BMGT 411: Assignment #1

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JC Penney has been in the news of late.  In the last few years, their STS (Same Store Sales) have declined at an alarming rate as has their profit.  They hired a new CEO only to remove him after poor performance.  Here are just some of the things that happened at JC Penney over the last few years:

– STS Dropped 25% in 2012 (First Year of Ron Johnson at CEO)

– Laid off 20,000 workers, in stores and at corporate

– Is in a lawsuit with Macy’s over a Martha Stewart exclusive agreement

– The stock continues to hit new lows, now trading near $12 a share

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Find an article that talks a little about what happened at JC Penney?  What would your recommendations be to have prevented this?  What in regard to marketing strategy could have JC Penney done to do this differently?  Do you think JC Penney will survive?

Post your comments below and link to the source of the article.

Chris Lovett

 

 

 

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7 thoughts on “BMGT 411: Assignment #1”

  1. JC Penny should have slowly phased out their old marketing plan that is cultivated by senior citizens and implemented new promotional campaigns to attract a younger demographic in a structured time frame, instead of alienating their core customer base seemingly overnight. JC Penny has brought make Mike Ullman back as CEO, who has reinstated discounts and reestablished some faith in the brand. Hedge Fund manager Kyle Bass and George Soros have decided to buy up shares and invest in JC Penny’s future, which is also helping with public perception. However, very few companies have dropped so far in share value in the last two decades and not one of them recovered. That fact puts a bleak shadow over JC Penny’s prospective future but I think they have a shot at recovery.

    http://www.cnbc.com/id/100972772

  2. What happened to JC Penney?
    I have been following JC Penney since the arrival of new CEO, Ron Johnson in 2011, who decided to change the pricing strategy for “everyday low price”. A huge disaster in losing their target audience who have been the core customers of JC Penney. First of all, Ron Johnson did not hire a professional team of marketing executives from buyers to marketing research (I personally think he gave his family and friends positions, without any marketing experience). JC Penney had secondary data for the new marketing research team to analyze data to get a clear picture of what “worked” for customers in the past, concerning coupons. I was a loyal JC Penney customer for over 20 years.The coupons is what kept the customers coming back to purchase more products. When the store rolled out the new pricing strategy, I was not a happy customer. The women’s clothing line was full of 60’s look with prints and very little solid colors, in which it became a problem for me to shop. Secondly,JC Penney did not promote their new product before tinkering with pricing strategy. They should have done a sampling test through their marketing research team to make sure this would benefit loyal customers. Ron Johnson price strategy failed quarter after quarter, till his resignation. JC Penney loss $2.7 billion.
    JC Penney should not have alienated coupons to their loyal customer, who are the baby boomers. When any company loses their core customer, you better believe that a drastic decline will take place. JC Penney lost sight of what was important to the company, not Ron, not his unprofessional team players, but the loyal customers who patronized the company over the years. The pricing strategy had caused over 20,000 jobs. I forecast a three years return on investment for JC Penney. I believe JC Penney will survive. They have a” buyer” who studied the customers buying behavior.

    http://business.times.com/2013/04/09/the-5-big-mistakes-that-led-to-ron-johnson-ouster-at-jc-penney/

    http://www.bizjournals.com

  3. JC Penny ruined themselves when they decided to take away “sales”. I don’t know why any marketer would think that consumers were tired of so many sales and coupons. Finding out what drives consumers is one of the most important things to acknowledge when planning a new marketing strategy. For some reason, the CEO made the decision himself that consumers didn’t want “sales”, and I would love to see where he got this so called research from. The article I found talks about “Fair and Square Pricing”. This new strategy would focus on more consistent prices with less promotions and sales. The most important part of the article to pick out I think is the following: Morgan Stanley analyst Michelle Clark, who surveyed consumers about JC Penney’s prices:

    “Consumers’ perception of JCP’s new pricing regime is worse than we (and the market) thought. Looking at shoppers who have been to JCP since 2/1 (i.e. since the intro of new pricing), more cited higher prices (rather than lower) at the dept. store. In fact, only 16% of shoppers associated ‘Best Prices’ w/ JCP and cited prices as being lower. Furthermore, customers cited bargains as harder to find and fewer aisles w/ deals.

    JCP shoppers find ‘Best Prices’ hard to understand, difficult to compare to other prices (both non-sale and deal), and low value for money.”

    Clearly, the research to back up the marketing strategy was not there. This is where JC Penny went wrong. Before making huge changes to a company that has been around for years and has loyal customers, extensive research should be done as the first step.

    http://www.forbes.com/sites/marketshare/2012/06/15/jc-penneys-epic-rebranding-fail/2/

  4. I was an employee of J.C. Penney during my Junior and Senior Year of high school in 2006-2007. I sold shoes on commission and made pretty good money for a high school student. Back then J.C. Penney was making money and was one of the only stores in the struggling Century 3 Mall to have a consistent and loyal customer base. This all came to an end when they hired Ron Johnson from Apple, which started the collapse of the company. Johnson came in and totally changed the pricing strategy of the company and ended up alienating its very loyal core customers. With Johnson’s goals of eliminating discounts and attracting new customers, he in fact “drove J.C. Penney into the ground.” His new pricing strategy caused so much customer confusion that many people started shopping elsewhere which lead to the massive layoffs. If you ever wanted to learn how to ruin a company, using Ron Johnson’s strategy would be it. When he took control of JCP, stocks were trading around $43/share nowadays its $12/share. They have lost billions. If I was him I would have never tried to change the pricing strategy, people love coupons. That was his biggest downfall, if he was really concerned about attracting new customers there are other ways of doing it without totally forgetting about your core customer base. His strategy was too quick and too confusing. He should have first tested his strategy and then rolled it out slowly if it did well during the tests. Unless, J.C. Penney can in some way regain the loyalty of its core customer base I think it is doomed for the future.

    http://www.huffingtonpost.com/2013/05/02/jcpenney-pricing-disaster-morale_n_3196037.html

  5. Many change’s happened at department store JC Penny’s within the past few years that helped their decrease in sales, but the main change was coupons. As of 2011, JC Penny’s brought in a new CEO that had many different “bright ideas” that would bring the store new revenue. The one that backfired and hurt the company the most was taking away sales and coupons.

    Sales and coupons is what made JCP for all of its regular customers. Discounted rates and coupons for department store items, is exactly what used to drive in JCP’s regular customer. For the company to of prevented the sales drop they should have stuck with what worked such as coupons and tried to just enhance aspects of the store to make it more hip.

    The marketing strategy was to basically to change JC Penny in my opinion from a department store who’s demographic was older adults and change it into more of hip store style wise kind of like Target. Although, the idea of making the company something fresh and more appealing for a younger crowd is a good thought, they didn’t really think about losing the customers they had. They completely changed the store around for regulars, and took away coupons and sales which is why almost all regular customers came in.

    The marketing strategy lost former customers, and although attracted some new people into the store, didn’t actually persuade them into actually buying.

    The company claims this transformation will take years, I do not think that it will make it that long.

    http://www.marketplace.org/topics/business/jc-penney-sales-plunge-amid-bumpy-transition

  6. JCP was basically taken over and run into the ground by Ron Johnson. It is ok to bring some changes to a store but they cannot be so drastic and fast. The core customers of JCP were alienated and the changes to the company basically pushed them out the door and made them feel unwelcome. The problem with Ron Johnson is that he made all of the changes because of what he felt the store should be like and what he felt the customers wanted. The fact is that all of these drastic changes he made should have been tested thoroughly and discussed with actual customers to see if they would be willing to accept them. You cannot just change the customers’ desires of shopping simply because you feel they should be changed. A company will never be able to keep customers this way. JCP was a unique store within itself, which is why it had so many loyal customers. Ron Johnson simply didnt understand the JCP brand and environment and acted entirely too quickly.

    JCP will need to try to assure customers that it can go back to the old ways in order to get the loyal customers back. Next time they want to chnage the company they need to do it slowly and test the changes to assure customer feedback is positive. However, I do not think JCP will survive much longer because of Ron Johnson.

    http://business.time.com/2013/04/09/the-5-big-mistakes-that-led-to-ron-johnsons-ouster-at-jc-penney/

  7. Donald McDuffee
    Exhuming JC Penney’s Failed Marketing Makeover For Leadership Lessons We Can All Use, JCPenney’s Epic Rebranding Fail, JCPenney ad apologizes for changes made by former CEO Ron Johnson, Bill Ackman takes huge loss on J.C. Penney
    fastcompany.com 5/22/13, forbes.com 6/15/12, appleinsider.com 5/1/13, cnn.com 8/27/13
    describes the fail, marketing reaction and losses, ad apologizing for changes made by former CEO, Bill Ackman selling shares of JCPenney
    Ron Johnson drove off customers, no coupons, 3 rebrands in 3 years, people want coupons and sales, youtube apology to customers, down 25%, $12.99b in losses since 2012, 9 quarters of loss, stock down 60% since 2012, Bill Ackman sells 18% of share of JCPenney
    JCPenney made big blunders under CEO Ron Johnson. He tried to get rid of the idea of coupons, and have good deals all the time. Market research then showed that researchers did not understand the low price strategy, and did not see lower prices. They felt there were less deals throughout the store. After seeing astonishing losses over Ron Johnsons short tenior with JCPenney the company is still trying to have a positive quarter. 9 strait quarters that have recorded as losses. The stock has gone down 60% since 2012. I think the imidiate strategy of going back to what they had before was a good move, but that can not be their final solution. They need to reinvigorate the “core customer” they lost. They need to get the younger generation that used to love american eagle and aeropastol when mom and dad were buying them clothes to start shopping at JCPenney where they should be able to find quality clothing for bargain prices. Working on marketing to make sure they are bringing in trendy clothes that customers can feel comfortable in, as well as confident in. People believe in looking good makes you feel good. This confidence needs to be shown by their new strategies. They need to bring in a strong leader who can pull them out of the hole. I would get rid of the former, and now current CEO and bring in another smart person with experience turning around clothing stores, or similar business. I think they will survive. Bill Ackman who owned 18% of the company sold his shares. I believe this is the catalyst needed to allow the company to bring in the right personel to correct the ship. What I would have done differently was not hire Ron Johnson. He did great things with apples, but pun intended thats like comparing apples to oranges. A high end electronics guy is not who they needed. They should have pressed harder to have certain brands cheap to bring in customers, while keeping more full priced. Always keep the coupons being sent in the mail. Older generations are used to shopping through a catalog at home. If they stop seeing JCPenney they stop thinking of JCPenney as well as stop seeing it as a good first store to walk in. If mom thinks she can get clothes for her kids at JCPenney for a better price, and faster than having to walk into 10 other stores at the mall she will do it. If she thinks its going to cost the same then maybe it stops being worth it to even walk in the door.
    http://www.fastcompany.com/3009936/exhuming-jc-penneys-failed-marketing-makeover-for-leadership-lessons-we-can-all-use
    http://www.forbes.com/sites/marketshare/2012/06/15/jc-penneys-epic-rebranding-fail/
    jcpenney-ad-apologizes-for-changes-made-by-former-ceo-ron-johnson
    http://money.cnn.com/2013/08/26/investing/bill-ackman-sells-jcpenney/index.html

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