J. C. Penney’s “Fair and Square” Strategy
Abstract
In 2012 , the huge departmental chain of stores, J.C Penney under its CEO, Ron Johnson came up with an ambitious plan dubbed “Fair and Square” as a countermeasure to recession and dwindling sales. However, instead of revamping the stores the plan which entailed offering complementary promotions and periodical price reductions led to further decline and the organization had to seek alternative ways to remain afloat. This essay presents the problems that J.C. Penney faced and the recommendations that it needed to follow to revert to profitability. It also presents an analysis of the issues to be addressed at JCP.
Executive summary
J.C. Penney one of the largest departmental stores in the US with a history dating back 110 years, has faced numerous problems in its bid to reestablish a new growth path. Prior to the implementation of the changes, the stores were experiencing decreased consumer demands due to economic recession that led to more consumer frugality. J C. Penney’s new CEO decided to overhaul the organization’s strategy by introducing new store designs and formats, revised periodical pricing and creation of “stores within stores”. The results were disastrous and the company had to seek alternative ways to regain their market share. The case study in J.C. Penney shows the need for companies to engage with their customers and factor in their views accordingly prior to rolling out new strategies.
The elimination of JCP coupons and rebates to which loyal customers were addicted to sales and discount programs has spelt trouble with many customers moving to low cost competitors.
The main issue has been repositioning J.C. Penney with a new pricing strategy dubbed “Fair and Square” which consists of everyday prices, monthly prices and best prices. The CEO also introduced new store designs, new logo and new sales structure. The many changes confused customers and led to poor financial performance for the company. The departmental stores are no longer attractive. Conservative women are also dissatisfied with the stores. E-commerce is not progressing as desired and it has stagnated. Many employees feel dissatisfied with the lack of contingency plans and commissions.
Recommendations
J.C. Penney can choose to keep the EDLP strategy but add some improvements will enhance brand collections of JCP and show that the CEO trusts the new strategy which is a positive sign in regaining employee as well as customer trust.
Revert to the high-low pricing strategy. The customers are already used to loads of coupons and the company ought to offer even better deals as a way to “compensate” the customers for the time it had gone “off track” and offended its loyal customers. However, the company should seek to come up with fresh-looking stores to attract a new category of shoppers mostly the younger ones.
It is also critical for J.C. Penney’s to conduct comprehensive market research to ensure that it takes the necessary steps in reestablishing its market share and grow it some more. The company may also need to invest in new ventures such as e-commerce where some goods in arrangement with some suppliers are sold through online platforms. This will break down the geographical barriers and increase sales volumes and profitability.
The company also needs to take advantage of the emerging advertising and marketing channels such as social media and the internet to launch strategic campaigns geared to not only regain lost market but acquire new ones. The company should also interact with the public to improve its public relations and collect suggestions on areas of improvement.
Create a positive image of the company among the public through a marketing campaign that explains the new pricing strategies to avoid heresies and spread of damaging rumors.
Analysis
J.C. Penney’s CEO introduced a new pricing strategy comprising of three tiers as a way of eliminating typical sales promotions. His target was to simplify the customers’ shopping experiences. The strategy to introduce several well known brands was to ease marketing and create synergies in marketing through collaboration with renowned brands. The new store layout was designed to attract new customers and excite the old ones. However, the company failed and there was need for it to revert back to the high-low culture it had created. The organization would avoid further financial losses and regain customer trust if it reverted back to the customer-driven strategies. In the competitive departmental stores business, it is critical that the company obtains and adheres to the dictates of the customers. The customers need their JCP Cash Coupons and the weekly special offers.
Conclusion
J.C. Penney required to have conducted proper market research prior to launching a new and comprehensive strategy with direct effects on the customers. Its failure in the strategy points to the need for organizations to engage their customers in their strategic plans so that whatever they implement on the ground resonates well with the majority if not with all the customers- both old and new.
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