As our session with strategic marketing comes to an end, module five’s emphasis is on pricing strategies and evaluating the case of J.C Penny. For this case I will examine its pricing strategy and the now ousted, CEO, Ron Johnson. In the period from 2009 to 2011, J.C Penny was down from almost $18 billion to $17 billion. That comes out to sales of about $150 per square foot, which is probably in the lower third of department store sales, if not the lowest. So in 2011, J.C Penny was looking for drastic change and a spark of life for their corporation. In June 2011, JC Penney thought they had found that spark with CEO Ron Johnson.
Unfortunately Mr. Johnson, though innovative, miss fired on what the consumer wanted and put J.C Penny in a predicament they still may not recover from. For this case, I will describe Johnson’s pricing strategy while providing background on the company and department store industry. I will then explain why Johnson’s pricing strategy was sadly catastrophic. J.C. Penney’s current pricing strategy will then be compared to Johnson’s pricing strategy. Finally, based on the most recent situation of J.C. Penney I will describe how J.C. Penney might perform in the next five years, and describe what Johnson might have been able to do better by considering all aspects of the marketing effort put forth by JC Penny.
History of J.C. Penney
J. C. Penney Company, Inc. is a chain of U.S. department stores based in Plano, Texas, a suburb on the northern edge of Dallas. 1902 the store was founded by James Cash Penny, by 1952 the company’s sales exceeded 1 Billion. In 1995 it allocated $2.1 billion in capital expenditures to open 100 new domestic stores and refurbish 500. In 1998 its J.C Penny launched its first retail site. The company operates more than 1,107 department stores in 50 states and Puerto Rico. J. C. Penney also operates catalog sales of goods and nationally in small markets, which makes it one of the main catalog stores in the United States.
With the size of J.C Penny and the great history of the company, one of the biggest challenges to management at JC Penny was how to make the company stand out and be more competitive as the industry changes.
Ron Johnsons Pricing Strategy
In the early months of 2012, the company revealed a new plan to transform its stores. Part of this strategy includes was going back to James Cash Penny’s value and really focusing on offering a truly special experience so customers will enjoy the spirit and the new exciting and modern stores unlike any retail experience that currently excites. (Investors 2012) In theory, customers would enjoy the spirit and the new exciting and modern stores. J.C. Penny planned to create excitement via promotions on monthly basis, which will be synced with the rhythm that the lives of the customers have. J.C Penny also planned to revamp every store present by rolling out the merchandize that is tagged with exciting initiatives.
Desperate for this change, J.C Penny, hired Ron Johnson, who laid out his vision of a more upscale, more youth-oriented Penney, who was weaned of its addiction to price promotions. When Johnson eventually unveiled his strategy, it centered on a few points. The biggest, perhaps, concerned Penney's incessant price-slashing promotion. In 2011 they had 590. The new JCP would have virtually none. (Reingold, J., Jones, M., & Kramer, S. 2014)
There would be three prices for an item: the original price, which was far below the typical marked-up price; a month-long value price for certain items; and a twice-monthly "best" price for things that needed to move. No more clearance racks, no more mess, just an honest—or as a later slogan put it, "fair and square" (Reingold, J., Jones, M., & Kramer, S. 2014), relationship between the customer and the store. In a retail world full of illusory market-share gains based on which retailer offered the lowest clearance prices, it felt like a welcome way to stop the
