Sunday, May 20, 2012
A Penney For Your Problem
Back in February, JC Penney's declared a major shift in their pricing strategy; doing away with the discounting that their customers have grown accustomed to. At Penney's, constantly slashing prices became a thing of the past. Yet, still wanting to maintain their low price marketing positing, JC Penney's shifted to an "everyday low price" strategy and message.
Or at least that's what they were hoping for. In a recent presentation to investors and analysts, JC Penney's CEO Ron Johnson explained that while their marketing was entertaining and engaging consumers, it wasn't doing the "hard work" of actually marketing, which resulted in a larger than anticipated loss of $163 million in the first quarter of 2012.
While the ads for JC Penney's new pricing strategy are straightforward, the message consumers are greeted with on the sales floor isn't as simple. Despite a strategy that whittles down promotions from 590 per year to only 12, the "everyday low price" is still a confusing three tier jumble that includes "everyday prices," month-long values and "best prices." With three different low prices, Penney's isn't exactly practicing "everyday low," causing confusion for its customers.
Slightly adding to the confusion, JC Penney's also jumped on the trend of giving themselves a nickname (JCP) and utilizing it in their branding and marketing rather than using the nickname that their loyalists customers gave them (Penney's). It may not seem like a big difference but nicknames are important and make a huge difference to brands trying to get into the heads of consumers. While JCP is actually shorter than Penney's spelled out, it's not easier. JCP is three syllables whereas Penney's is two; thus you're more likely to hear a shopper utter the phrase "let's look in Penney's" than "let's look in JCP."
Even though Penney's price-centric messaging is confusing, fixing the confusion might not resolve their problem. After years of training customers to patiently wait for the best deal they could find, going cold turkey from discounting might be an impossible marketing challenge. The Penney's customers has been well-trained in the game of trading coupons for cash off. Adjusting will take more than a couple months time and even then some customers might never adjust. Why? For human beings, habit is more powerful than choice. And most coupon cutters do it out of habit. Consequently, without coupons in their hands that say Penney's, a visit to the store is no longer on the itinerary. To them, the coupon or sale is a signal that says they're getting a deal.
They're certainly are people who, even without coupons or discounting, still associate JC Penney's with low cost clothing - I am one. The drawback to this is the low price position also signals less fashionable to these shoppers. They were never enticed by price, out of similar habit and training, they look for higher prices to signal higher fashion.