JC Penny Case Study - Questions and Answers PDF

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JC Penny Case Study

1. Problem Definition/Decision facing the Company: Problem Definition: During 2012, the company came really close into bankruptcy. Reason behind this was because their current CEO at the time, Ron Johnson started a bold plan to revitalize the brand using different methods, such as remodeling the stores, changed to the merchandise and eliminating sales and promotions in favor of everyday low prices. These changes caused the company to alienate many of their loyal consumers without attracting the new target market they were trying to attract. 2. Core Value/ Positioning Strategy:  JC Penny decided on three key factors they should

focus on to reboot their company. They chose to focus on omnichannel, private-label goods, and increasing revenue per customer as the three strategic objectives that would guide all future initiatives. They

3. Target Market: Price Sensitive Consumers and Families 4. Competition: Some of JCPenney’s competitors are Target, Kohl’s, Macy’s, Sears and Walmart as all these stores aimed towards the same Target Market and provided their consumers with the same types of people in the same categories. 5. Analyze the 4 P’s Product: The company is a mass merchandiser offering everything from clothing to hardware, household items, office supplies, sports goods and even sometimes food items. Place: U.S Department stores and Online Website Promotion: ● Order online, Pick up in-stores ● Loyalty Program: This program allowed JCPenney’s customers track their number of trips and how much they spend during this trips in order to personalize offers based on these actions. ● JCPenney Credit Cards: The company would encourage customers to sign up for their credit cards in order to benefit from the extra reward points exclusively for cardholders. Price: Competitive Pricing = Low prices by only charging the minimal markup charge

6. SWOT analysis: Strengths: Partner with NFL star and TV show host Michael Strahan, everyday low pricing, order online and pick up instore, employees love for the company, Weaknesses: 500 revamped home line stores and designer furniture.

Opportunities: signed deals to bring Sephora cosmetics and Liz Claiborne clothing and

accessories to stores. offering complimentary services such as gift wrapping and promotional events including free ice cream during the summer months and free haircuts during the back-to-school shopping season. hired comedian and talk show host Ellen DeGeneres as its new spokesperson, who appeared in ads that poked fun at markdown gimmicks.

Threats: Stores appeared outdated and lacking character, and were described as

disorganized, Department stores like Walmart and Target, The hiring of DeGeneres, a lesbian, prompted the conservative Christian group One Million Moms to call for a chain-wide boycott. Online retail stores,

7. Analysis

1. Evaluate the overall effectiveness of the “Fair and Square” repositioning strategy. More specifically, a. What metrics or indicators are pointing to a possible need to go back to heavy promotions and to admit “Fair and Square” was a mistake? In the case study it stated that after “Fair and Square” was implemented annual sales dropped over the course of 2 years. “$17.2 billion in 2011 to $11.8 billion by 2013, promoting store closures and thousands of layoffs.” Another indicator was triggered by the consumers as well. “2012, the number of JC Penny shoppers had dropped by 10%... months into rebranding effort, the company had lost $310 million, with net sales down 21.3%”. Numbers do not lie, this clearly shows that customers were not happy with “Fair and Square”. JC Penny’s customers enjoy sales, discounts, coupons, and markdown items. b. What metrics or indicators are pointing to a more positive direction that may indicate that “Fair and Square” will potentially succeed? One positive indicator that “Fair and Square” had potential to succeed is in the sales per square foot. Compared to the old stores ($134) the newer stores that had the new policies implemented “earned $269 in sales per square foot.” Also it

supplied everyday low pricing. The prices in store were 40% lower than the listed price. 2. Identify the key assumptions about JC Penny’s 5 C’s (customers, competitors, collaborators, context and company) that Johnson and his team are relying on that has led them to believe that the “Fair and Square” pricing can be a successful approach for JC Penney. How confident are you that these assumptions are correct? ● Customer: JC Penney customers need to be lead. Johnson stated that Penney should anticipate what customers would need and supply that need before they even know they have it. “Customers were disgusted with the lack of integrity on pricing” ● Competitors: Due to Johnson being so successful with other companies he assumed he knew what it took to transform JC Penney. He also helped transform Target which is one of JC Penney’s competitors. ● Collaborators: Johnson assumed that JC Penney needed to collaborate with celebrities and artist. He introduced Ellen as his new spokesperson and established a relationship with Joe Fresh and Martha Stewart. This assuming that JC Penney needs the help of collaborators to increase sales and recognition. ● Context: I think context is value. This meaning sales and promotions of JC Penney. Johnson assumed that these things do not help the perception of the company as a whole. ● Company: Johnson was trying to elevate JC Penney into a more high end department store like Nordstrom and Macy’s. He did this by renovating the stores and getting rid of most promotions.

3. Repositioning with a new target market: a. Describe the type of customer Johnson is trying to appeal to with the “Fair and Square” brand repositioning. The type of customer Johnson is trying to appeal to is Millennials. Millennials care about brand and quality. They do not have a large disposable income (meaning sales are encouraged), but again they focus more on quality. Johnson was trying to push experience and service. b. Why does Johnson want to attract the new target customer?

Johnson wants to attract new target customers because he feels like the sales and discounts are hurting customers perception of the company. He was trying to elevate the company making it “America’s Favorite Store”. c. Also, compare and contrast between existing core customers and new target customer for JC Penney. Existing core customers actual enjoy the adventure of sales. JC Penney is within the existing core customers household budget. They did not have a large disposable income. New target customers of JC Penney are into the service that the employees and the company as a whole provides. Like the haircuts and consultations. They appreciate the collaborations and endorsements of celebrities and artists. New customers would seem to have a larger disposable income. New customers are also more liberal (Ellen Degeneres sponsorship) They both enjoyed the coupons and promotions (over 590 a year).

Demographics/Psych ographics

Existing Core Customers

New Target Customer

In 2010: Surburban Mothers between the

Millennials. Customers that like

ages of 35-55 with an annual household income ranging from $35,000 to $100,000.

quality and style, but at affordable prices. Ages 18-35. Making about $35,000 to $75,000

Shopping Behavior

Consumers who enjoyed searching for discounts. “People like the treasure-hunt

Consumers who come into JC Penney looking for quality service along with

aspect of using quality environment. coupons on top of sale Consumers who are items…” attracted to ambiance.

Product Preferences

Service Preferences

In season/trendy clothing apparel.

Products like the Denim Bar, Martha

Preferable on sale/discounted.

Stewart's line, gift wrapping, and ice cream. (Experience)

Traditional customer service, sales

Complimentary service. Events.

promotions all year around....