JCPenney – cool new strategy did not trump loyal customer preferences

JCPenney lost nearly $1 billion in the last year with its disastrous shift in marketing and branding. Just-fired CEO Ron Johnson, who came from Apple, decided to take everything  that had built JCPenney’s loyal customer base and brand and throw it all out. Now he’s gone and they’ve brought back the old CEO.

The simple concept of remaking the company to be more hip and attract new customers made some sense. Showcase the more contemporary lines of clothes, focus on younger and more affluent moms and grow market share as Target did with a broader demographic of consumers, thus stealing  customers from Target and Macy’s. Great ideas. But they made one critical mistake – drop all the discounting and couponing that had become the mainstay and driving force for getting loyal consumers into the store. After all, once you’re totally hip and awesome you don’t need no stinking coupons!

Many ideas Johnson had were not that bad, but the execution lacked one major thing I’ve seen with top marketing and senior management people: no attention to research or facts. I don’t mean a $100,000 research study, I mean some common sense research that would show them who their current valued customers are and how to keep them while they grow a new segment of customers. No, they didn’t do this. In fact, the CEO actually said in an interview in response to the question about research that “we didn’t do consumer research at Apple,” ignoring that Apple is not even in the same category as most tech companies.

So, after their disastrous launch in February 2012 where they dropped all couponing, got rid of all the top executives in the company and most middle management, sales dropped by $175million in the first quarter. By the end of the year their stock was worth 1/4 of its original value.

What Johnson did that was so tone deaf, so completely lacking in any sense of the consumer relationship was to ignore the existing customer and not spend the time to figure out how to manage that discount relationship and bring in new customers. I don’t believe that giant, comprehensive, overly data-driven consumer research is necessary, but I do think some exit surveys at stores, some simple research on customers—how they perceived JCP and why they come into the stores— along with looking at the new demographics and figuring out how to lure them along, would have saved millions in losses.

There have been attempts to bring back coupons but they have done such serious damage to the brand and to their customer relations that they need to send a powerful signal to consumers about what they are doing.

The JCP lesson in a nutshell — brands ARE made of the customer experience. Whether you’re a retail store, post office, or healthcare provider it’s about expectations and managing them and delivering on them.