Q1. Evaluate the overall effectiveness of the “Fair and Square” repositioning strategy.

How well
or poorly do all the elements work together or work at odds with one another to deliver a
coherent whole? What elements are missing?

 Fair & Square a value based proposition - attempt to capture market through everyday low prices
(EDLP)
 Simplified pricing structure
 EDLP adopted to create a consumer perception that JC Penny offered lower prices on regular basis
 No market research to gauge customer perception of EDLP before implementation - critical mistake
 Slashing sales commission demotivated sales team, the most important part of marketing
department. Ineffective communication with sales team w.r.t their role as product expert
 They rendered their advertisement ineffective by removing words like “Sale” and Discount, failing to
understand that customers were highly hooked with sales and discount coupons
 Having 3 different pricing structures created further confusion for customers
 Even though JC Penny offered the lowest prices amongst all competitors (as per analyst reports), it
still recorded lower sales
 Even though ELPD pricing strategy could have created long term success for JC Penny, ineffective
communication and coherence with other marketing mix elements inhibited its success
 Q-2 What do the first and second quarter results indicate about the "Fair & Square
strategy?Are the first two quarters of results enough to validate or invalidate the changes?
How would you respond to them?

 The first quarter showed positive results with 67% of the products sold at the “Fair and Square” price
 However, results started to decline as mothers, the most important target customers steadily scored JC
Penny lower on value-perception scores
 Lack of discounts and weekly price promotions were cited as primary reasons for turnaround, even
though JC Penny had the lowest average price as compared to its competitors
 Consumer survey revealed preference for JC Penny’s old pricing strategy
 Walmart, through its promotional and discounting pricing, was taking away the loyal customers
 There was a significant earning’s loss of $163 million based on plummeting sales revenue. Gross
Margins collapsed from 40% to 37%
 Investors were quick to react to this, sending the stocks down by 20%, the biggest single day drop in over
4 decades for the company
 With overwhelming negative press and huge losses in revenue and stock prices, it is safe to conclude
that the pricing strategy had an overall negative impact on the company
 However, with huge investments in changing the pricing structure and logo, it is better to continue with
the current strategy
 They should push the current strategy forward through aggressive advertisements educating the
consumers on actual pricing scenario and changing their perception towards sales and discount coupons
Q-3 Are the results due to a faulty strategy or to a faulty execution of a solid strategy?
Would you expect similar or dissimilar results if the changes had been implemented
more slowly or in a different timing sequence?
• The said results happened because of both a faulty strategy and a faulty execution of a
solid strategy. As mentioned in the first question, strategies such as choosing a
spokesperson, Elen, did not relate to or could convey the message in a manner that was
intended. Promotions to bring awareness and value to the customer was limited.

• Ideally, the customers needed that more than a new spokesperson to be made aware of
the changes and also pertaining to why such changes benefited them on a rather large
scale.

• Similar results could be expected if changes had been implemented more slowly or in a
different timing sequence. While results were marginally better in a slower manner, but
without the proper promotion, the long term results would have been the same as
customers would still have reacted negatively to lack of sales and full-prices.
Q-4 What assumptions about JC Penney’s 5Cs must hold true for the repositioning to be
effective?

Customer
1. Customers : They need to be loyal
2.Competitors : would have to follow suit
Context Competitors 3.Collaborators : proper communication
making process smooth
4.Company : believe in company
5.Context : more of a clarity in deal for
customer
Company Collaborators
Q-5 Is JC Penney a brand that can be “Target-ized” or “Apple-ized”? Why or Why not? In what
fundamental ways does JC Penney differ from these two brands? Does Johnson’s plan address
these differences in ways that make the success of it’s new strategy more or less likely?

TARGET FEATURES APPLE FEATURES

• Affordable yet stylish • High Quality Products

• Mass Merchandising
Can be Target-ized Can be Apple-ized
• Modern Technology use
• Lower end of Market • Small Range products
•• Brand is Price
Customer Oriented
spread over a vast • •Need
Theyno
aresale expertbring
Innovators as noinnovation
spectrum technological knowledge required
• Company focused on Premium • Different target market of Apple
segment
Q-6 Is Johnson's past retail experience helping or hurting him as he tries to achieve his
goal of making J.C. Penney “America's favorite store”

About Johnson
• Vice President of merchandising at Target - transformed the mass merchandiser into a hot retail brand
• Worked with Steve Jobs to develop Apple retail stores and “Genius Bars” concept
• Talented and Persistent - Steve Jobs of retail industry

Past retail experience - Helping/Hurting ?

• The e-commerce space was overlooked - could have catered to omni channel consumers
• Penney's (affectionately called by customers) was changed to jcp
• Enough market research was not done before making changes to strategies
• Apple(technology and feature driven) and J.C. Penney(departmental store) were different in every way
• Abrupt decision on a number of changes
• eliminating the Monthly Values pricing tier
• modifying the name of the Best Price Fridays to “Clearance”
• To simplify consumers’ understanding, he eliminated the name “Fair and Square”
• Promotional spends were increased to run circulars
Q-7 Do you agree with the changes Johnson is making to the pricing scheme that are set
to take effect August 1st ? Are they enough to turn things around?

• Since the sales have been dismal in the past two quarters, the changes
were needed
• As per the below figures from the case, the scheme change makes sense:

• May turn the things around, but not in very near future - huge spendings
on advertisements and promotions already made.
Q-8 What should Johnson do now? Looking out one year, will JCP be stronger or
weaker brand if he stays on the current course?

If the pattern continues there would be a weakening in the brand image due to the following reasons:

Due to problems in conducting market research to test the strategy, it has caused harm and hence an
immediate analysis to gain actual customer insight is required.
It is required to provide the consolidated feedback to Johnson instead of making claims/assumptions about the
marketing strategy being ineffective or that customer have not understood the price policy.
Changes in buying behaviour is to be considered i.e. women shifting to Macy’s and loss of customers that were
loyal shows the ineffectiveness of the policy.
Commission removal for sales force builds up a negative feeling and hampers motivation.
No incentive would cause harm in successful transaction completion which is reflected in sales per retail
square footage. No product differentiation plays a vital role, as price competitiveness drives sales and also a dip
in e-commerce sales reflects the same.
As customers have all the prices from all retailers and would go with the best price : additionally there are no
offers to motivate customers.
Thank You