JC Penney

The subject of JC Penney, Ron Johnson and tanked earnings came up the other day.  We all sat around musing about what had gone wrong.

My thinking is that Mr. Innovation from Apple might have had some good ideas but he had not gotten to know his new consumer.  This is not to say that the consumer who bought iPhones did not shop at JC Penney. I am suggesting they approached those two purchases very differently.

I was reminded of the book, The Experience Economy by Joseph Pine. Mr. Pine’s book takes us on a journey through the four consumer drivers of the phases of the American economy.

1. Agriculture: Metals, oil, farming, etc.

2. Industry/Product: Those things that we made with agriculture.

3. Service: Example- IBM was a product industry giant until a four-letter word nearly wiped them out…DELL.  DELL had a nearly identical product, but their product came with an unprecedented service package.  One so appealing to the buying public that IBM not only lost its market share, they nearly went under.

4. Experience: This is where we are now.

Mr. Pine uses the illustration of a child’s birthday to give context to the consumer drivers and phases of the American economy.

In the Agricultural phase, you would go out to your hen house for a couple of eggs, milk your cow for some milk, mill some grain for flour, go into town for a sack of sugar, spend 27 cents and all day to make a cake for your child.

In the product phase of the economy, you could go to the market and buy a box of Betty Crocker cake mix for $1.79 and a tub of frosting for $3.67, spend an hour and make your child a cake.

In the service phase of the economy, you stop by the bakery, spend $32 for a cake with a picture of Sponge Bob on it. Happy Birthday Junior!

In the experience phase of the economy, you spend $400, and take 10 kids to laser tag because they want an experience.

So what does this have to do with the JC Penney shopper?

The current JC Penney customer has been a product consumer.  JC Penney has not been a mecca of service and definitely not a sought after experience.

This is not to say that the JC Penney customer was stuck in some product consumer time warp. Actually the contrary, they wanted experiences too, just not there. They sacrificed experience in their St. John’s Bay and Lee Brand Jeans for price so they had the jack left in their wallets to pay for experience someplace else. They were not looking for experience; they were looking for their product at a cheap price so they got more bang for their experience buck.  Error #1- JC Penney did not understand where they fit into their customer’s world.

Mr. Johnson and his team of innovators wanted to create a JC Penney shopping “experience”. They forgot one thing- their consumer did not come for experience they came for product, inexpensive product.

Let’s say JC Penney’s strategy was to pick up new customers that would come for experience.  I won’t dispute this goal; I think it’s good-“get more market share”.  In order to get “MORE” market share it’s generally a good idea to maintain what you have, otherwise it’s just trading for a different market share.  If you look at the four consumer drivers above, JCP had not stopped to realize he was trying to take a group of #2’s (Product) and move them to #4 (Experience), leap frogging #3 (Service) altogether.

We need to consider the psychology of thinking. One of the issues I have always found is that most people do not process think. As thinkers, we usually cannot go from A to E without B,C, and D spelled out for us.  It was this way with the obliteration of the JC Penney staple- the coupon.  JC Penney did not understand the focus on and importance of the coupon and the psychology of the deal. Yes, the adjusted pricing meant costs were roughly the same, but here’s the catch. While JC Penney was investing capital to create experience stores, the consumer assumed they were paying for it with the coupon savings they were no longer getting.

So, instead of being sustained by the customer base JC Penney had relied upon for years, their customers started jumping ship like a Carnival Cruise line without water and food. JCP was never going to be able to grab the Target, Dillard’s, or Macy’s customer along the way this quickly, and especially not now with their current customer base bailing out so fast.  JCP’s best hope was only to pick these people up slowly as they proved themselves; first in the Service phase, then maybe the Experience phase had a shot.

The current JC Penney “product consumer” needed to move into phase #3-Service first. Mr. Johnson and his team needed boots on the ground to bring their customers to the next phase- talking them through it. Equip those closest to your customer guys- you know your employees…who you’re laying off faster than Joan Rivers gets her next round of botox?! Instead they set themselves up for a service fiasco rivaling Home Depot when the Orange Apron brigade went from experts to shelf stockers…who rarely could be found nor knew where anything was.

Who knows what lies ahead for Ron and his buddies? Part of JC Penney’s issues stemmed from treating the forbidden fruit alumni like a deity instead of pushing back and questioning decisions.  It’s always a problem when humility does not accompany power on the trajectory path. It does not seem it was required here…I’m just saying.

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