Despite its CEO’s high profile pedigree, initial high hopes for success, and an innovative strategy, J.C. Penney Co. is in a huge amount of trouble.
Under the guidance of former Apple Store chief Ron Johnson, the department store chain has seen large declines in sales and a recent admission that the turnover will take even longer than expected.
In a post at the Harvard Business Review, Wharton Professor Barbara Kahn argues that the company’s issues come from a fundamental misunderstanding of how people decide to buy things. A confusing revamp of discounts and sales coupled with a re-imagining of the physical store was a giant contradiction.
Consumers do not just wake up and make a purchase. The purchase process is staged. First, consumers recognise a need, then they search for information about products that might solve that need, they create a consideration set, and finally make a choice.
Johnson’s strategy is focused on the in-store experience, but that’s not enough.
By focusing on that and completely changing pricing, he ignored the part of the decision-making process that actually brings people into stores.
Basically, he shot his own strategy in the foot by making insuring that less people would see his nice new stores.
And even though the company’s backtracking, it’s left core customers alienated and confused.
So no matter how nice and innovative or unique the store is, it doesn’t factor into the first stage of decision making, which is based on a critical need. People always want to feel like they’re getting a great deal.
Costco on the other hand, totally gets it, Kahn argues. They offer cheap food and cheap gas, both of which are critical needs. And their prices and bulk offerings are doubly appealing in tough economic times. They get people into the store, and then they buy a few sweaters or a pack of socks and so on. And that’s just part of their unique strategy.
Price isn’t the only differentiator. Warby Parker offers the opportunity to try eyeglasses out either online or physically, setting themselves apart at the search stage.
JCPenney does not offer a product, service, or pricing that is so fundamentally different that it stands out in that first stage of decision making. And they don’t seem to have a strategy to do so.
It just goes to show that even massive companies and intelligent executives can forget fundamental business and psychological facts.
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