JCPenney has back pedaled on its “Fair and Square” pricing. Turns out that if a retailer has indistinguishable product and weak customer service – price becomes important.
The company’s first-quarter results seemed to affirm that customers have been slow to warm to its pricing plan. JCP, lost $163 million, or 75 cents a share, in the three months ended April 28, compared with a profit of $64 million, or 28 cents a share, in the year-ago period.
Analysts and the media say it’s because JCP’s customer are familiar the sale markdown game and would prefer to continue the “don’t buy it at full price” dance. I don’t buy it. I give consumers more credit than that.
Here’s what really ails JCPenney:
It’s The Product! From my post on February 8th “JCPenney Needs To Focus On Product – Pronto!” JCP investor Bill Ackman, like so many other non-merchants, fails to realize it all begins with the product. Creating the right product is difficult. Not impossible, but definitely difficult.
By “right” I mean – function, aesthetic and quality consistent with the customers anticipation of benefits and price expectations. But “right” also means – product the target customer desires, providing the benefits the target customer believes are essential and product that creates a connection between the brand and the target audience. If a retailer can nail all of those aspects, and believe me it is no simple task due to multiple moving parts, they may just sell a few widgets. And if they sell a few to customers who become brand advocates – the retailer may just be successful.
Target-esque Marketing Was Lipstick On A Pig
From my post of May 17th, “JCPenney Marketing Must Focus On Product
“. A clear path to winning back its coupon-cutting customers and boosting sales is to shift the emphasis of the marketing strategy from positioning the brand to selling the product. Sounds simple and it can be – but it may be difficult if the Targetesque marketing strategy continues to drive the bus.
JCPenney does not need to scrap its pricing strategy. Instead it should be communicating product attributes, benefits and virtues…even going so far as to create the perception that JCPenney’s products exist at the intersection of quality and value. Highlight the construction of a dress, the craftsmanship of a handbag or performance of a swimsuit – then connect a great price to that product. Feature the merchants who are charged with globe-trotting sourcing and negotiating the best price on every product JCPenney sells.
JCPenney has spent far too much energy on operational activities and perhaps not enough focus on product. There may be better product in the pipeline – but for now promotional pricing is about all they’ve got.