JC Penney has put every aspect of itself – from product to pricing – under the microscope as part of a massive brand overhaul unveiled Wednesday.
Over the course of a two-hour presentation on Manhattan’s west side, JC Penney CEO Ron Johnson and president Michael Francis outlined a series of massive changes across all aspects of the department store’s pricing, promotion, presentation and products. Changes will be unveiled to consumers on Feb. 1.
Among the changes: The retailer introduced a new logo (right), as well as a new spokeswoman, Ellen DeGeneres, who joined the proceedings via a recorded comedic video. Martha Stewart was there in the flesh to discuss her partnership with the retailer. A new line from designer Nanette Lepore was announced. And Johnson teased attendees with a brief discussion of a new JC Penney prototype to launch in 2014 and “heavily informed” by his alma mater, Apple . It was an impressive spectacle.
“Just like Apple , we’re going to learn that the best days aren’t in the rear-view mirror, they’re right down the road,” Johnson said, noting JC Penney is 110 years old this year. “I believe the department store is the number-one opportunity in American retail. And this isn’t something I decided last June when I took the job. This is something I decided 10, 15 years ago.”
Johnson told the crowd that during his time working in retail at Apple he would often visit malls to assess potential Apple store locations. His team always parked at the department stores, he said, because there “weren’t any cars.” He then flashed on the screen a picture of the Minnesota-area Dayton’s store he grew up visiting and waxed eloquent about restoring integrity to the concept of the department store.
The first significant change will be embracing a new pricing strategy, consisting of so-called “fair and square” pricing. It includes three types of pricing: everyday, regular prices; month-long values; and best prices, which will always happen on the first and third Fridays of every month. To determine new prices across its product range, Johnson said that the retailer looked at what it was charging and what customers most often paid after numerous discounts. He found that only one in 500 items sold at full price, while 72% of the company’s revenue was derived from selling products at 50% off or more.
For example, a T-shirt that had retailed for $14 but typically sold for closer to $6 will now be priced at $7. In a month when it’s a featured product, it will cost $6. When it’s time to clear it out and change colors, it will cost $4. The retailer is also embracing flat prices, no more 50-cent or 99-cent add ons.
The new strategy will trim JC Penney’s promotions from 590 a year to 12 per year. In homage to the promotional noise, presentation attendees had to walk down a hall plastered with old ads and circulars, while a raucous soundtrack, including a cat fight played. Francis called it the “Hall of Hell.” Instead of spending $2 million per promotion, Johnson said, JC Penney will spend $80 million per month promoting its products.
“Steve [Jobs] would have called this insanity,” Johnson said of the sheer volume of promotions. “At some point you, as a brand, just look desperate. JC Penney spent over $1 billion and the customer didn’t even pay attention.”
Greg Clark, senior VP-creative marketing, said the new strategy will lead to an overall decrease in the retailer’s ad budget. “Honestly, we just didn’t need to spend as much when we shifted the strategy and stopped having to feed the 590-event animal,” he said. “Now, the media spend is more impactful, very aggressive and not spread so thin.”
New ads breaking today from Mother are a teaser for the new pricing strategy and alert customers to the Feb. 1 launch date. They carry the tagline, “Enough. Is. Enough.” Consumers throughout the spot scream when faced with sale signs, coupons and a mailbox overflowing with circulars and direct mail. A Facebook component includes a “No Meter” and consumers can work through “challenging” exercises to try to get a discount.
Are there Canadian retailers in need of such a massive overhaul? Is this the right strategy for JC Penney? Post your thoughts in our comment section.
There’s more! To read the full article in Advertising Age, click here.
