The J.C. Penney Debacle: Five Lessons Learned

By Ellis Verdi, president of the NYC advertising agency DeVito/Verdi

Here are the five lessons I learned from the J.C. Penney debacle — unfortunately we knew all of this before Ron took his ideas to market.

1. Advertising doesn't work quickly to change behavior. Even if educating consumers on fair pricing made sense, having people understand "fair pricing" could take many years, and I'm not sure consumers even care.  Aside from the pure challenge of getting the word out through advertising and in-store, because of its inherent complexity, it still requires enormous levels of advertising and time.

2. Consumers need to remain in control of value. After all, we are asking them to part with their money. "Trust me this is a low price" doesn't work well unless they have years of successful experience with that store's pricing format. In fact this was a wholesale change and those consumers seeking a deal, did not know they were or were not getting one.

3. The money guys have a hard time with a strategy dependent on communications. Ron's idea requires a belief that consumers will see the wisdom of the change if they learn about it through advertising. Too many times the financial types don't have the tools to evaluate that and actually tend to believe it more than they should – witness the boom/bust of the .com era, when financial organizations put tons of money in advertising, often with little to no success. Inventory management, finance, sourcing, staffing etc are all more tangible, more-easily quantifiable.

4. Ron actually didn't have the right experience for Penney's. Not that a direct knowledge of this type of retailing is critical, but the vision he created can't be justified in any way based on his past experience. Neither Apple nor Target fits the bill. Most understand why Apple is less than relevant (high priced product that has a strong following, with good built in margins because it is manufactured by Apple versus buying from others etc…) but Target is also a different breed. Target's cool commercials have the luxury of not having to be accountable in the same way (they sell detergent and products we need — not just want), and its message is critical to Target only because they have to create a look and feel to differentiate from Walmart. This direction has nothing to do with a value/price message, nor does it have that hard-hitting quality that is needed to drive traffic. JC Penney advertising has more responsibility. Target creative work shows a unique look/feel; J.C. Penney needs a strong, substantive message as well as a look/feel.  

5. Even the most innovative strategies have to reflect what we know about the customers. It was reported that many SKUs of best selling products were discontinued because of a vision to go slightly higher end or specialized. Essentially eliminating products that customers want, in order to bring the tore up a notch, is bound to cause a backlash. We have learned there is often not as much thought given to the collateral damage of simply "elevating a brand," as compared to successfully serving the masses.


More Expert Insight

Comments

Ron had the right background, but too short and too long ago!

After getting his Masters Degree at Stanford, Ron Johnson went to Mervyns, as a trainee.
A store more like Penny's than any others.
Had he recalled that environment, he might have had a chance.
Unfortunately, he decided that a huge change was in order. Maybe Ackman told him to make drastic changes. Or maybe Ron decided "everyday low prices" worked at a Target, so why not here?
And finally, maybe it was time to bring Myron Ullman back.
Good luck, and best wishes to Ullman and JCP.

Ron had the right background, but too short and too long ago!

After getting his Masters Degree at Stanford, Ron Johnson went to Mervyns, as a trainee.
A store more like Penny's than any others.
Had he recalled that environment, he might have had a chance.
Unfortunately, he decided that a huge change was in order. Maybe Ackman told him to make drastic changes. Or maybe Ron decided "everyday low prices" worked at a Target, so why not here?
And finally, maybe it was time to bring Myron Ullman back.
Good luck, and best wishes to Ullman and JCP.

Lesson that should have been learned

What JC Penney should also learn from the Ron Johnson debacle is NOT to take away product lines that work, e.g. St. John's Bay and Made For Life for women in the baby boomer generation. Now when I shop JC Penney, all I find are cheaply made, loud colored, striped sweaters and shirts for teens, tight jeans with embellishments on the one end of the spectrum, and matronly, flowered, over sized shirts and elastic band slacks for the elderly. There is nothing there for me anymore.