J.C. Penney Pricing Strategy Fails to Meet the Perception of the Masses

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I find this breaking news to be very intriguing, especially since I wrote a short post just over a year ago in regards to the new pricing strategy put into practice by the new CEO in 2012. A quote from the January 2012 article on Yahoo goes as follows:

Perhaps the biggest challenge for Penney is to sell shoppers on its new pricing. For years, Penney, like many other stores, has propped up price. The intent: to make it look like shoppers are getting great discounts when items go on sale.

The increased discounting has been a vicious cycle that only feeds into shoppers’ insatiable appetite for bigger and better discounts. In fact, whereas it took 38 percent off to get shoppers to buy 10 years ago, it now takes discounts of 60 percent, Johnson says.

I love this quote because as a very astute shopper who can quickly analyze and calculate all facets of a transaction, I am dumbfounded at how “sales” are becoming so dumbed down in order to attract and fool the masses. I love marketing, but I am also capable of not being tricked by marketing and shopping gimmicks. Yet folks, generally speaking, are easily maneuvered, as described above in the Yahoo article.

The breaking news is that the new J.C. Penny CEO, Ron Johnson, has been canned. Johnson, when he took the helm at the retailer, rolled out a strategy of “everyday prices,” new price tags that eliminated gimmicky markdowns, and whole figure pricing. Johnson, who came from Apple, brought his Apple-like strategy of shunning discount pricing while focusing on service and product offerings. J.C. Penny is a very traditional, old retailer with a core customer base that is not as sophisticated as the Apple customer base, hence the inability to sell sophistication to the masses seeking bargains – even if they are only perceived bargains.

As I noted in my previous post, Mr. Johnson’s fail may have been economics, and not marketing. The average shopper has been trained to see sales, and not the real value of the products they buy. The cheap-and-easy credit era helped to fuel that ignorance because the abuse of credit has been justified by folks who believe that there is an upside to all the debt: they are buying value because goods appear to be listed at bargain prices. In reality, they are overpaying for products and getting sucked into buying things they didn’t plan on buying, and the end result is more stuff, more debt, and a skewed perception of value.

Mr. Johnson tried to change all of that, at least for his customer base, but the world was not ready for a boutique J.C. Penney or a brutally honest retailer selling service and reality over perceptions. Wall Street, investors, and corporate boards want strategies and promises constructed around the easy-money economy. I say good luck to Mr. Johnson, because I think there is a place for his game plan somewhere in the modern retail world.

4:07 pm on April 8, 2013
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