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- 1. JC Penney Fair and Square Pricing Initiative Crisis SIPR Team 1 Terenia Autrey Rey Colarte Nyota Ferguson David Hardnett Jesse Teske
- 2. History ✤ Originally named Golden Rule and was a small goods store ✤ Opened by James Cash Penney in Kemmerer, Wyoming in 1902 ✤ Sold blue jeans and other work clothes, shoes, fabrics and sewing needs ✤ At its height, there were over 1,200 stores in all 50 states and Puerto Rico, Mexico and Chile (Our History. n.d.)
- 3. Change Is Good Right? (FIDM Digital Arts Blog. 2012)
- 4. CEO Ron Johnson ✤ Former Target executive and creator of the Apple Store ✤ Plans to bring in better merchandise and create strategic partnerships ✤ Rolled out a new pricing plan for J.C. Penney (Heller, L. 2012)
- 5. New Pricing Plan ✤ 75% of everything sold at J.C. Penney was at a discount of 50%. ✤ Mailers and coupons are no longer used. ✤ The makeover was expected to save the company over $900 million dollars (Mohammed, R. 2012)
- 6. New Pricing Plan ✤ Prices will now end in "0" instead of "99" and price tags will list just one price. ✤ New pricing initiative has three levels: ✤ Red tag items - indicate the everyday price ✤ Blue tag items - will be the best price for as long as the item is in stock. ✤ Month long values (Thompson, S. R. 2012)
- 7. Public Relations Efforts ✤ Will begin to house affiliate brands and partners ✤ Will develop Town Squares to offer constant customer support and complimentary services ✤ Completed a 10-year agreement with Martha Stewart Living Omnimedia ✤ Used Ellen DeGeneres as a celebrity spokesperson (Thompson, S. R. 2012)
- 8. Survey Says ?
- 9. A Major Drop In Sales webpronews.com
- 10. Results of New Pricing Plan ✤ Customers are confused about new pricing plan ✤ Shares decreased more than 8% in premarket trading ✤ There was a lost of $147 million or 67 cents per share ✤ Gross profit margin fell to 33.2% from 38.3% a year ago ✤ The sales decline accelerated to ~22% in the second quarter ✤ A lot of negative press about the change (D’Innocenzio, A. 2012)
- 11. What Are Customers Saying?
- 12. What Are Customers Saying?
- 13. Reoccurring Themes ✤ Customers like coupons ✤ Customers do not believe they are getting deals ✤ Poor customer service ✤ Quality is perceived as deteriorating ✤ Customers are moving over to competitors such as Target and Kohl’s ✤ Online store is continuously out of stock
- 14. What Went Wrong
- 15. PR Action Plan To Date
- 16. PR Action Plan To Date Goal To Become America's Favorite Store (Thau, B. 2012)
- 17. Action Plan /Crisis Plan ✤ H a v e a C r i s i s Te a m i n P l a c e ✤ Spokes People ✤ Developed Process
- 18. Action Plan /Crisis Plan ✤P r e p a r e d f o r S o c i a l M e d i a (Dhaly, I. 2010)
- 19. Action Plan /Crisis Plan ✤B r a i n S t o r m f o r t h e F u t u r e • Testing Ideas and Changes First • Determine What the Customer’s Really Want • Developing Better Communication with Customers •Find what is Relevant to the Consumer and Test
- 20. References Dhaly, I. (2010). Social Media for Crisis management Retrieved August 20, 2012 from http://www.slideshare.net/ishraq77/social-media-for-crisis-management D’Innocenzio, A. (2012). J.C. Penney revenue, profit plunge; everyday prices struggle. USA Today. Retrieved August 20, 2012 from http://www.usatoday.com/money/companies/earnings/story/2012-08-10/jc-penney/56929566/1 FIDM Digital Arts Blog. (2012). On JC Penney website. Retrieved August 20, 2012 from http://blog.fidmdigitalarts.com/typography-tuesday-jcpenneys-newest-brand-re-design-is-catching-our-attention/ Heller, L. (2012). JCPenney's Ron Johnson Is The New Steve Jobs. Forbes. Retrieved August 20, 2012 from http://www.forbes.com/sites/lauraheller/2012/06/25/jcpenneys-ron-johnson-is-the-new-steve-jobs/ Mohammed, R. (2012). Understanding J.C. Penney's Risky New Pricing Strategy. Harvard Business Review. Retrieved August 20, 2012 from http://blogs.hbr.org/cs/2012/01/understanding_jc_penneys_risky.html Our History. (n.d.). On JC Penney website. Retrieved August 20, 2012 from http://www.jcpenney.net/Our-Old-Company/About-jcpenney/Our-History.aspx
- 21. References Thau, B. (2012). What the Exit of JCP's President Means for Its 'No Sale' Strategy. Daily Finance. Retrieved August 20, 2012 from http://www.dailyfinance.com/2012/06/19/what-the-exit-of-jcps-president-means-for-its-no-sale-strateg/ Thompson, S.R. (2012). J.C. Penney's pricing: Here's what has changed. Dallas Business Journal. Retrieved August 20, 2012 from http://www.bizjournals.com/dallas/blog/2012/07/a-break-down-of-jc-penneys-pricing.html
Editor's Notes
- Welcome, everyone, to our team presentation on JC Penney, Fair and Square Pricing Initiative Crisis. This is SIPR Team 1 and our team members are Terenia Autrey, Rey Colarte, Nyota Ferguson, David Hardnett and Jesse Teske. J.C. Penny’s is one of the largest companies in the world. However, the past economic recession has left the company struggling to find new ways to reach its customers. They dropped seven spots in the Forbes Fortune 500 list from position 146 to position 153. (Forbes) A recent shift in their marketing strategy has further complicated the problem and left the company scrambling to save face, increase sales, and increase customer satisfaction.\n\n
- \nJ.C. Penny’s was originally a small goods store opened by James Cash Penny in 1902 under the name Golden Rule. The small shop sold blue jeans, work clothes, shoes, fabrics, and other sewing needs. Over the next century, the company grew tremendously and at its height had over 1200 stores in all 50 states, including Puerto Rico, Mexico, and Chile. \n\n\n
- Like most companies, J.C. Penney’s went through changes in supply, distribution, products, and marketing. Their logo went unchanged for nearly 45 years from 1968-2010. In 2011, the logo received a face lift to include a square box. The following year, it received an even bigger face lift and the companies name was abbreviated and included a larger box. \n\n
- In 2011, J.C. Penney’s hired Ron Johnson whom had previously worked with Apple, Target, and Mervyns (Wikipedia). Under his guidance, Apple had launched their Apple store and it had been a major success. Today, Apple is the most profitable company in the world (CNN) and their Apple stores are constantly packed with customers. Johnson’s plan for J.C. Penney’s was to bring in better merchandise and create strategic partnerships with individuals and companies like Martha Stewart. Additionally, he launched a new pricing campaign for the company. \n\n
- Johnson noticed that 75% of everything that J.C. Penney sold was at a discount of 50%. Taking notice of stores like Wal-Mart, where everyday low price simplified the buying process, Johnson introduced a new pricing plan that eliminated the need for mailers and coupons. The makeover was expected to save the company over $900 million dollars. \n\n\n
- The pricing plan was simple. Instead of items ending in 99 cents, like traditional marketing, prices would end in 00 and list just one price. No before and after instant savings. No rebates. No frustrations. It was designed to be easy for the customer. Additionally, the new pricing initiative has three levels. Red tag items signify an everyday price. Blue tag items are the best price for as long as the item is in stock. The last level is month long values.\n\n
- With such a big shift in their strategy and customer acquisition, marketing and PR efforts needed to be coordinated to educate the public. As part of their campaign, they began to house affiliate brands and partners. They developed Town Squares to offer constant support and compliment services. They also completed a 10 year agreement with Martha Stewart Living Omnimedia. To put a face on their company and help brand it, they enlisted the help of Ellen Degeneres as a celebrity spokesperson. \n\n
- With so much work put in and so much at stake, how would their customers react?\n\n
- Unfortunately for Ron Johnson and J.C. Penney’s, the public did not respond to the new pricing favorably and their sales tanked. According to this graph from Webpronews.com, J.C. Penney saw a drop in daily sales of over 50% and then a continuing slide.\n\n
- The new pricing plan was a major headache not only to the company but to their customers. The customers, who were accustomed to clipping coupons and coming for weekly sales, were now left to figure out the new pricing strategy. Sales declined roughly 22% in the second quarter of 2012 while gross profit margin fell over five points from 38.3% to 33.2%. Originally, a profit of $2.16 per share was expected, but a revised earnings report decreased the anticipated earnings to $1.26 per share Because of this, shares decreased over 8% in premarket trading and total losses resulted in over $147 million which equates to 67 cents per share. However, the bad news did not \n
- Not only was the press coverage of the incident enough to make a CEO cringe, but confused and mad customers hit the cyber world and voiced their opinion on Facebook and other outlets. The common theme among their customers was to bring back the sales and coupons that they had been so accustomed too. Not only were they losing out on customers, but their loyal fans had now become detractors and were influencing others not to shop at J.C. Penney’s.\n\n
- In addition to the new pricing plan, confused customers were upset about horrible customer service, stock issues online, and a perception of a decrease in quality of products. Because of these problems, they were losing market share as their customers flocked to Target and Kohl’s. \n\n
- Reoccurring Themes \n\nCustomers like coupons\n Customers do not believe they are getting deals\n Poor customer service\n Quality is perceived as deteriorating\n Customers are moving over to competitors such as Target and Kohl’s\n Online store is continuously out of stock\n
- So what exactly went wrong? Most marketing experts simply believe that JC Penny’s failed to effectively communicate their new pricing plan. Many retail analysts liked the strategy but ultimately, the shoppers did not. So ultimately, the idea and logistics may have been sound but the execution and communication to their customers was not. As one customer stated, “Can anyone enlighten me because I just don’t get it.” A commericail needs to provide a customer with a call to action or motivate them to engage with your brand, not puzzle them. Because of this JCP president Michael Francis, the junior partner in the executive duo leading the chain's ra\n
- Realizing that the company needed to turn the ship around and generate positive buzz and increase awareness, the company worked with celebrities to improve the relationship by doing good deeds for the military. They teamed up with Flotus and Ellen to provide military daughters with prom dresses in Jacksonville, FL. They also provided young children with free haircuts in August. \n\n
- The goal of JC Penney’s according to Daphne Avila, media relations director for the company, “is to become America’s favorite store and to stick with their Fair and Square initiative. This plan includes introducing new brands, exciting stores, and the new pricing structure.”\n\n
- To help J.C. Penney survive this crisis, they need a crisis team with a clear spokesperson and process in place to quickly and effectively manage negative information thru all channels including social media. \n\n
- The framework for managing the crisis can be broken into 5 areas. \n•Monitoring blogs, social networks, and twitters feeds hourly and daily so that the company can quickly respond to any issues that arise.\n•Cultivate a network of influencers to reach the masses and help spread messages and grow the brands message\n•Be prepared for a crisis at all times. This includes using an online crisis collaboration site and setting up a dark crisis site. \n•Responding to crisis in a time manner using a blog to address the situation. Additionally, use twitter to send out messages and have the influencers retweet the messages. \n•Finally, the company should be ready to promote positive messages to detract from the crisis. This includes keyword marketing, online advertising, blogs, and websites. \nUltimately, the company needs to be able to respond to negative information with 24 hours. The speed in which an issue can travel and escalate is at rates never seen before. \n\n
- Finally, the company needs to become proactive and brainstorm to come up with ideas for problems that could arise and to plan for success. Currently, they have no plan to change their marketing strategy so they must rely on adjusting its message and how it communicates with the public. They need to dig deep and find what their customers really want and adjust their strategy to align with those needs. Additionally, they need to focus on the positives of their strategy and continue to mold their strategy until they hit their sweet spot. A solid PR plan and constant monitoring of social media will give them real-time access to how each shift in their message affects their customers. \n\n
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