Please read this rather good entry discussing the recent performance downturn for JC Penney. Dr. Calkins attributes the downturn to Penney's decision earlier this year to go from deep discounting to daily low prices. Essentially, the difference would be (borrowing an example from the comments at the original blog post):
Old JCP - Buy this $50 shirt for $20, sale ends Tuesday
New JCP - Buy this shirt for $20
What's changed? A lot actually. The shirt hasn't changed, but the perceived value of the good has changed. For the MBA students, this relates directly to our discussion yesterday about the psychological signalling of price. An everyday low price sometimes signals cheap, where a promotionally low price signals DEAL!
What do you think?
OK, so is JC Penney trying to compete with Walmart or K-mart? I think this signals a cheaping of the company and thier products.
ReplyDeleteExactly. And, based on recent performance, they lost the customers that used to shop at JC Penny's and did not pickup the customers that shop at Walmart of K-Mart.
ReplyDeleteI agree with you both. When I was reading this I found myself thinking how unappealing "everyday low prices" sounded. JCPenny is known for quality and great deals but when they tried to incorporate "Cheap" into their sales it is obvious that they would fail. With the way the economy is today people want to believe that they are getting quality for their hard earned work. Sales do bring in that "thrill" and JCPenny offered that fantastic attraction by the "great deals" one found. I can understand why their sales failed with their new approach.
ReplyDeleteJC Penney's is also losing the sales that were created from the sense of urgency. I often find myself making a purchase even if I am not 100% sure I want it because I know the sale is going to end. When the price is always low you lose that, I will set it back down and "think" about it; never returning to make the purchase.
ReplyDeletePeople are driven to purchase items that are on sale because they believe they are getting the most for their dollar. JC Penny's offered a number of incentives through their coupons and this attracted customers and increased sales. With this new approach, customers did not get the same satisfaction from their purchase because the items were already marked to a low price and the quality of those items were perceived to be low.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteFrom this article, it seems JCPenney switched from a best-cost provider strategy to a low-cost strategy. At least in the eyes of consumers, the old message was that buyers were getting a higher quality good for a lot less money. This reaches a different target market from those consumers wanting to buy low-priced goods. Unfortunately, whenever JCPenney made this strategic move, it clashed with their prior marketing efforts. Therefore, loyal consumers were left disappointed, hurting JCPenney's brand equity.
ReplyDelete