Introduction
J.C. Penney is a 110 year old department store chain that recently unveiled its new pricing plans and strategies in order to remain competitive in an increasingly competitive retail market sector. It can be asserted that majority of the companies that flourished a few years to a few months before the global recession suffered from a certain extent of slowdown after the latest global financial crisis was unveiled in 2008 from which the United States economy has not fully recovered (Lublin & Mattioli, 2013). The goal of the new pricing and integration strategy, as announced by the CEO of J.C. Penney, Ron Johnson, is to reclaim the status of J.C. Penney as a retail powerhouse. J.C. Penney has a long history and track record in providing huge discount prices to its regular customers (Glazer & Lublin, 2013). Among its largest competitors are other big players in the retail and marketing industry like Wal-Mart and other supermarket and department store chains in the U.S. Currently, J.C. Penney enjoys a stable foothold in the industry it operates in with over 1,107 stores scattered all over the 50 U.S States and a few located in the island of Puerto Rico. The objective of this paper is to discuss the new pricing and integration policy that the company’s board, headed by its CEO, has implemented in order to bolster its competitiveness in the retail discount market.
The New J.C. Penney Pricing Policy
With more and more companies using coupon-based discount schemes to heighten up sales figures that may be partially caused by a slowdown in the global economy, continuous use of the already-common coupon-based approach in competitive pricing and discounting would naturally seem to be a bad idea because there are already a lot of retail market players out there that would have used this approached and have extracted all the possible benefits from it. This is what ran into J.C. Penney’s board of directors. They knew that if their goal would be to attract customers into entering and buying something from their large chain of stores, they have to do something different, something that has not been done by other industry players. The new pricing strategy being implemented by J.C. Penney is called the Fair and Square Every Day pricing policy (Mattioli, 2012). It is actually similar to the coupon-based merchandise discounting schemes with a few key differences. Firstly, it does not provide the customers with a constant rate of discount whenever they try to visit a store because under the J.C. Penney pricing strategy, there will be three discount choices namely: Every Day, Month Long Value, and the Best Prices, each of which having a distinct feature and or timing. From the name itself, the Every Day discount scheme uses of a daily discount rate that customers may availa instead of a constant deep discount sale available for only a limited amount of time that other retail companies offer. The Month Long Value is what one would usually refer to as the seasonal sale such as the back to school promo and Christmas Sales. here, J.C. Penney offers discounts based on the season. The Best Prices discount scheme is the counterpart of clearance sales in a common retail or department store chain company. Also, under the new policy, prices would not end with 99 but rather in 0 and the price tags would not show the previous and undiscounted prices of the items anymore. The price tags will now only show the discounted price. All of these changes in pricing policy were allegedly made because the management at J.C. Penney wanted the customers to think that at J.C. Penney, they buy based on their own terms and not the company’s (Reingold, 2012).
The Perceived Effectiveness of the New Pricing Policy
Whether the new pricing policy would be an effective feat that would provide the company with larger sales and presumably larger profits is something that cannot be precisely answered because firstly, it has only been a year since the new policy was implemented and some auditing processes are yet to be done to ensure that the measure of the performance of the company after the implementation of the new policy is accurate and clear. All in all, the effectiveness of the pricing policy shall be based on two things: number one, the uniqueness of the policy compared to that of other industry players and number two, the compliance of regular and new department store buyers on the new scheme. These two indicators are actually related because for example, when the customers perceive that the pricing policy is unique, they will mst likely be attracted to it, which in itself can be considered as a form of liking. So yes, there is some good chance that the new pricing strategy would be effective.
The Effect of the New Pricing Policy on Merchandising and Promotion Strategies
The most common form of competition in the U.S. markets and industries that most players use is perhaps the cut throat competition wherein the price is the leading and ultimate indicator. The lower the price of a merchandise is, the more the customers or the market will be attracted to it. This is the ultimate rule of cut throat competition. Based on this premise, the company that offers the lowest prices with the most acceptable levels of quality would most likely be the one to emerge as the winner. This is how the new pricing policy of J.C. Penney would affect its merchandising and promotion strategies. Because of the huge and unique discount system that it developed, more and more customers will be attracted to its products and services and so it will see its merchandising and promotion efforts succeed.
Learnings from the Case Study
One great learning from this case study is the fact that uniqueness when combined with the right prices and acceptable product qualities and brand reputation could go a long way. Uniqueness makes it easier for a company to win the sentiment of the people.Lower prices basically do the same albeit at a much larger extent. It literally makes people go crazy about going to the store--the store with the lowest prices, especially when they know that there is a regular schedule of the appearances of the discounts. This should help J.C. Penney achieve its financial and organizational goals.
References
Lublin, J., Mattioli, D. (2013). Penney CEO Out, Old Boss Back in. Wall Street Journal
Glazer, E.; Lublin, J., Mattioli, D. (2013). Penney backfires on Ackman. Wall Street Journal
Mattioli, D. (2012). How J.C. Penney was minted. Wall Street Journal.
Reingold, J. (2012). Retail’s New Radical Forture. Wall Street Journal
