For years, JC Penney has been one of my favorite — if not my most favorite — places to shop for clothing, primarily because they tend to have clothes that fit me and because they are relatively inexpensive. However, with exception of a couple of random items that were desperately needed (primarily from the A.N.A. brand they carry), I never, ever buy unless it’s on sale or on the clearance rack. While I want to look good, I don’t consider myself any sort of “trend setter”and I don’t have the money to spend $20 on a T-shirt. Especially when I know it will be on sale in a few weeks anyway.
It looks like many people are in my same shoes, and luckily the 100-plus-year-old brand has taken note by announcing some fairly signficant changes that focus on playing up pricing an downplaying promotions. A recent AdAge article explained some of the pricing changes here.
The first significant change will be embracing a new pricing strategy, consisting of “fair and square” pricing. It includes three types: everyday, regular prices; monthlong values; and best prices, on the first and third Fridays of every month. To determine new prices across its product range, Mr. Johnson said that the retailer looked at what it was charging and what customers most often paid after numerous discounts. He found that only one in 500 items sold at full price, while 72% of revenue was derived from selling products at 50% off or more.
For example, a T-shirt that had retailed for $14 but typically sold for closer to $6 will now be priced at $7. In a month when it’s a featured product, it will cost $6. When it’s time to clear it out and change colors, it will cost $4. The retailer is also embracing flat prices, no more 50- or 99-cent add-ons.
This sounds great, and I am excited to see how much prices will really drop in the next month or so. However, I hope they will monitor this carefully to make sure they aren’t hurting themselves by getting rid of the “thrill of the sale.” While I advocate for pricing items as low as possible while still being able to make money, there is some excitement in a limited-time sale, and JC Penney should keep that in mind. I think they have by making certain items on sale when it’s time for them to get a move-on.
Also, I am interested to learn they will do away with the .50 and .99 pricing endings. Many marketing texts have said these price endings puts the perception in people’s heads that what they are getting is a good value. But why? If I have the option of paying $5.99 or $6.00 for something, it really isn’t that big of a deal. What’s a penny worth in today’s world? I think JC Penney is recognizing people have become smarter than this old notion.
Besides dropping regular prices, another change to JC Penney is decreasing the amount spent on promotional efforts. According to the AdAge article, JC Penney has spent $2 million per promotion in the past. So, if they have had 590 promotional events per year, as the article states, that is about $1.18 billion or $98 million per month.
Under the new plan, rather than spending so much per promotion, they will spend only (yes, not the best use of the world only) $80 million per month, allowing them to either save $18 million monthly ($216 million annually) or put those extra million toward cutting prices year-round.
In today’s world, where saving money is essential and hokey, redundant advertising is shunned, this plan sounds like a great one; a trailblazing one, perhaps.
In addition to making price points more available, the current advertising JC Penney has done seems to not only mention the craziness associated with sales. I mean, what American hasn’t purchased something only to find out it was significantly cheaper a couple days later? It’s one of the most frustrating feelings in the world, and they captured it in their new commercial.
In the end, I think these changes are exciting and I’m very interested to follow their success. They are certainly getting the company plenty of press and helping change the company into one that is focused on what consumers want. In fact, when JC Penney released this info, its stock rose significantly, even though it had been fairly low for a while.
From a customer’s perspective (assuming you have shopped there before in your life), what do you think of the changes they’re making?