Running head: CASE STUDY: JC PENNEY & ELLEN DEGENERES
Case Study: JC Penney & Ellen DeGeneres
Eunice Hurh
University of North Texas
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CASE STUDY: JC PENNEY & ELLEN DEGENERES
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Case Study: JC Penney & Ellen DeGeneres
Background Information: JC Penney
In 1902, James Cash Penny opened J. C. Penney Company, Inc. with the sole purpose of
selling merchandise and services to consumers internationally at a profit (Funding universe,
2012). With over 1,200 stores, JC Penney Company, Inc. is the largest department-store retailer
and catalog merchant in the United States (Funding universe, 2012). The company rocketed in its
early days because it sold all goods at "one fair price" and brought stylish goods from the East to
more isolated areas (Funding universe, 2012). However, the company struggled through the
1970s, as companies like WalMart and Sears gave JC Penney threatening competition within the
hardware and appliance departments (Funding universe, 2012).
Private label brands became a principle for the eminence of JC Penney. Customers liked
them because of controlled quality and cheaper prices than brand names; Penney liked them
because he could control the price and make a higher profit margin (Funding universe, 2012).
Belle Isle, Ramona, Honor Brand, and Nation Wide were private label names for piece goods,
and Big Mac, Waverly, and Lady Lyke were labels on work shirts, men's caps, and lingerie,
respectively (Funding universe).
In the following few years, the company's growth flourished. As Penney's personal
wealth increased, so did his charity: He founded Penney Farms, established the JC Penney
Foundation, and the Memorial Home Community (Funding universe, 2012). By JC Penney’s 50th
anniversary in 1952, its sales reached up to $1 billion (Funding universe, 2012). JC Penney was
different from many of its competitors with its late entry into the catalog mail-order business;
other big retailers started in mail order and then launched into retail stores (Funding universe,
2012).
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Then, in 1975, JC Penney’s directors decided the company needed extensive revamping.
The company expanded the fashion programs in men's, women's and children's departments, and
the company divided its stores into two categories, metropolitan (based in regional shopping
centers) and geographic (based in smaller communities) (Funding universe, 2012). Moreover,
apparel, home furnishings, and leisure lines would be emphasized, and auto service, hard line
appliances, paint, hardware, lawn and garden merchandise, and fabrics were phased out; its big
mass merchant competitors, Montgomery Ward and Sears, continued in these lines (Funding
universe, 2012). Additionally, J.C. Penney's continued concentration on women—who accounted
for 80 percent of apparel sales and on whose behalf each store now allocated up to 41 percent of
its space—was paying off (Funding universe, 2012).
Unfortunately, in 1995, JC Penney's recovery lost its momentum, falling short of both its
own and analysts' expectations (Funding universe, 2012). Retail sales increased only 0.9 percent
for the year ($20.6 billion vs. $20.4 billion), income fell from 1994's outstanding $1 billion to
$838 million, and comparative store sales experienced a 1.4 percent drop (Funding universe,
2012). With its stock value falling, JC Penney announced in 1999 it would sell 20% of Eckerd in
the form of a tracking stock, but it postponed the IPO three times (Hoovers, 2012). That year it
also sold its private-label credit card operations to GE Capital and sold its store in Chile to
department store chain Almacenas Paris (Hoovers, 2012). Eventually in 2000, JC Penney closed
about 50 department stores and 300 Eckerd drugstores (Hoovers, 2012). Sadly, JC Penny
continued to close more and more department stores.2001 the company shuttered about 50 more
department stores and drugstores. The possibility of JC Penney disappearing from the
department store industry was becoming a sad and slow reality.
CASE STUDY: JC PENNEY & ELLEN DEGENERES
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Perhaps JC Penney needed to revamp its company through the use of a celebrity
endorsement to create a sustainable competitive edge and emotional hedonic connections with its
consumers.
Background Information: Ellen DeGeneres
Ellen DeGeneres, born on January 26, 1958,is an American stand-up comedienne,
television host, actress, author, and celebrity spokesperson (Biography, 2012). She hosts the
syndicated talk show The Ellen DeGeneres Show and has also starred in two television sitcoms,
Ellen from 1994 to 1998 and The Ellen Show from 2001 to 2002 (Biography, 2012). During the
fourth season of Ellen in 1997, DeGeneres came out publicly as a lesbian in an appearance on
The Oprah Winfrey Show (Biography, 2012). When she was growing up she dreamed of
becoming a veterinarian, but she gave up the idea because she was "not book smart” (Biography,
2012). Reportedly, Ellen DeGeneres worked at a Louisiana-based JC Penney (Wong, 2012).
Following her employment at various jobs, Ellen discovered she was funny and amazing
at stand-up comedy. DeGeneres was invited onto The Tonight Show and earned the distinction of
being the only female comic to be invited by Johnny Carson to sit on the famed "couch" during
her first visit (Biography, 2012). She then began making regular appearances on the talk show
circuit, including performances on The Late Show with David Letterman, The Tonight Show with
Jay Leno, The Oprah Winfrey Show, Later with Greg Kinnear, Larry King Live, and Good
Morning, America; Ellen was also profiled in detail on ABC's PrimeTime Live (Biography,
2012).
In 1994, DeGeneres achieved her goal of becoming an actress with her own prime-time
sitcom: Ellen (Biography, 2012). This show faced strong condemnation when, in April 1997,
DeGeneres' character became the first lead in sitcom history to openly reveal her homosexuality
CASE STUDY: JC PENNEY & ELLEN DEGENERES
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on air (Biography, 2012). Affiliates and sponsors began pulling out from contracts with Ellen in
response to the spurred controversy. Despite all the negative reactions, the show also received
rounds of applause from gay-friendly activists—including DeGeneres' mother, Betty DeGeneres,
who appeared on copious talk shows in support of her daughter (Biography, 2012). Nonetheless,
even though Ellen had loyal viewers; an Emmy Award for the coming-out episode; and the
show's pioneering place in television history; the show got canceled in 1998 (Biography, 2012).
In 2003, Ellen DeGeneres revisited the television and became a success with her talk
show, Ellen. Ellen has won an Emmy, nearly a dozen Daytime Emmy Awards, and numerous
People's Choice Awards (Biography, 2012). In continuation of her lesbian profile, DeGeneres
married de Rossi on August 16, 2008, in what was perhaps the highest-profile gay marriage after
California legalized the unions (Biography, 2012). Looking at the amount of success Ellen
DeGeneres achieved in her lifetime thus far, it is clear that she would be a prime candidate for
being a spoke person, as she already is for Cover Girl cosmetics.
JC Penney & Ellen DeGeneres
On January 25, 2012, JC Penney announced that it was getting a new logo and
completely revamping its pricing, branding, promotions, as well as refreshing its stores (Palmer,
2012). An additional part of this plan included Ellen DeGeneres as JC Penney’s brand partner
(Palmer, 2012). Although this was just one element of the company’s revamping plan, many
were not thrilled and several issues arose for JC Penney’s loyal customers. A division of the
American Family Association, One Million Moms, called for DeGeneres to be replaced because
she is a lesbian (Wong, 2012). "Funny that JC Penney thinks hiring an open homosexual
spokesperson will help their business when most of their customers are traditional families," the
group wroe on its website (Wong, 2012). Additionally, One Million Moms stated, "DeGeneres is
CASE STUDY: JC PENNEY & ELLEN DEGENERES
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not a true representation of the type of families that shop at their store. The majority of JC
Penney shoppers will be offended and choose to no longer shop there and the small percentage of
customers they are attempting to satisfy will not offset their loss in sales." (Wong, 2012) The
group's statement concludes: "By jumping on the pro-gay bandwagon, JC Penney is attempting
to gain a new target market and in the process will lose customers with traditional values that
have been faithful to them over all these years." (Wong, 2012)
The company's CEO, former Apple executive Ron Johnson, explained why the company
chose DeGeneres to the Associated Press: "I think Ellen is someone we all trust. She's lovable,
likable, honest and funny, but at her soul, we trust her," he said. (Wong, 2012) When JC Penney
CEO Ron Johnson spoke to CBS News, he called it a "no-brainer" and dismissed any debate
(Wooledge, 2012). Johnson said, "[W]e stand squarely behind Ellen as our spokesperson, and
that's a great thing. Because she shares the same values that we do in our company. Our company
was founded 110 years ago on The Golden Rule, which is about treating people fair and square,
just like you would like to be treated yourself." (Wooledge, 2012) Eventually, Ellen herself
spoke on the debate, and she got the opportunity to address the One Million Moms’
condemnation of her "values” (Wooledge, 2012). She said, "Here are the values I stand for: I
stand for honesty, equality, kindness, compassion, treating people the way you'd want to be
treated, and helping those in need. To me, those are traditional values. That's what I stand for."
(Wooledge, 2012). Her loyal followers positively agreed with her statement. How can JC Penny
keep its partnership with Ellen DeGeneres without losing its current, loyal, and traditional
customers?
Solutions For JC Penney’s Brand Image
1. Pricing Strategy
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a. The lynchpin of J.C. Penney's revitalization is a new "Fair and Square Every Day"
pricing strategy (Mohammed, 2012). In contrast to J.C. Penny’s plan, Burberry
underwent pricing changes and streamlined its products to a higher price point
(Moon, 2004). Instead of using deep discount sales to attract customers, J.C.
Penney will offer three simple price categories of “Every Day”, “Month Long
Value”, and “Best Prices” (Mohammed, 2012). Additionally, prices also now end
in "0" instead of "99" with only once price listed on the tag (Mohammed, 2012).
However, displaying a "previously sold at $99" on the price tag helps to validate
this price mentally (Mohammed, 2012). J.C. Penney’s absence of differentiation
in making this pricing strategy successful, might lead to its pitfall. Generally
speaking, J.C. Penney's products are fairly homogenous (Mohammed, 2012).
When selling a relatively undifferentiated product, the only lever to generate
higher sales is discounts; even worse, if competitors drop prices on comparable
products, J.C. Penney's hands are tied (Mohammed, 2012). Since, the J.C. Penney
shopping experience hasn't reached the "loyalty-inspiring" stage, like
Nordstrom's, which can protects it from price competition (Mohammed, 2012).
Also, prices ending in “0” are interpreted as a premium offering, while those
ending in “9” convey value (Mohammed, 2012).
2. Advertising, Logo, Slogan
a. Companies like Benetton, American Apparel and Dolce & Gabbana used “shock
advertising” as a way to gain publicity, attract consumers, and higher profit
margins (Ganesan & Thota, 2003). For J.C. Penney, the advertising included a
new Beginning August 1st, J.C. Penny brought a different meaning to the word
CASE STUDY: JC PENNEY & ELLEN DEGENERES
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“Clearance” for its customers. In collaboration with its new pricing strategy, J.C.
Penny tweaked its advertising to better communicate its strategy to the customers
(Anderson, 2012). In April, the J.C. Penney rolled out an ad campaign titled “Do
the Math,” which was intended to showcase its current system presenting prices
that are cheaper than combining coupons and sales (Tuttle, 2012). J.C. Penney
will also have a "Town Square" offering courtesy services to customers as well as
promotions such as free hot dogs and ice cream in July (Mohammed, 2012).
3. Continue Partnership with Ellen DeGeneres
a. Since the announcement of brand alliance between Ellen DeGeneres and J.C.
Penney, there have been positive and negative reactions. Parallel to Benetton
Group’s evolution of its communication strategies, J.C. Penney was well-aware of
the flack they would receive from those not ready for this type of partnership
(Ganesan & Thota, 2003). The organization, One Million Moms, was adamant on
the extraction of Ellen DeGeneres as spokes person for J.C. Penney. The
organization even called for a boycott until J.C. Penney responded with the
wanted result. However, One Million Moms inevitably backed off on the boycott
and deleted its Facebook page due to the insurmountable amount of backlash and
lack of support (Levon, 2012). Its recent disappearance from the social network is
indicative of how powerful society can be once it unites to conquer (Levon,
2012). On March 8, 2012, One Million Mom’ director Monica Cole stated that
this disappearance and dropped boycott was due to other issues requiring her
group’s attention (Adam, 2012).
Recommended Solution
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The combination of innovative advertising and continued collaboration with Ellen
DeGeneres will yield the highest profit margin for J.C. Penney. Because Ellen holds high regard
in the mass public for positive popularity, J.C. Penney should remain with her and take
advantage of her status. Once J.C. Penney achieves its long-term retail vision — which is
exciting and groundbreaking on many levels — it will have both the product and shopping
experience mojo to make its Fair and Square pricing strategy a success (Mohammed, 2012). This
ultimately ties together all three solutions into a fancy bow. However, given its current "I've got
something similar" product mix and very price-sensitive customer base, its rollout seems
premature (Mohammed, 2012). Advertising the company through the partnership with Ellen will
project a brand image of social responsibility regarding the LBGT community. Moreover,
holding events that create conversation and publicity will aide in this movement. Thus, all the
good that DeGeneres draws is probably the reason JC Penney hired her in the first place to help
the retailer become “America’s favorite store” (Baranaukas, 2012). For the current year, the
company projected per-share earnings of $2 to $2.10 on total sales growth in the low-single
digits on a percentage basis (Talley & Stynes, 2011). Analysts polled by Thomson Reuters most
recently forecast a profit of $1.75 a share and revenue growth of 2% (Talley & Stynes, 2011).
CASE STUDY: JC PENNEY & ELLEN DEGENERES
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References
Anderson, M. (2012, July 26). J.C. Penney brings back the word ‘clearance’ amid customer
confusion. Huffington Post. Retrieved from
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Biography true story. (2012). Ellen DeGeneres. Retrieved from
http://www.biography.com/people/ellen-degeneres-9542420
C Baranaukas. (2012, February 2). Ellen DeGeneres and the suddenly cool J.C. Penny. [Blog
Post]. Retrieved from http://www.washingtonpost.com/blogs/she-the-people/post/ellendegeneres-and-suddenly-cool-jc-penney/2012/02/09/gIQAt0Fa4Q_blog.html
Funding universe. (2012). History of JC Penney Company, Inc. Retrieved from
http://www.fundinguniverse.com/company-histories/j-c-penney-company-inc-history/
Ganesan, S & Thota, V. (2003). Benetton group: Evolution of communication strategy. ICRAI
Knowledge Center. Retrieved from https://learn.unt.edu/bbcswebdav/pid-338319-dtcontent-rid-1517317_1/courses/MDSE_4660_001_11235W2/Benetton%20Group%20%20Evolution%20of%20Communication%20Strategy.pdf
Hoovers. (2012). JC Penney Corporation, Inc. Retrieved from
http://www.hoovers.com/company/J_C_Penney_Corporation_Inc/rfxrif-1-1njhxk.html
Levon, W. (2012, June 4). One million moms take aim at J.C. Penney, but disappear from
Facebook. Yahoo! News. Retrieved from http://news.yahoo.com/one-million-moms-aimjcpenney-disappear-facebook-185100111.html
Moon, Y. (2004). Burberry. Harvard Business School. Retrieved from
https://learn.unt.edu/bbcswebdav/pid-338329-dt-content-rid1517325_1/courses/MDSE_4660_001_11235W2/Burberry.pdf
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R Mohammed. (2012, January 30). Understanding J.C. Penney’s risky new pricing strategy.
[Blog post]. Retrieved from
http://blogs.hbr.org/cs/2012/01/understanding_jc_penneys_risky.html
Palmer, A. (2012, January 25). JC Penney overhauls marketing, promo strategy. Digital
Marketing News. Retrieved from http://www.dmnews.com/jcpenney-overhaulsmarketing-promo-strategy/article/224733/
S Adam. (2012, March 8). You did it! ‘One million moms’ abandons call for Ellen to be fired,
says group is “moving on”. [Blog post] Retrieved from http://www.glaad.org/blog/youdid-it-one-million-moms-abandons-call-ellen-be-fired-says-group-moving
S Wooledge. (2012, February 13). A round of applause for the ‘million moms’ and their anti-gay
campaign…seriously. [Blog post] Retrieved from http://www.huffingtonpost.com/scottwooledge/million-moms-ellen-jcpenny_b_1272420.html
Talley, K. & Stynes, T. (2011, February 25). J.C. Penney’s profit rises 36%. The Wall Street
Journal. Retrieved from
http://online.wsj.com/article/SB10001424052748704150604576166192556670476.html
Tuttle, B. (2012, June 19). More troubles for J.C. Penny: Top executive departs amid sales
slump. Time Moneyland. Retrieved from http://moneyland.time.com/2012/06/19/moretroubles-for-jcpenney-top-executive-departs-amid-sales-slump/
Wong, C. M. (2012, February 1). Ellen DeGeneres’ JC Penney partnership slammed by anti-gay
group one million moms. Huffington Post. Retrieved from
http://www.huffingtonpost.com/2012/02/01/ellen-degeneres-jc-penney_n_1247657.html