers had an array of choices, often choosing to spend their money at specialty stores like The Limited and Gap.
- (MASON). In 2012, fifty to seventy percent of all sales were sold at discounted prices. (HBS)
- (MASON). In 2012, fifty to seventy percent of all sales were sold at discounted prices. (HBS) company losing market share from competitors like Macy’s from above, and discount retailers TJ Maxx and Target from below.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- This in conjunction with an oversupply of company stores forced management to lose focus on the company fundamentals, opening up the market to allow for new competition to capitalize on JCPenney’s declining business. For the first time in the company’s history, a decline in sales occurred, largely due to the fact that JCPenney lost its brand identity, and became too similar to its competitors. Historically, the retailer attracted middle-income families and was the retailer of choice for children’s wear, home goods, and women’s and men’s apparel. Another trademark differentiator for J.C. Penney was a strong private label program. The company brought in well-known brands like Levis Strauss and Jockey to combat the negative consensus among consumers that private label brands were cheap and unattractive.(MASON) However, conforming to the merchandise model of its department store competitors did not drive sales. The strategy of “sameness” cause the retailer lose value and appeal with their core customer base, who were not as affluent as a Macy’s customer and appreciated low prices over brand names. At the same time, more affluent customers were not willing to make the switch to J.C. Penny, a store well-established in the market as a lower-end department store. To make matters worse, during this time period customers had an array of choices, often choosing to spend their money at specialty stores like The Limited and Gap.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- designed to resonate with the everyday American This impulsive behavior marked just the beginning of many planning failures under Johnson’s management:
- JCP needed to authentically connect with existing customers, while also attracting new ones. Rather than turn our backs on traditional customers, we recommend still catering to them by taking a balanced approach, mixing innovation with familiarity so not to scare them away. We would take measures to retain the existing customers who are loyal to JCP, and then slowly phase in our messaging, merchandise,and brand look, which will simultaneously attracting new customers to the store. The project management team recognizes that changing a company brand name can create a public relations nightmare if customers don't understand the reasons behind the change. Being too innovative, too fast, can come off as being unauthentic. Introducing a brand image should have been implemented in stages with advance communication via news releases, billboards, social media, as well as notification the company’s website featuring both the old moniker next to the new one. The company’s messaging explained how the new name symbolized the company’s future and also tell customers the moniker would soon appear on company trucks, employee uniforms and eventually its clothing.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- Johnson believed that consumers were tired of coupons, and his “Fair and Square” pricing program abruptly abolished the practice The new pricing was created to be the clear differentiating factor for JCP, and the retailer would not play into the popular gimmick of high-low pricing, which inflates prices only to make discounts more appealing. JCP would offer merchandise at the best price possible right off the bat, and only offer promotions 12 times per year. Johnson hoped that eliminating promotions, and giving a giving them an attractive price would move merchandise off the store shelves faster, as opposed to having them sit idle until a sale.
- Everyday prices: competitive, yet reasonable daily prices Month-long: Values were sales on select items that lasted an entire month. Best Price deals: offered on 1st and 3rd Fridays of every month, and slashed the price of products to move them out
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.
- At the turn of the century, JCPenney celebrated 100 years in the retail industry Founded in 1902 by James Cash Penney Grew its success by following 3 key principles: A focus on understanding the JCPenney brand 2. Catering to the needs of their customers 3. Offering fashionable, high-quality merchandise at affordable prices.