Introduction
Gerald approached the break room, seemingly for the last
time in his 18-year career with JC Penney. Somehow, he still couldn’t accept
the reality that his store in High Point, North Carolina was closing under the
new company-wide strategic campaign. As he strolled into the employee break
room to gather the last of his things, he ran into his fellow tenured employee,
Norma. The expression on her face, lifeless and drained of color, said
everything he felt in his heart.
“Still hasn’t sunk in, has it?” Gerald
said. “For years, you and I have witnessed and experienced so much within our
little store here in High Point. It's hard to believe we aren’t among the
survivors. Have you heard from people at any of the other stores about whether
or not they made the cut?”
Noticing Gerald’s state of disbelief, Norma replied, “From
what I heard through the grapevine, we are one of five stores closing. The
other stores that I heard got the axe are in Morrow, Georgia; West Dundee,
Illinois; Des Moines, Iowa; and Culpeper, Virginia. I also heard that two call
centers were closed during this restructuring process as well. All in all, we
are among thousands of newly unemployed workers. How great does this new brand
image appear now, I wonder?”
“That's unbelievable,” Gerald replied. “I didn’t think this
brand strategy would have such an impact on other aspects of this company. Just
a couple of weeks ago, we were adjusting to our new CEO from
Apple, and now we are adjusting to
having no jobs. Doesn’t seem like it could get much worse, does it?”
“For us and the thousands of others who are unemployed, it
wouldn’t appear that way. Even our fellow employees who have retained their
jobs are talking about how difficult the new company-wide policies are to
adopt. The rounded-dollar pricing, the loose-return policy, the three-tiered
pricing buckets--very few employees fully understand how best to shift from the
previous norms to adopt the new status quo. In some ways, can you really say
you envy the employees of the ‘new’ JC Penney?”
Norma continued, her frustration building, “Have you had a
chance to read the customer backlash that’s ensued from this rebranding? Very
negative and very critical of the new company outlook. One customer went as far
as to say that the new JC Penney is not customer friendly and suffers from an
identity crisis. Is JC Penney now the ‘Target’ of department stores, trying to
appear as the ‘cheap chic’ alternative? Many of our longtime customers may
abandon the brand completely.”
“Well, I know one thing for sure. The JC Penney I worked for
is going to walk out that door with me. Take care of yourself, Gerald. Try not
to dwell on the past memories here too much.”
Just like that, Gerald’s friend and colleague walked out the
door behind him. There was a lot of truth in Norma’s departing words. Gerald
quickly grabbed his remaining belongings and turned to leave the employee break
room one last time. As he pushed open the door, he said to himself, “How did
things get to this point? Was Norma right when she said that the old JC Penney
was going to walk out of the door with us?” Without hesitating further, Gerald
followed Norma out of the room.
JC Penney’s Struggles
When online retail shopping began to boom, JC Penney blindly
splashed into the water with both hands tied behind its back and immediately
found itself struggling to integrate its business function into an online
environment.
In 2010, jcpenney.com was unable to handle large amounts of
traffic during its Cyber Monday sale, and its Facebook page exploded with angry
comments from frustrated consumers who were not able to place orders. This lack
of preparation showed that JC Penney overlooked the potential for error in the
system, ultimately pushing its customers toward competitors. JC Penney’s
failure to translate its business model for an online atmosphere prevented
growth outside its outlets and ultimately led online consumers to take their
spending elsewhere.
Taking a look at how the business was struggling internally,
JC Penney was slow to embrace methods that strong competitors were using
successfully as they navigated profound changes in the retail landscape. When
JC Penney encountered problems with its online store, company executives
struggled to develop an efficient multi-channel return policy that would
minimize the cost of returns for both online and offline purchases. Customer
relationship management did a poor job of understanding its consumers and their
behavior in the context of returning online purchases, which directly led to
significant financial problems. JC Penney lacked the ability to adopt the
proper business strategies that would have kept the company growing and left
its consumers with a satisfying shopping experience. And in addition to these s
internal struggles, JC Penney faced continuing challenges in trying to
establish brand identity.
During the late 1990s, JC Penney was burdened by high
operating costs and got caught in a difficult middle market for clothes.[1]
With competition along a range of retailers – from heavy discounters, such as
Wal-Mart, to high-end retailers, like Saks Fifth Avenue – JC Penney was not able to meet the demands of
consumers in a distinctive way. Furthermore, organizational alignment became
another problem since JC Penney was known to purchase products from foreign
suppliers who held little regard for the treatment of their laborers.[2]
This sociopolitical issue was perceived by critics as un-American and left JC Penney’s
consumer base to question whether it should support such a business. By failing
to protect itself, JC Penney damaged its brand identity and left many customers
uncertain if they would shop there again.
JC Penney’s struggles were evident when looking at company
sales. During the company’s last fiscal year, sales at stores that had been
open for at least one year rose merely .2 percent, which is a significant drop
from the 2.5 percent increase these stores saw the year before. Macy’s, on the
other hand, saw a 5.3 percent rise store sales.3
In an effort to regain a competitive edge in the market, JC
Penney brought in a new CEO in November 2011 – Ron Johnson, a veteran executive
of Apple Inc. and Target Corp. – who was to pave a new path for future growth.
The New JCP
JC Penney has recently developed a new brand identity,
complete with new pricing models, a new return policy, a fresh, patriotic logo,
and a restructuring of its store layouts to make the shopping experience more
convenient and enjoyable for patrons. These changes were intended to help the
company strengthen its position in the market while also maintaining ties with
past customers and appealing to a younger demographic.
In terms of pricing, JC Penney has
developed a new, three-tiered system. This “fair and square” pricing model is
broken into “everyday prices,” “month-long values,” and “best prices.” The red-tagged
“everyday prices” indicate daily low prices that are about 40 percent lower
than previous ones. “Month-long values” indicate discounts on merchandise that
are changed each month. The blue-tagged
“best prices” are clearance prices, which will be
established on the first and third Fridays of each month.[3]
These changes are aimed at promoting the company image as a higher-quality
retailer, such as Macy’s, that offers its products at a discounted price,
comparable to lower-end retailers like Kohl’s.
Many customers in the past expressed dissatisfaction with JC
Penney’s strict return policy, which required them to have a receipt in order
to return items. The new “Happy Return” policy is meant to satisfy customers by
allowing them to return “any item, anytime, anywhere, no restrictions.” If a
customer has a receipt, he or she will be able to exchange the product or get a
full refund. If a customer does not have a receipt, the item can still be
exchanged, or that customer can earn a complete refund in the form of a JC
Penney gift card.5
JC Penney also revitalized its brand by altering its
logo.
The new logo, which can be seen on the right side, is much
sleeker and more modern. The two squares (the blue square on the interior and
the shape of the logo itself) signifies the new “fair and square” pricing model.
It is designed to resemble the American flag, exemplifying the idea of
patriotism and implying that JC Penney is an accessible, All-American
store.
Continuing to capitalize on nostalgic parallels to a sense
of Americana, the large aisle passing through the middle of the store is called
“Main Street,” and the outdated central jewelry counters have been replaced by
a “Town Square.”
Accompanying these changes is a brand new face of the
organization. Ellen DeGeneres, who worked for the company as a teenager, has
already been featured in multiple advertisements that highlight the new
changes. Her role has sparked some controversy, as conservative groups such as
“One Million Moms” have protested her position as the company spokesperson
since she is homosexual. JC Penney has continued to publicly stand by
DeGeneres.
Communication Problems
The process of rebranding JC Penney has created an identity
crisis for the retailer. Consumers are unsure of where the company falls on the
retail spectrum: Is the company now positioning itself closer to a lower-end
discounter or a higher-end department store? Confusion over the quality and
pricing of JC Penney’s products has led to traditional JC Penney customers
shopping elsewhere. JC Penney has focused more on gaining new customers,
appearing to abandon its traditional customers.
Employees share this same confusion when adjusting to this
new company-wide rebranding strategy. For example, in regard to the new pricing
buckets that are part of the “fair and square” model, some employees,
especially those within the jewelry department where deep discounting is the
norm, have struggled with the three-tier everyday low price approach. On top of
the employee and customer confusion, some department stores and call centers
have actually been closed as a result of the aforementioned changes.
The new “fair and square” pricing model is also unexpectedly
communicating a change within JC Penney that long-time core customers are not
buying into eagerly. These long-time customers grew accustomed to the old
system of coupons and aggressive seasonal sales that once represented the JC
Penney brand. The rapid and radical change on JC Penney’s part has created
confusion and vociferous objection to the new system. Ninety-six percent of 420
recent reviews of JC Penney on the Consumer
Affairs website rate it below two stars for satisfaction.[4]
Many customers argue that the departure from coupons has created a more
expensive and less enjoyable shopping experience. JC Penney now faces a
combative climb back to profitability, as it launches new campaigns and
strategies to attract new customers but continues to alienate its established
core customers.
With customer fallout from the rebranding strategy and
employee confusion about the new internal policies, JC Penney faces a unique
challenge moving forward. What communication problems does JC Penney currently
face, and what can the company do to help clear up these underlying issues?
What can JC Penney do in order to successfully communicate its new brand both
to employees and customers?
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