Marketing Project

Your analysis needs to be typed on a single page (11-point font size) using a 4-quadrant format similar to the following template. Your analysis must include at least two (2) specific examples of each item in the SWOT (i.e., minimally 2 strengths, 2 weaknesses, etc.). Bullet points are fine, but they must be descriptive enough that it’s obvious to your reader what you are communicating .

Introduction to Marketing (29-630-301)

BONUS POINTS OPPORTUNITY

(THIS IS A GRADED ASSIGNMENT WORTH A MAXIMUM OF 10 POINTS THAT WILL BE ADDED TO YOUR SCORE ON EXAM #1).

JC Penny Makeover

The attached two (2) articles describe JC Penny’s (JCP) new merchandising policy and its business implications. Using just the information in these articles, construct a SWOT analysis for JCP.

Strengths and weaknesses are what JCP did well and did poorly, respectively, at the time that they decided to introduce the new strategy (at the beginning of 2012). Opportunities are changes in policy and direction for the company that JCP identified as considerations for the future. Threats would be any factors that might block, hinder, or delay the implementation of the opportunities that were identified.

You may work on this project by yourself, or with one other member of this class. Your analysis needs to be typed on a single page (11-point font size) using a 4-quadrant format similar to the following template. Your analysis must include at least two (2) specific examples of each item in the SWOT (i.e., minimally 2 strengths, 2 weaknesses, etc.). Bullet points are fine, but they must be descriptive enough that it’s obvious to your reader what you are communicating (that takes a little practice !). A cover page with the project title and your name(s) on it is required as well.

I will accept only a hard copy of your report in class at the time of Exam #1, if you so choose to do it. If you work on this project with someone else in this class, you need only submit one report with both names attached. The Rutgers Honor Code policy applies to this project.

Location of Factor	Type of Factor
Favorable	Unfavorable
Internal	Strengths:	Weaknesses:
External	Opportunities:	Threats:

Research & Ideas

Is JC Penney’s Makeover the Future of Retailing?

Published:	March 5, 2012
Author:	Kim Girard

Executive Summary:

The stuffy department store chain has become emboldened under new CEO Ron Johnson, with plans for an innovative store upgrade, simplified prices, and a brand polish. Professor Rajiv Lal discusses whether Johnson can repeat his previous magic at Apple and Target. Key concepts include:

· J.C. Penney’s 110-year history now works against it, as customers have forgotten what the brand stands for.

· New CEO Ron Johnson has begun a top-to-bottom makeover of the store’s look and feel, pricing strategy, and brand image.

·

Johnson’s vision is to make the shopping experience as easy and enjoyable as buying a smartphone at an Apple store or sipping a latte at Starbucks.

About Faculty in this Article:

Rajiv Lal is the Stanley Roth, Sr. Professor of Retailing at Harvard Business School.

·

More Working Knowledge from Rajiv Lal

·

Rajiv Lal – Faculty
Research

Ron Johnson’s latest undertaking has the makings of a perfect business school case study. As the new CEO of J.C. Penney he’s charged with transforming an aging department store chain with lagging market share.

The sweeping plan begun February 1 to put cool back in Penney includes new designer brands, simplified pricing that replaces the retailer’s constant sales and coupons, and an updated store design that promises to make one think more of Apple’s high-touch emporiums than a typical department store layout.

“J.C. Penney is in a very tough spot.”

In fact, the apple does not fall far from the tree. Johnson … comes to Penney after more than a decade of leading Apple’s retail effort, where his innovations included the Genius Bar. Johnson is also credited with making Target chic. This makes his launching of the new Penney one of the most intensely watched experiments in the future of retailing, as the industry grapples with how to entice shoppers away from their keyboards and back to the sales floor.

Johnson could make his plan work, but it won’t be easy, says Rajiv Lal, … at Harvard Business School.

“J.C. Penney is in a very tough spot,” Lal says. “If you ask people today what J.C. Penney stands for, you don’t get a particularly compelling answer.”

Once a staple for everything from bed sheets to children’s clothing, many shoppers now associate the 110-year-old brand with a bygone era of paper catalog shopping. Penney’s sales have lagged in an increasingly fierce retail environment, with stores such as Walmart vying for customer dollars on the lower end, Kohl’s and Target jockeying for the middle market, and Macy’s and Nordstrom reaching for the upper-middle end. JCP reported a December-quarter loss of $87 million, with revenue falling year over year by 4.9%, to $5.42 billion.

Johnson, who took over in November (2011), is revamping Penney’s 1,000-plus stores to target “all Americans.” Standing out in the crowd, making the pricing scheme work, and reinvesting in the company despite razor-small margins are all part of his challenge, Lal says.

Pricing it right

Retail pricing is a high art, and Johnson is starting from scratch at Penney, replacing frequent sales—the company had 590 of them in 2011—with “Fair and Square everyday pricing.”

When outlining the plan in January he called the company’s former strategy of offering items at a high initial price and then marking them down weeks later “insulting.” He also eliminated coupons, something Macy’s did in 2007, only to reverse the decision after unhappy customers snubbed the store.

Nearly three-quarters of everything at Penney is usually sold at 50 percent discount from list price. The new model is based on three prices: the everyday (at least 40 percent off), which kicked off February 1; month-long values, based on themes like back-to-school and Valentine’s Day; and “best prices,” which are clearance sales. In addition, Johnson decided to end all prices in “00,” instead of 99 cents, and exclude the suggested retail price of a product on the tag in favor of just one marked-down price.

“I think that on the consumer side this has simplified pricing, which makes a lot of sense,” Lal says.

“All department stores either rise or fall on their ability to execute a strategy.”

Penney will be able to move more merchandise off the floor faster, Lal adds, quickly making room for fresh items. This strategy could bring customers into the store more frequently and buying when they find a compelling piece of merchandise, rather than waiting until the next sale.

Still, Penney’s pricing plan is

risky

. “Every day prices will not be as low as the biggest discounts that [the company] once offered,” pricing consultant Rafi Mohammed wrote .. “Instead, its pitch to consumers is why play the ‘wait for the rock-bottom price’ game when Penney offers ‘pretty good’ prices every day?”

Aside from pricing changes, all retail stores are under intense pressure to create item assortments that cannot be found elsewhere. “We complain that every department store is the same,” Lal says.

Some retailers are already fighting this perception, observed Lal and coauthor Jose B. Alvarez in

Retailing Revolution: Category Killers on the Brink

. TJX Companies—parent company of T.J. Maxx, Marshalls, and HomeGoods—is well positioned because it “fostered a differentiated treasure hunt that is highly productive. Macy’s [has strengthened] its already wide-ranging assortment of unique items. Nordstrom’s private label has always been a respected part of its offer.”

Town Square

Johnson’s vision is to make the shopping experience as easy and enjoyable as buying a smartphone at an Apple store or sipping a latte at Starbucks.

J.C. Penney stores will be overhauled and streamlined, adding 80 to 100 so-called brand shops, or stores-within-stores, to be located along a new “Main Street” that replaces the confusing, endless racks common in department stores.

Brands will include the ubiquitous Martha Stewart and Nanette Lepore’s “l’amour nanette lepore” line, a budget-friendly teen boutique. Existing brands including IZOD, Liz Claiborne, and The Original Arizona Jean Company will receive refreshed displays. Add to the mix an American themed red, white, and blue logo, an as-yet-undefined “Town Square” space in all stores, and the naming of talk show host Ellen DeGeneres as a company spokeswoman, and the ingredients are moving into in place to create a buzz around the brand.

The store-within-a-store concept promises to provide Penney with the unique merchandise it needs to stand out and attract new customers. But it can also be tricky to execute. For example, if Penney allows too much leeway to the individual store-in-store brands on how they display and manage their merchandise, it could subtract from the overall shopping experience that Johnson is trying to create, says Lal. Overall brand control includes everything from how the merchandise is sold to the way employees interact with customers.

“If [Johnson] is able to control the shopping experience it’s a much more viable strategy,” Lal says.

Will it work?

Johnson has “painted a picture that is very reasonable,” Lal continues, but it will take about three years to gauge whether he’s succeeding.

This August, the company will begin updating all stores with new merchandise. Two to three in-store shops will be installed monthly over the four-year plan. The Town Squares, which will likely be used to provide shoppers with complimentary services (free ice cream? haircuts?), are scheduled to debut in 2013. Johnson expects the transformation to be complete by 2015.

“All department stores either rise or fall on their ability to execute a strategy,” Lal says. “These are great ideas, but the ability to execute day in and day out, and keep employees motivated in such a large organization where stores are spread over such a huge territory” will make or break the plan.

Penney Wise, Pound Foolish? JCPenney Backpedals on Confusing Pricing Strategy

Posted by

Dale Buss

on May 31, 2012 04:02 PM

At some point, JCPenney CEO Ron Johnson is going to run into massive credibility problems with shoppers, investors and employees. He may already be there.

As part of its new “fair and square” pricing strategy that was

introduced

as part of its brand refresh in January, the retailer

announced

new promotions that would give lower prices on specific days of the month and also that some products would have better pricing for month-long periods. Coupons, in a risky move, would be eliminated — a move, it turns out, that didn’t sit well with 

“couponing moms”

.

But one

bad quarter

later, in addition to lowering prices every first and third Friday of the month (aka “payday”), Penney’s has

backpedaled

on its non-promotional stance by adding five additional “Best Price Fridays” throughout the year that will also feature lower prices, such as the one before Memorial Day weekend.

While the move is designed to woo back customers after the brand’s dismal first quarter, at least one analyst is afraid that the addition of the new days will confuse consumers even more.

The first “Best Price Friday” took place on May 25th to lure Memorial Day sale shoppers. Another is slated for Black Friday in November. And while for any other chain a Friday promotion before a major holiday would be as routine as mopping the floors overnight, any kind of price-based promotion is a huge deal for the “new” JCPenney.

That’s because Apple emigre Johnson has staked not only his tenure as CEO but in many ways the entire future of the JCPenney brand on the notion that American consumers can be “educated” to embrace a new “everyday-pricing” strategy that offers regularly lower prices in exchange for dependability.

“The additional Best Price Fridays equates to adding promotions and is a step away from the company’s three kinds of pricing strategy, suggesting that the company is willing to forgo its original thinking,” Deutsche Bank analyst Charles Grom wrote,

according to

Ad Age.

In order to get its various crucial constituencies to understand where he’s trying to take the venerable retail brand, Johnson has rolled out everything from Ellen Degeneres in a period Victorian dress in one new TV ad, to a new logo, to comments counseling patience after Penney’s

miserable

first quarter

results

, in which JCP lost $163 million and sales plunged 20%. He’s also reminded everyone not to expect great things out of this strategy for at least another couple of years.

But do consumers actually not want to be lured by coupons and other promotional gimmicks and really not want to be whipsawed by deeply discounted prices one day only to see them return to a higher price the next day? No one’s really sure.

And there’s certainly plenty of evidence that a highly promotional strategy can work very well even in Penney’s specifically defined segment; look no further than Kohl’s to find a brand that has figured out how to make a crazily promotional approach work just fine.

It may have been other things about the Penney brand that have been keeping customers away, such as its iffy reputation in soft goods over the last couple of decades — concurrent with Kohl’s stratospheric rise in that important market.

“Our first 90 days are a little tougher than we expected,” Johnson recently told analysts and investors. He at the same time insisted that Penney’s transformation “is way ahead of schedule.”

But as HBR

bloggers

have been

noting

, even “way ahead of schedule” may not give him enough time.

Below, JCPenney’s fact sheets explaining its “fair and square” pricing strategy and “monthly cadence” —

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