Have you seen these commercials?
On February 1, J.C. Penney (now known as jcpenney) launched a new brand identity. The cornerstone of their new identity is the “fair and square pricing” strategy. Rather than setting a high ticketed price and then offering markdowns, jcpenney will now offer everyday “true value” prices, month-long discounts on specific items, and “best pricing” on the first and third Fridays of the month.
Will it work? We hope so. Here are two Clear Verve perspectives on the strategy – Christina’s thoughts as a former retail buyer, and Jackie’s thoughts as an experienced marketer.
From a recovering retailer. (Christina’s perspective)
As a former member of the buying team at Kohl’s department store, I love jcpenney’s new strategy to generate profitable earnings. Buyers live and die by their numbers, and margins are difficult to manage when you are constantly being forced to run unplanned markdowns. Of course, everyone knows that at Kohl’s, sales are planned events. And as a former buyer, I can tell you that there is more than enough markup in most items to make up for the markdowns. But when sales were trending down, the first reaction at Kohl’s was to run a mid-week ROP. My feeling (even back then), was that these unplanned ads did nothing to drive store traffic. Either you were planning to go to Kohl’s that day or you weren’t. Seeing that I had marked Levi’s 505s down from $19.99 to $18.99 was probably not going to send you running to the store. Sure, I might sell a few extra pairs, but that would only erode my margins, or leave me in a poor stock position for the sale that had been planned for the following week.
The bigger problem came the following year. Now, faced with whatever sales increase we had managed to obtain through our quickie ad, we (of course) repeated the ad. No ad ever went away. And the margins went down, and down, and down. So, the initial markups went up, and up, and up. I mean, does anyone really think Kohl’s is losing money when they run fine jewelry at 50 percent off plus an extra 10 percent? They could run fine jewelry at 80 percent off and still make money. Really.
In addition, the Kohl’s customer is trained. When was the last time you bought something at Kohl‘s that was not on sale? I’ll bet never. If it’s not on sale, everyone knows to just put it back on the rack and wait another week. Better yet, wait two weeks. Then, it will probably be on sale and you might have received a coupon in the mail for an extra 20 percent off.
In today’s world where the consumer expects corporate transparency, the jcpenney strategy is honest, which makes is great by marketing standards. And from a buyer’s standpoint, it’s a smarter way to manage inventory and pricing levels. Either way, it’s better for all their customers, including me.
And for me too. (Jackie’s perspective)
From a marketing perspective, jcpenney must have been feeling ignored and neglected, I guess. The 110-year old company spent more $1 billion on U.S. marketing last year, and not enough people paid attention. So it decided to do what a lot of companies don’t have the guts, make that the leadership and support, to do: rip up the playbook, rethink every aspect of its essence, make major changes and transform itself. How bold. How brilliant.
Beyond the pricing strategy, there’s new everything: promotion, presentation and products. But what is most interesting and engaging is the new marketing strategy, led by new agency partners. Consumers are buzzing about the new logo, the new TV spots and the new spokeswoman. They are even repeating taglines such as “fair and square” pricing and “monthly catalog” mailings. That’s a retailer’s dream scenario.
In general, the basic concept of the initial TV ad was interesting even though the screaming got annoying fast. By now we all get that the company wants to revolutionize the way we shop (using coupons and waiting for sales), but only time will tell if it succeeds.
Ultimately I think whether the average (non-marketing) person decides to shop somewhere or not isn’t as much about the logo as it is about customer service, merchandise availability and pricing. That said, I’m a sucker for key messages rooted in integrity, simplicity and respect. According to JCP (an abbreviation taken right from the company’s fresh, American flag-like logo) “every initiative we pursue will be guided by our core value to treat customers as we would like to be treated – fair and square.” Ah, yes, the Golden Rule. It’s tough for any of us to argue with that one.
But is this enough to motivate us to drive to a store and actually shop? Will it increase sales? JCP is the retailer to watch this year. The rollout of its 4-year plan to transform itself has been exciting so far. Observing (and scrutinizing) how this story continues to unfold will be interesting. It’s a marketing case study in the making.
Details Matter in Customer Experience
Christina Steder is the President of Clear Verve Marketing and works with clients to plan, create and execute marketing campaigns. Follow her on Twitter as @clearverve.
Jackie Costa who is Director of Content Marketing at Clear Verve, works with clients to create and distribute smarter, better marketing communications materials. Follow her on Twitter as @JackieMCosta.