JC Penney’s “Fair and Square” Pricing Strategy

Submitted By: Group 3, Section A

Overview:
J.C. Penny was one of the largest departmental stores in the US with over 2000 stores as of 2012. The
company primarily sold soft goods Company brand image was getting to fade away and was associated
with old, disorganized stores and the brand positioning was between premium and low priced segment,
which was between these two and considered as middle market retailers. Economic recession of 2008
was a bad phase for Penney’s with years of sales decline, stores closing. Johnson, appointed as the CEO,
was already pioneered in the field of retailing with Apple and Target. The retail landscape as such was
facing stiff competition with new players coming into market such as Amazon and Walmart, which
offered low prices. With the appointment of Johnson, he started to re-group the brand and introduced
new methods such as the “Fair and Square” strategy, “Best price Friday” and “Month long values event”,
thus eliminating the coupons and complex pricing system. But soon after the introduction, he faced
stiffness from the customers as they were used to buying coupons and were eager to use those in the
store. Now, customers felt it was boring to visit the store as it had the same prices throughout the year.
The customers were now visiting more of Macy’s and the company was going backward in value of the
stock market and sales.

Problem statement: ​Johnson has changed the nomenclature of sales and promotion schemes to make it
more customer centric and simplified. “Fair & Square” pricing strategy with a new price-match
guarantee program, which is not working as expected and seems to have confused the customers. What
should be the right pricing strategy for JC.Penny ?

Case analysis:
SWOT analysis:
Strength: Weakness:
● It has a strong presence with ● Stores were old and often
operation for more than 100 disorganized
years ● Employee satisfaction was
● The cost of rent per square low
foot was lower by $5 ● Stock prices were going
compared to other down
competitors ● Millenials were not a part of
their customers

Opportunities:
● Multi channel retailing as
their presence in online was
not that significant
● Seasonal offers to attract
customers and coupons as
sold by other competitors
Threat:
● Online retailers like amazon
and discount retailers like
walmart were encroaching
their market share
● Even in departmental stores
category, Macy and Sears
were poaching their market
share
Problems identified:
Ecommerce arm of JC Penney wasn't doing as well as that of competitors like Kohl’s and Macy’s
Sales/sq.ft of JC Penney were constantly decreasing and quite less compared to competitors Suppliers
being anxious with JC Penney’s sales drop started shifting to competitors, and lack of trust by suppliers
will have a long term effect on JC Penney’s brand image
JC Penny was known for deals and bargains and Johnson removing the sales and bargains with the new
Pricing strategy had a heavy impact on bargain hunters who regularly frequented the store. The
leadership team majorly came from Apple Retail and tried emulating the Apple model which didn’t work
with clothing retail as both products are fundamentally different.
Alienated the core customer base with huge changes to the brand including the logo, store layout design
etc which essentially made it a different company itself. Also they decided not to do any testing or
market research to see if these strategies work which didn’t give the customers time to adjust.

Recommendation:
1. Bringing back the coupons and high low price strategy:
Pros:
● As mentioned in the case, customers considered using coupons as the best value for
money products. Bringing back this would make the customers lured to the store and
can increase the declining traffic to the stores.
● Traditional customers’ satisfaction can be increased.
Cons:
● The margin percentage will decrease again and is difficult to sustain in long term.
● The amount spent on pricing promotion ($1 bn) was not even noticed by customers.
● Constantly juggling between strategies will destroy the brand image of JC Penney and
will confuse the customers
2. Developing Multi Channel presence and bring back Private labels:
Pros:
● Private label brands developed over the period of time will give the value to the brand.
● As e-commerce was a desired platform among the customers, it’s essential to develop
the platform for attracting the young customers.
Cons:
● Investment will be needed and is difficult as the company is already bleeding money.
3. Focus on Millennial customers:
Pros:
● Millennials constitute a huge chunk of shopping population
● Easy to attract them on the basis of discounts and coupons as this generation gets easily
influenced by price
Cons:
● Do not show brand loyalty and will put off long standing old customers

Recommendations:
Develop multichannel retailing and more emphasis should be given for attracting the millennial
customers. Changing the strategy again would incur more cost and hence they should wait and see.