Reinventing the J.C. Penny Brand

Question 1

JCPenney is one of the largest and leading retailers in America with over 1,107 department stores. JCPenney is also one of the biggest home furnishing and apparel sites online. Additionally, JCPenney offers business merchandise catalogue in general. Through these combined services, the company offers its customers a wide variety of private, public, and exclusive brands, which reveals the company’s commitment to offering its customers with quality and style at a good price. In 2010, the company introduced a new strategy of in-stores in its merchandising as a way of raising the dwindling business. Ron Johnson announced in 2012 that the company would start up boutique style shops inside larger stores.

The use of an In-store can be crucial in promoting sales and welcoming new customers. This will offer a new experience where people get attention that is specific to products rather than having to wait to be served on general shelves. The stores will also attract young customers as opposed to old and loyal existing customers (Stock). One of the disadvantages of this is that existing customers might be resistant to the new structure. The other disadvantage of this strategy is that this will require massive investment, yet the company is struggling at the moment.

Question 2

J.C.P. has been using promotion coupons for a very long period. However, with the new strategies, the company decided to eliminate the coupons and set prices at their real values. Implementing this strategy faces many challenges. First and foremost is the fact that existing and loyal customers are used to this kind of pricing and any attempts to change it will drive them away. It is common knowledge that most shoppers love negotiating prices for products before making payments. This makes the shopping experience interesting. The second challenge is that competitors continue to offer discounts and coupons, which means that customers are likely to move to the competitors.

Question 3

During the quarter ending in April 2012, J.C.Penney’s same-store sales went down by 18.9% while total sales went down by 20.1% to $3.15 billion. In February of the same year, the company introduced a new pricing strategy, which eradicated daily coupons, discounts, and sales events that loyal customers were used to as opposed to everyday prices. During the change in price strategy, the company initiated an advertising campaign, which featured comedian Ellen DeGeneres (Zmuda). However, this campaign did not explain the pricing strategy well to customers, leading to the loss of core customers. The outcome of this marketing strategy was the reduction in sales by 18.9%. Recently, sales for the company has started rising, though in single digits. During few weeks before the end of the year in December, the sales rose 3.1% for the same stores sales. Sales from the internet rose 26.3%.

Question 4

Sephora cosmetics established an In-store marketing strategy presuppose that their experienced staff demonstrate how to use and apply specific products. This goes beyond the usual stores where similar products are displaced in a specific place in the store (Stern). The In-store gives the staff an opportunity to offer 10-minute Express Services to customers for free. During the 10-minute Express Service, the staff shows customers how to apply makeups and a mini-lesson on how to attain season’s most fashionable looks like a smoky eye or the pouty lip. Additionally, the In-stores offer makeup sessions for 60 minutes after customers make a minimum purchase. Larger stores organize special events with regular intervals, which feature consultations with the brand and industry specialists. This strategy coupled with digital marketing has led to a massive expansion and success of the company to over 1,600 locations globally and 386 in-store shops in J.C.P. in less than 20 years of operations. The In-Store strategy can work for J.C.P. as well and result in increased sales. However, the current pricing strategy that eliminated discounts and coupons that customers enjoyed will counter the benefits that come with In-Store marketing strategies (Tuttle).

Question 5

Ron Johnson joined J.C.P. from Apples where he worked closely with Steve Jobs. At Apple, Ron Johnson decided to sell products by lifestyles rather than in line with a traditional classification. This is the same strategy he brought on board when he joined J.C.P. His first plan for J.C.P. was to transform existing stores into lifestyle stores. The plan was to attract new and young customers from different parts of the world. He planned that the stores would be organized differently, would be neat and very orderly. In addition, he planned to eradicate

rows of cloth racks and introduce new small shops in stores where shoppers would enjoy an experience of being in outside shopping malls. Ron’s other plan was to eradicate all discount coupons and promotions and set prices for all products at their real values (Denning).

Question 6

Strengths

One of the strengths that JCPenney enjoys is its long history. Having been established over a hundred years ago, most people in the United States of America know the brand and thus are likely to make a purchase due to the brand popularity. The second strength is the Brand recognition, which, as mentioned earlier, allows the company to enjoy better sales than its competitors.

The third strength is its interaction with popular brand names. J.C.P. associates with companies like Levi, which means that customers for such brands by extension might be customers for J.C.P. This can be a crucial way of tapping into a new market for customers who have been purchasing from the company. Additionally, the company offers shipping services for its goods and services to customers, which in turn improves customer experience. It is also important to note that the company offers free haircut for kids, which acts as an attraction for customers (Segall).

Lastly, the company has a presence in the entire United States of America with over 1,100 stores. This means that this presence ensures that it has a large market share for a wide variety of products that the company sells. The company sells footwear, jewelry, furniture, electronics, and clothing, which means that the company can still make sales from one line of business when the sales from other lines of business go down. This makes it difficult for the company to run out of business entirely.

Weaknesses

One of the greatest weaknesses of the company is the fact that it does not have a presence globally. Most stores are in the United States and, therefore, the company does not take an advantage of emerging markets in developing and emerging economies. Additionally, the current market share decreases on a daily basis due to the increasing competition by companies who offer the same products (Kumar, Massie, & Dumonceaux). Some of their major competitors include Mercuries & Associates, Daiei, and J Front Retailing.

The other weakness is the decrease in popularity of the company due to the change in pricing strategies. Initially, the company would state high prices on products and then customers would negotiate to get a discount, sometimes up to 40% of the price. Under the new strategy, the company decided to set a real price for all products. This has led to reduced popularity as customers like negotiating prices for goods and services.

Opportunities

One of the opportunities available for the company is tapping new markets in emerging economies. The company can seek alternative markets in Asia, Middle East, and Africa. This will lead to increased revenues for the company. With the increased use of the internet across the globe, the company can take advantage of getting new customers through internet sales. Online shopping has become a common phenomenon even in the undeveloped world. This means that the company can still make sales without having to set up stores in some countries. Additionally, the company can explore new niche markets like the Big and Tall market and the maternity market. This is a market that has not been tapped completely by existing competitors.

According to Zacks Equity Research, the company can also take advantage of the increasing disposable income of consumers as the economies across the world continue to improve. JCPenney can also acquire small retail shops to take advantage of customers that already exist. Lastly, the company still has an opportunity of giving discounts to consumers and making the stores cozy and modern at the same time. This will attract new customer and leave the existing ones happy. The company has the opportunity of increasing its visibility through marketing and advertisement and creating its awareness across the globe (Dunn).

Threats

One of the major threats facing the company is the use of price point level. As mentioned earlier, the company eliminated the coupons and discounts on its products and started stating the exact price of products. This is quite discouraging for customers who might seek alternative companies that can enjoy such benefits. The other threat is the availability of internet marketing. Through the internet, customers can compare prices of products from different companies, which means customers are likely to buy from the cheapest company. The mounting cost of labor in America is another threat facing the company. The increase in these costs would lead to an upsurge in production costs, which would eventually push the price for commodities up. The rise in prices for products lowers the demand for the same products to a great extent (Zacks Equity Research). Lastly, the rise in competition is a major threat to the company, which, if left unchecked, can force the company onto its knees in a few years. At the moment, the company is struggling against competitors like Kohl’s Corporation and Macy’s.

Question 7

J.C.P. stock has been going down since the introduction of new strategies by Ron Johnson. The loss of core customers has led to the market reacting negatively, which in turn led to a decline in the stock prices. When Ron Johnson joined the company in November 2011, the prices were $31.67/share. According to J.C. Penney Company, Inc., this went down to $16.42/share by the time he left in April 2013. However, his departure pushed prices down further to $ 7.28. The price has started going up slowly in 2014 due to the reintroduction of previous pricing strategies, with the prices as at September 2 being $11.14 (Berfield).

The main advantage of the corporate strategy the company adopted was the attraction of the young people as part of their clientele. This is due to the new display of the shops and the concept of In-store shops (Bauer). The second advantage included the rise in sales though for a short period before the strategy failed. The main disadvantage of the corporate strategy is the loss of loyal customers, who have known and shopped with the company for a long time due to the elimination of coupons and discounts. The second disadvantage of the strategy was the reduced sales levels after the loss of the loyal customers. Lastly, the company’s share price dropped to its lowest, which in turn results in the loss of investors’ and shareholders’ confidence.

Question 8

In the early years, the main target market for J.C.P. was the elderly people who were 55 years and above, earned less than $35,000 per annum, and were extremely sensitive to prices. This was the reason of their massive price coupons and discounts. When Ron Johnson joined the company, his aim was to target the young market in their teenage years through to thirties. This target market, however, was still low-income earners. However, the main market still remains old people.

The company makes use of its coupons and discounts as the main marketing strategy. Lately, the company uses the internet to market and sell its products. As a part of the assortment selection, the company sells a variety of products to its customers. JCPenney is also one of the biggest home furnishing and apparel sites online. JCPenney also offers business merchandise catalogue in general in a wide variety of private, public, and exclusive brands.

During the years before Rob Johnson, the company employed the anchoring pricing strategy referred to as fake pricing. Under this strategy, companies price their products highly to generate a perception that products are of a high value. Since anchor prices are very high, customers are usually unwilling to pay for them. Therefore, larger markdowns and discounts offered appear to be large and tempting on such products. When Rob Johnson joined the company, he tried introducing the fair and square approach under which discounts were reduced to actual prices. This led to a massive loss of customers and a reduction in revenues. Upon ouster of Rob Johnson as the CEO, the company reverted to the fake pricing strategy.

Conclusion

JCPenney, a company that has been in existence for over a century has been on the verge of collapse in the recent years. The company brought on board Rob Johnson to turn around the company. His strategy was to change the operations of the company through introducing a new pricing strategy and In-store marketing strategy. While his intention was to duplicate the success he had at Apple Inc., his strategy failed terribly at JCPenney. The sales volumes fell by over 18%, leading to the ouster of the CEO in less than two years of service. According to Clifford, the company reintroduced its marketing strategy after Rob’s departure and even though the company’s sales are picking up slowly, it is still struggling with concerns that it may prove difficult to save it.

Works Cited

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