Can Penney’s Squareness Lead to Loyalty?


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Being fair and being loyal are not the same thing. But can one engender the other?

The question hit me when reviewing J.C. Penney’s annual report, which reveals that its heady new pricing strategy, called Fair and Square, could produce a fair number of zeros in the coming months – meaning declining sales.

Penney’s approach is admirable enough. As coupons, price cuts and other deep discounts have essentially trained consumers not to pay full price (and to wonder what the full price on anything really is), the department store chain opted to walk away from the madness. Fair and Square, it said: everyday low pricing, with just two sales a month on out-of-season wares.

The company invested roughly $200 million in implementing the new strategy and retained Ellen DeGeneres to star in a series of clever commercials. But in its annual report, it warned that the strategy “could result in a prolonged decline in sales.”

Sure, part of this is the necessary warning a publicly traded company must make when it undertakes a dramatic change. The bigger issue, to me, is the extent to which Fair and Square will build loyalty among Penney customers.

It’s pretty much accepted that deep discounts alone will not win loyalty – at least emotional loyalty. Ask anyone who will shop nowhere but Nordstrom. I think the opposite is also true: Predictable pricing alone will not win loyalty.

Penney, in describing its strategy, does not mention loyalty. But make no mistake, Penney CEO Ron Johnson knows all about it. He used to lead the retail business at Apple, whose customers are maniacally loyal. But Apple achieved its following through unparalleled technology, surprisingly gorgeous designs and an element of scarcity. These qualities are not exactly what we expect of Penney.

Which begs the question: What do we expect from it? Penney needs to identify what its best shoppers love most about it, and then build on that. Perhaps it is Fair and Square pricing. But it may also be the merchandise selection and the sales associates.

Penney could likely find some answers about customer relevancy in its loyalty program data. But considering the JCP Rewards program earned a scant four sentences in the entire annual report, it does not appear to be a go-to tool for the new team.

And that may be a hard fact to square with its loyalty members, all of whom share their purchase information in hopes of a better experience.

Lisa Biank Fasig
Lisa leads the creation of editorials and feature stories for COLLOQUY and oversees the work of contributing editors and writers. With 18 years of reporting experience, most in business and specifically consumer behavior, she is highly skilled at researching data and teasing out the trends. A background in graphic design enables her to see ideas in three dimensions and tell the story visually.


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