JC Penney

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Synopsis:

In August 2012, Ron Johnson, the new CEO of department store J.C. Penney, is reconsidering the dramatic changes he recently initiated for the business model and brand of his company as he gets ready to release second quarter results. A new pricing scheme he put in pace in February, dubbed “Fair and Square,” was a central component of the new strategy. The “Fair and Square” scheme was a switch from J.C. Penney’s traditional high-low pricing approach, in which the retailer ran frequent sales to offer customers discounted pricing off its higher day-to-day prices, to a pricing strategy that attempted to simplify J.C. Penney’s pricing structure and presumably make it more straightforward for customers, offering them great prices every day, with less frequent price promotions. The scheme initially had three pricing tiers and eliminated sales promotions; thus moving J.C. Penney to something that more closely resembled everyday low pricing (EDLP). Other components of the new strategy included a new store layout, the inclusion of several well-known brands of merchandise, and the development of J.C. Penney specific clothing lines by well-known designers. However, troubling first quarter results that continued into the summer months prompted Johnson to make adjustments to his original pricing plan. It seemed as though J.C. Penney shoppers, accustomed to receiving JCP Cash coupons and weekly circulars advertising the week’s special, were slow to embrace the new pricing format and began leaving the retailer in droves. Johnson was now under enormous pressure to turn things around as the all-important back-to-school and holiday shopping seasons were imminent. Was the “Fair and Square” pricing strategy misguided or was it just a matter of time before customers favorably responded to it? Were the recent pricing adjustments enough to turn things around? Should Johnson stay the course on the other elements of his repositioning efforts? Is Johnson’s experience in setting up Apple stores helping or hurting his as he tries to achieve his goal of making J.C. Penney “America’s favorite store”?

Case Discussion Questions:

1. Evaluate the overall effectiveness of the “Fair and Square” repositioning strategy. How well or poorly do all the elements work together or work at odds with one another to deliver a coherent whole?

2. What assumptions about JC Penney’s 5 C’s (customer, competitors/ collaborators, context, and company) must hold true for the repositioning to be effective? What does Johnson perceive in these factors that lead him to believe that “Fair and Square” pricing can be a successful approach for JC Penney? How confident are you that these assumptions are correct?

3. Is JC Penney a brand that can be “Target-ized” or “Apple-ized”? Why or why not? In what fundamental ways does JC Penney differ from these two brands? Does Johnson’s plan address these differences in ways that make the success of JC Penney’s new strategy more or less likely

4. Do you agree with the changes Johnson is making to the pricing scheme that set to take effect August 1st? Are they enough to turn things around? What should Johnson do now? Looking out on year, will JC Penney be a stronger or weaker brand if he stays on the current course?

JC Penney