JC Penney proves why simple pricing is not so simple.

We so want it to work.  But it just never, ever does.

Ok, here’s the back story:

JC Penney is sucking sales wind.  JC Penney hires former Apple retail chief Ron Johnson as CEO to revitalize the company.  Johnson changes everything, and implements a “month-long value” pricing model, removing the word “sale” from Penney’s vocabulary.  At the end of Q1, Penney missed its sales estimates by almost 300 million dollars.

Or, in other words, after all that . . .

JC Penney continues to suck sales wind.

You can read the non-bullet pointed version of the story in this article from MSNBC.

So what really happened?

JC Penney proved that simply lowering prices doesn’t solve your sales problems.

There is a population of people out there that just pay full price and that’s it.

But, there is a huge and ever growing population of people who like discounts, who want discounts, who feel entitled to discounts.  And if these people don’t get what they want (even if it’s shrouded in complicated pricing strategies that are better for the seller), they won’t buy.

Bargain hunting, extreme couponing, even the Living Social and Groupons of the world have proven that shopping for the best deal is a game that many people like to play.  And when you take the game away, you end up losing.

We’ve seen examples of Penney-type simplified pricing in our biz a bunch of times . . . including this Previews Only price that popped up a few years ago, and, well, sucked sales wind too.

If you’re one of the hottest products/shows on the street, then you can do without discounts.  (Sometimes I think Ron Johnson forgot he went from hawking Apple iPhones to halter tops.)

But if you’re not, then in today’s consumers-have-control economy, discounting must be part of your strategy.

You just have to be smart about it.

 

 

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Comments
  • David McKibbin says:

    This idea is applicable not just for discount pricing. This concept of doing less work if you’re guaranteed hit is applicable for PR media in general (different departments, similar concept). Coincidentally, “The Book of Mormon” and “Death of a Salesman” have one TV commercial with NO FOOTAGE OF THE SHOW ITSELF, photos, and the basics—but NO B-ROLL CLIP (ironic, huh?)! Other shows have full-blow B-Rolls and are willing to do ANYTHING social-media related to market their shows while “Book of Mormon” does less work and gets a higher attendance rate than a show like “Gore Vidal’s the Best Man”, “Sister Act”, “Jesus Christ Superstar”, and even “Once”.

  • It’s not the price, it’s the brand. Two places I never think about going clothing shopping: Penney’s and Sears. Never heard my daughter mention them for clothing either. Kohls services the same crowd, but one attaches a different meaning to their name.

    Penney’s should change their name and create a new story. Sear’s should turn all their stores into two stores– with non-hardware items under a new name.

  • John P. says:

    I think that shoppers at J. C. Penney expected coupons and the “sale” eliminated the coupon and so the coupon-clipping crowd stayed away. Got to know your customer.

  • Mary Riley says:

    It’s so funny you brought this up. I used to shop there all the time, armed with my 20% off your entire purchase or my $10 off coupons. They handed them out as if they were water. Then everything changed. They said that the prices would be just as good, but as someone who likes a good deal I can tell you it’s just not been the same. Dresses may be priced lower in their new model, but it’s just not as low as what I could get with my 20% off with and additional 10% off and my $10 coupon (LOL)… or maybe it is just as low…and just psychologically I can’t handle the new JCP. I can tell you that 34th/HS was PACKED with folks during the old model and the last time I was there, it was like crickets chirping. I go about 90% less than I used too.

    We’ve spent years getting folks used to deals and coupons with signs and ads and radio and TV and when you take that away, it’s just hard to get used to a new model.

    RIP-JCP

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