Over the years, the company has been successful until its management came up with new pricing strategies that would only hurt the company. Business magazines, reviewers, and analyst say that these new pricing strategies by J.C Penney are a strategic mistake that will haunt J.C Penney. On the other hand, J.C Penney is confident with the new pricing strategies and promises everyone that it will be the turning point for his company and that the new strategies will be instrumental in luring as many customers to all the stores all year round instead of only at sale and promotion time (Reingold, 2012).
J.C Penney Corporation is a chain of American midrange department stores based in Texas. The company has 1060 department stores in 49 United States. The company previously operated several discounts outlets and a catalogue business. Other Than selling conventional merchandise, the stores offer other services such as jewelry repair, salon, portrait studios, coffee shop and optical centers. Most of the stores are located at sub-urban and before 1966, most of its shopping malls were located in the downtown areas. In 1962, the company growth and success started paying off. The company entered discount merchandising with acquisition of general merchandise company that gave them treasury stores.
These discount operations proved successful over the years and was contributory to the company’s growth and success. From 1980 to 1999, the company developed and acquired internet stores that led to the closure of 44 underperforming stores. However, the years from 2000 to 2009, the company experienced continued growth and success by opening more stores, branches and new department stores. Its success was also contributed by closure of rival companies that made the company thrive until 2010. From 2010 to present, the company rebranded and experienced decline and turnaround. In 2011, the New York Times exposed the company for using link schemes to increase the company’s web site ranking in google search results. Google took retaliatory measures and drastically reduced the company’s visibility in searches. This was a blow for J.C Penney. In 2012, the company’s chief operating office reported that employees were wasting more than 30% of the company’s bandwidth by streaming YouTube videos. It was clear that the company was making losses and on February 1, 2012, the company introduced new pricing methods.
New pricing methods by Johnson’s company began on February 1, 2012. The pricing strategies developed ‘Every Day’ prices, ‘Monthly Values’ prices for certain items in every month and ‘Best Price’ for the first and third Fridays of each month on paydays (J.C. Penney slashing prices on all merchandise, 2012). The pricing strategy also declares that prices would not end in seven or nine but will instead be whole figures on priced items. The company also decided to trim its workforce and developed the store-within-a-store system that eventually costed the company a comparable loss of 22% and a reported internet sales dropping of 33% (J.C. Penney slashing prices on all merchandise, 2012)
Mr. Johnson did away with most strategies and scrapped off dubious price polices then came up with a new strategy of offering discounts, heavy promotions and coupons. He also promised to introduce interesting products with reasonable prices. This was a strategic mistake, as these changes would not assure any positive outcome. These changes in pricing occurred with the already in store merchandise that customers were already used to. Customers wanted new merchandise that would fascinate them into purchases. This failure made the company return to its old pricing strategies with lots of promotions, marked-up prices and price focused advertisements. This was probably one of the biggest mistakes ever made by the company. Too much, change too quickly without testing the impacts (Berfield, 2012).
Branding strategies, positioning and segmentation often require prior informed decision making and planning. Before the implementation of any strategy, the company was expected to carry out a survey on their customers and the general population on what they feel about changes in price strategies. They should also consider the location of their stores before positioning. Positioning their stores in the suburban and downtowns is not an ideal place for department stores. Such stores should be positioned in the middle of a town where customers are concentrated (Conte, 2012). The company also needed to stock new merchandise rather than the old merchandise that customers were already getting tired of. If not, the company should rebrand old merchandise and pack them in attractive packs with flashy colors. Apart from that, as other retail stores do, they should be able to attract more customers by establishing more hotels, restaurants, swilling pools and other fun and leisure related activities that will attract customers for leisure activities and shopping at the same time (Conte, 2012).
A strategic mistake made some years ago regarding pricing strategies, everyday low prices, replacement of sales with coupons means that almost immediately, and yeas later, the company’s sales and popularity will decline drastically. With the new pricing strategy taking effect with everyday prices and whole figures pricing on items, the new pricing strategy is just as ineffective as the previous subsequent strategies. They have cost the company an upward of $3.3 billion in sales that have decline steadily over time. The company management needs to take immediate action. They should stock their stores with new merchandise with rebranded products and logos that should be marketed by celebrity icons to increase the overall sales (Reingold, 2012)
Conclusively, it is evident that J.C Penney has been struggling and is still struggling to keep up with its sales and marketing tides. Its recent foray into and out of low pricing has provided important lessons for manufacturers and retailers evaluating pricing strategies. The leadership of Ron Johnson and his new pricing strategies eliminated promotions and focused more on selling recognized brands. We all know that the new pricing strategies did not gain popularity and overall acceptance with consumers. Shifting from “Everyday” price strategies to promotional coupons came late for the company C.E.O Mr. Ron as many of their customers had already fled the company. Therefore, retailers, marketers and manufacturers should learn lessons from J.C Penning. They should learn that an everyday strategy is greatly helpful with unique merchandise or very low prices. High brands merchandise can be able to operate with few sales and promotions.
Business people should also learn that overtime, shoppers and customers should be trained to expect sales events. J.C Penning had a history of low pricing and frequent sales event that trained customers to expect more events that will attract them. When the company eliminated those sales events, they took away reasons for customers to shop at their stores. Retailers and manufactures should also learn that too much change too soon for a company eliminates reference pricing for customers. The everyday pricing strategies encountered some difficulty for both the company and customers. The customers were not able to judge quality and value of the goods, and merchandise as reference price was inconsistent due to the changing price tags. Furthermore, by switching from prices that ended with a “9” to prices that ended with “0” deeply confused customers on whether the prices were hiked or not. Therefore, the future of J.C Penning remains unclear and unpredictable.
