Recognizing the mistakes it made in an attempt to reinvent itself, JC Penney is now trying to woo customers back with a television and social media campaign apologizing to customers and inviting them back. But is that enough?
“The apology is a nice first step, but we need to see what lessons JC Penney is going to keep from CEO Ron Johnson’s tenure and what it will jettison,” said Dr. Daniel Korschun, an assistant professor of marketing at Drexel University’s LeBow College of Business. “Johnson did a lot of smart things that the company badly needed, like rethinking their product lines and improving the in-store experience.”
Johnson’s ambitious “fair and square” model that included eliminating coupons and sales in favor of regular, low prices resulted in sales plummeting 25 percent last year. But JC Penney was facing difficulties before Johnson was brought on, according to Korschun. “It’s important to look at this through the lens of a turnaround attempt,” he said.
In order to attempt a turnaround, Johnson needed to make substantial changes in the way JC Penney promoted itself. Simplifying the structure of sales was a good starting point. “Sales can lead to fatigue among customers,” said Korschun. “As a buyer, you always have to wonder whether you could have gotten a better deal on a different day. Simplifying the sales and the coupons is one way to improve the experience and reduce some of that regret.”
So, why did a lack of coupons and sales lead customers to shop elsewhere? Korschun discussed the JC Penney case in one of his MBA classes. Most students agreed that the constant sales were confusing and a turnoff. But when they analyzed the tactic in relation to JC Penney’s number one goal – which was to drive traffic to the store – opinions started to shift. “The class came to the realization that while this approach could make shopping more pleasurable, it didn’t motivate them to run to JC Penney before Macy’s,” said Korschun. “While customers might like the idea of it, the urgency to shop at Penney’s just wasn’t there.”
As part of the reinvention under Johnson, new brands were introduced –Izod, Liz Claiborne and Levi’s, to name a few—while others were discontinued in an attempt to attract younger shoppers, but the initiative ended up alienating long-time, loyal shoppers. In addition to its apology, JC Penney has now brought back an old-time favorite, St. John’s Bay. The store layout accents the most appealing brands and some sales events are linked to particular brands. Korschun believes this sort of approach is going to be a big part of the Penney’s formula for a comeback. “One of the discoveries that Walmart has made over the past five or six years is that consumers don’t just love cheap stuff, they love to get good deals on brands they love,” he said.
With Johnson now gone and his predecessor back at the helm, it won’t be easy for JC Penney to win back shoppers. “We’re talking about a steep uphill climb,” said Korschun. “It’s a very competitive market to begin with. And now JC Penney has to re-acquire many of the customers it lost over the past couple of years. That’s an expensive proposition. But the store’s latest steps are encouraging. It looks like JC Penney is finding the right balance.”
The JC Penney commercial acknowledging mistakes and inviting customers back: