JC Penney has repeatedly been caught up in the struggle because of its pricing and marketing strategies (Wahba, 2016). Therefore, it is safe to say that the majority of the problems appearing within all the layers of the company leave the leader to be accountable for all the failures and shortcomings. It is worth mentioning that JC Penney proved to be a conservative organization throughout its history (Wahba, 2016).
This particular outlook had a rather serious influence on the company’s market share and how it was perceived by its customers. The selection of the new CEO would have meant a lot for the company at those hard times (Wahba, 2016). This was when Ron Johnson came in to bring the brand back to life and get JC Penney back on the business charts. His outlook presupposed innovation and was meant to extend the company’s customer base.
Regardless of the efforts, Johnson’s plan failed despondently (Wahba, 2016). The fact sheet showed that JC Penney’s annual sales dropped by more than $5 billion, and the company had to fire more than 40 thousand employees. Presumably, it was Johnson’s strategy that almost bankrupted the company. The desire to hastily bring the change might be considered another factor of the failure (Wahba, 2016). This paper analyses the aspects of the Johnson’s pricing strategy failure, provides suggestions concerning the possible improvements that could be made to the strategy, and evaluates the future of JC Penney’s performance.
Johnson’s pricing strategy failure
The first aspect that affected the pricing strategy was the economy (Reingold, 2012, 2014). To repair the issue of repetitiveness and make it interesting for clients to come into the stores, Johnson elaborated a concept of exclusive boutiques in each of the JC Penney stores (Glazer & Lublin, 2013). He emphasized more on the wealthier cohort of the population. Basically, Johnson’s strategy implied that the company would apply more savings to fascinate a new clientele layer. The fact is, the richer cohort of the population was not responding to the strategy quick enough. At the same time, the old clients were abandoning the company (Glazer & Lublin, 2013). Johnson also attempted to manage the department stocks’ major problem, profile-raising pricing, or what is habitually termed high-low pricing.
Another aspect of the JC Penney’s failure was the competition. The issues that high-low pricing triggered were incredible (D’Innocenzio, 2012). To keep the long story short, JC Penney’s clients came into the store; they saw the new-fangled products, and they saw the prices. They liked the goods, but did not tolerate the prices, and so they did not buy anything (D’Innocenzio, 2012). Accordingly, these new products could not be sold and were kept on the shelves. The initial price cutting happened after 45 days. The company had to wait for a month and a half to be able to compete with its market rivals. Throughout these 45 days, JC Penney was wasting its property and monetary assets/ investments (D’Innocenzio, 2012).
Customer behavior is another aspect of the Johnson’s failure (Mattioli, 2012b). Customers, in their turn, were habituated to shop for markdowns, particularly the families with an income of a middling value (or even lower), while the fashionable boutiques did not need their products to be weakened by markdown pricing (Mattioli, 2012b). The pits of the collapse made this daily-low-prices approach problematic to carry out (Introduction to Marketing Research, 2015).
Purchaser circulation fell abruptly, and JC Penney was evidently struggling. If clients had had more available revenue and had a better outlook on their future, Johnson might have had a bigger time period to correct the mistakes. The reality formed a different situation. JC Penney’s sales cut down almost instantaneously (Mattioli, 2012a). Under those conditions, it was hard, if not incredible, to entice the retailers to approve the boutique concept. The retailers were scared of losing their money due to the transformed customer behavior, not to mention their anxiety about the weakened status of the all-embracing brand (Mattioli, 2012a). Lastly, the business ascendency ruckus came in the middle of the summer season and had an extensive impact on the customers’ vision of JC Penney.
Possible improvements to Johnson’s strategy
The first possible improvement relates to the segmentation criteria. The company should be concentrating on eminent remote label products that would open broader limits for the corporation (Timberlake & Townsend, 2012). JC Penney should be endorsing and manufacturing products that are marketable, are of exceptional quality, and are much more reasonably priced than products of other market contestants. More significantly for stockholders, these goods would generate broader margins (Lublin & Mattioli, 2013).
They would also retain the popular National products in stores while abolishing the National products that were not so popular among JC Penney’s customers and formed low limits. There is another factor that would affect the segmentation (Timberlake & Townsend, 2012). The company should be working on partnering with productive stores functioning exclusively within JC Penney that have been lucrative for the vendor. If the product mix stays improving and extending, gross margin ratio will come back to historical heights (Lublin & Mattioli, 2013).
The second aspect that is rather important is positioning. The company does not necessarily have to reinvent its corporate scheme entirely. It is safe to say that they just have to keep on coming back to where they were before Johnson’s leadership period (Timberlake & Townsend, 2012). This comprises restoring the products that core clients are accustomed to, having the markdowns customers appreciate, and most prominently being able to bring the customers’ trust back (Lublin & Mattioli, 2013).
The notion of positioning presupposes that it would be rather reasonable if the central customers were satisfied with the fact that the stores have come back to what everyone is used to (including adequate discounts and a proper product mix).
The third aspect of the possible improvement is the branding of the company (Timberlake & Townsend, 2012). When taking care of branding, JC Penney should take into account the current possibilities of its web sales. Most probably, the sales are going to continue to rise if the company picks the right strategy (Lublin & Mattioli, 2013). JC Penney should have a stylish and well-organized e-commerce website, numerous delivery facilities, a robust electronic mail campaign tactic, and robust online advertising creativities (Timberlake & Townsend, 2012). So that the branding of the company would always be on point, the business should hire vital additional specialists that will assist in keeping the e-commerce sales move in a positive direction.
Evaluation of the future JC Penney’s performance
JC Penney will on no occasion be the trade giant it was before. Nevertheless, it will be easier to withstand its economizing structure while increasing sales via its current retail policies (Best, 2016). As it progressively rewires with its numerous clients, JC Penney should be capable of carrying out its change, followed by improved sureness in its stock for the future, hypothetically predicted by the stock’s performance at the beginning of the year (Garcia, 2016).
During the era of CEO Johnson, same-store profits fell abruptly, costing the business approximately $6 billion. Since 2013, JC Penney has steadily dispatched same-store profits progress and amplified sales per clients, which is the crucial factor in achieving the measure it necessitates to upsurge profit restrictions (O’Reilly, 2016). Even though JC Penney is not projected to return to cost-effectiveness until 2017, the course of the main measures continues to recover.
Conclusion
After critically assessing the insinuations connected to Johnson’s decisions and his leadership style, the author comes to the conclusion that the company almost went bankrupt on account of the hastily performed actions aimed at the improvement of the situation. More importantly, it may be concluded that the change was not necessary, and JC Penney should have adjusted its strategy instead of rejecting it. The current pricing strategy of the company reminds of the strategy that has been implemented before Johnson became the CEO of JC Penney. The future of the company looks promising as its profits are increasing and the client base is exponentially growing.
The product mix of the company is now diversified by various brands. By 2017, JC Penney should get back to a decent income level, but it should be noted that there is no chance the company would look the same way it looked before Johnson’s leadership decisions.
References
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