“J.C. Penney’s “Fair and Square” Strategy”

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Feb 20, 2024

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MKTG 4506 Consumer Behavior “J.C. Penney’s “Fair and Square” Strategy” Case Questions 1. Who had been J.C. Penney’s core customers? What was J.C. Penney’s brand image prior to “Fair and Square” pricing strategy? Who do you think Johnson is targeting with the new strategy and marketing message? ● Core Customers: Before the "Fair and Square" pricing strategy, J.C. Penney's core customers were typically middle-income families looking for value purchases. These customers were attracted by the frequent sales, discounts, and promotions that J.C. Penney offered, viewing the brand as a place to get good deals on a wide range of merchandise including clothing, household items, and other general merchandise. ● Brand Image: Prior to the implementation of the "Fair and Square" pricing strategy, J.C. Penney's brand image was that of a traditional department store that offered value through discounts and promotions. The brand was associated with affordability, a broad selection of merchandise, and a promotional pricing strategy that relied heavily on sales and coupons to drive traffic and purchases. ● Target of New Strategy: With the "Fair and Square" pricing strategy, Ron Johnson (the CEO of J.C. Penney at the time of implementation) appeared to target a broader demographic, aiming to simplify the shopping experience by eliminating constant sales in favor of everyday low prices. The strategy seemed to aim at attracting customers who valued transparency and consistency in pricing, potentially including younger and more affluent shoppers who might have been turned off by the traditional coupon-heavy, high-low pricing strategies. 2. Evaluate how well the “Fair and Square” pricing strategy fits with J.C. Penney’s value proposition, competitive position, and the existing customers’ attitudes. ● Fit with Value Proposition: The "Fair and Square" pricing was intended to realign J.C. Penney’s value proposition towards simplicity and integrity, offering customers consistent pricing rather than the traditional high-low pricing model. While this was aimed at making shopping easier and more straightforward, it may have conflicted with the perceived value proposition of getting a "great deal" through sales and promotions, which was important to J.C. Penney's traditional customer base. ● Competitive Position: This strategy differentiated J.C. Penney from other department stores and discount retailers that relied heavily on promotions. However, it also risked alienating customers who were accustomed to and motivated by the traditional

promotional model. Competitively, it aimed to position J.C. Penney as a more transparent and customer-friendly retailer but may have overlooked the importance of promotional activities in driving traffic and sales in the highly competitive retail landscape. ● Existing Customers’ Attitudes: The shift likely confused and disappointed existing customers who were accustomed to, and even enjoyed, hunting for deals within the old promotional model. The drastic change in pricing strategy may have led to a perception among these customers that J.C. Penney no longer offered the same value as before, leading to a disconnect between the company’s new strategic direction and its customers’ expectations and shopping behaviors. 3. What are the pros and cons of starting Johnson’s new strategy with the pricing change? ● Pros: ○ Simplicity and Transparency: The new strategy aimed to simplify the shopping experience, making it easier for customers to understand pricing without needing to track sales or use coupons. ○ Differentiation: It sought to differentiate J.C. Penney from competitors by positioning it as a more straightforward and honest retailer in terms of pricing. ○ Potential to Attract New Customers: It could attract a new segment of customers who preferred simplicity and transparency in pricing and who might have been alienated by constant promotions. ● Cons: ○ Alienation of Existing Customers: The drastic change risked alienating J.C. Penney's loyal customer base, who were accustomed to and appreciated the traditional sales and promotions. ○ Risk of Revenue Decline: By moving away from promotional strategies, J.C. Penney risked a significant decline in traffic and sales as customers looked elsewhere for deals. ○ Poor Communication: If the change was not effectively communicated, it could lead to confusion and a perception that J.C. Penney no longer offered good value, even if everyday prices were competitive. ○ Timing and Implementation: The success of such a strategy depends heavily on timing and execution. If not implemented during a period of strong consumer spending or without adequate marketing support, the strategy could fail to gain traction.

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