Running head: JCPENNEY 1 JCPenney: A Company in Need of Better Strategy Casey Braun Kent State University JCPENNEY 2 JCPenney: A Company in Need of Better Strategy JCPenney has been experiencing a rapid decline. The retailer is still reeling from its botched 2012 rebranding effort, led by then newly appointed chief executive officer Ron Johnson, formerly of Apple, Inc. (Edwards & Minato, 2013). Corporations often suffer major setbacks when CEOs or public relations practitioners are not able to think strategically. JCPenney is an organization that is still marred by poor tactics, such as its recent Super Bowl “tweeting with mittens” promotion. This paper will provide a brief overview of the decline of the JCPenney brand and will offer insight on how the retailer could refocus its branding efforts on its core tenets to strategically right the ship. The “tweeting with mittens” example will also be explored and deconstructed with suggestions for improvement from a public relations management perspective. JCPenney recruited Johnson from Apple near the end of 2011, citing “hopes [that] Mr. Johnson ‘will change how people shop’ and attract younger buyers into the store” (Holmes & Lublin, 2011, para. 14). The 2012 rebranding effort was JCPenney’s third in three years, which Olenski (2012) identified as “never a good a sign” (para. 2). Johnson announced his plan to turn around JCPenney in January of 2012 at an Apple-­‐inspired kick-­‐
off event. He announced to the crowd, “We can change a brand overnight. And we’re going to do that starting 2.1.12 [sic]” (Groth, 2013). From the beginning, based on his broad announcements alone, it is clear Johnson and his management team were not thinking strategically or considering the legacy values of the JCPenney brand. Before Johnson announced his new vision for JCPenney, the corporation fired Saatchi & Saatchi, its ad agency, and M Booth & Associates, its six-­‐year public relations agency. Following Johnson’s early-­‐2012 presentation of his vision, he replaced nearly all of the company’s top managers JCPENNEY 3 as well as thousands of middle managers (Edwards & Minato, 2013). With the heavy marketing and managerial changes Johnson was instituting, it is possible that those who had worked with the brand for an extended period of time and could have predicted the reaction that was to come from JCPenney’s customer base were no longer with the company. Johnson’s new vision seemed more tactical from the start. He leapt into his January presentation with the notion that JCPenney’s brand could be restored based on the six tenets of product, place, presentation, price, promotion, and personality—all of which are rather vague terms that do not seem to invoke a higher strategy. Johnson went on to detail how he wanted to redesign JCPenney’s stores to look more like Apple stores, wean customers off of promotions in favor of lower, every day prices, and confine brands to small “specialty shops” within the larger store (Groth, 2013). By mid-­‐2012, Edwards (2012) noted the retailer’s “complicated new pricing strategy [was] driving away its core customers” (para. 1), as evidenced by a revenue drop of 20 percent in the first quarter of 2012. Further, 80 percent of the comments on JCPenney’s Facebook page were negative (Edwards, 2012). A year after Johnson announced his plan, same-­‐store sales were down by 32 percent and the company was “burning through cash” to build the shops within stores (Lutz, 2013, February 27). Blodget (2013) called JCPenney’s fourth quarter in 2012 the worst in retail history. Lutz (2013, April 22) cited Johnson’s “getting rid of the sales and promotions that long-­‐time customers loved” (para. 10) as the key contributing factor. By the end of 2012, JCPenney had lost 985 million dollars and share prices had fallen by 60 percent. Finally, after a 16-­‐month reign, Johnson was replaced in April 2013 (Lutz, 2013, April 22). JCPENNEY 4 Johnson made a myriad of mistakes as CEO. The most notable being he did not approach the rebranding of JCPenney from a strategic standpoint. After reviewing various articles written about Johnson’s plan, what it appears he was attempting to do was recreate the Apple retail experience he pioneered in the JCPenney stores. The primary mistake with that approach is the corporate identity of a young Silicon Valley brand like Apple is very different from that of a legacy brand like JCPenney. Therefore, radical changes all at once to store design, promotions, prices, and merchandise that may attract technology enthusiasts drove away loyal department store customers. While attempting to rebrand the store to attract young noncustomers, Johnson effectively lost clientele to competitors like Macy’s (Edwards & Minato, 2013). Underestimating the value and fragility of the relationships with key publics proved to be a costly error for Johnson. It is in this arena where public relations management should have had an active role. As was made clear by his tenure with Apple, Johnson was an accomplished retail man. However, just because one has implemented a successful retail model in one sector does not mean he or she can duplicate that same success in another sector using virtually the same formula. Johnson may have been a retail man; however, he certainly was not a relationship man. Good public relations counsel would have been able to quickly assess that “the road hadn’t been paved for new direction” and, as such, “core JC Penney customers [would be] alienated” (Gross, 2013, para. 1). JCPenney was not Apple. Therefore, the same strategy carefully implemented by Johnson and Steve Jobs could not simply be cloned in the department store sphere. In Drucker’s (1994) article “The Theory of the Business,” he explains a valid theory of the business has three parts: assumptions about the environment, the specific mission, JCPENNEY 5 and the core competencies of the organization. The environment includes “society and its structure, the market, the customer, and technology” (Drucker, 1994, p. 99). The mission is the overall role the organization aims to serve or “how it envisions itself making a difference…in the society at large” (Drucker, 1994, p. 100). The core competencies are the tools the organization will use to accomplish the mission. It can be argued that having fired the two agencies who had been responsible for guiding the organization’s strategic communication and the managers responsible for aligning practices with the organization’s core values, Johnson effectively decimated JCPenney’s theory of the business without properly and strategically guiding in a replacement theory. Drucker (1994) emphasizes the importance of assumptions about the environment fitting reality. Johnson’s assumptions about the environment did not fit with reality. He seemed to assume radical changes would not affect current customers and JCPenney loyalists. I would argue this was knowable had public relations management been employed. Further support for a need for public relations counsel is provided in an article from Lutz and Bhasin (2013). Johnson’s vision for JCPenney went directly against core values instilled in the company by founder James Cash Penney who said, “The public is not greatly interested in saving a little money on a purchase at the expense of service” (Lutz & Bhasin, 2013, para. 7). If the objective JCPenney was after was to improve the shopping experience and attract younger shoppers to the store, the tactics of cutting prices and remodeling the store layout into smaller specialty shops was not the correct path. The issue was a poor assessment of the environment. A thorough SWOT analysis could have revealed these potential problems and extreme loyalties both customers and in-­‐store employees felt to the JCPENNEY 6 original vision of James Cash Penney. As interviews conducted by Lutz and Bhasin (2013) revealed, that loyalty was very much present during the Johnson-­‐era changes. “I cringe each time I say ‘how can I help you?’” an associate told us, “because I feel the chances I actually can have diminished so.” “No more help in lingerie, fashion jewelry or men’s suits, if help is needed a supervisor is paged, another wait,” explained another associate. “I think Mr. Penney would be very unhappy about these changes.” (Lutz & Bhasin, 2013, para. 9-­‐10) A better strategy would have been to slowly introduce more modern merchandise into the JCPenney stores while keeping legacy brands, such as the popular St. John’s Bay (Brownell, 2013), on the shelves. Further, a modernization of the website would have served as a significant refresh, as a constantly adapting online presence is critical for today’s shoppers. Finally, a campaign to emphasize on the legacy core value of quality customer service in the JCPenney stores would have, again, reaffirmed current customers’ loyalty to the brand while simultaneously attracting noncustomers. In this way, the strategy is marrying the objective of improving the shopping experience and attracting new customers to the core tenet of quality customer service. However, it appears JCPenney has still not learned from its mistakes. During the 2014 Super Bowl, the retailer engaged in a tactic to generate buzz during the game. Twice between 6:45 p.m. and 7:30 p.m., the department store tweeted from its @jcpenney Twitter handle with purposeful typos, leading many to speculate that either someone had hacked the Twitter account or that whoever was managing the store’s social media was tweeting under the influence of alcohol (Prakash, 2014). However, neither was the case. The promotion according to JCPenney spokeswoman Kate Coultas was “tweeting with mittens”: JCPENNEY 7 All of this just contributed to the buzz and once they saw our “Oops…we're tweeting with our mittens on” tweet they also updated....We wanted to find a way to stay above the Super Bowl fray and instead create our own narrative. Given it was cold, and we are selling Go USA mittens, we thought it could be a fun stunt! (Prakash, 2014, para. 10) Again, it appears JCPenney jumped to tactics without thinking about a strategy. While the brand may have gained Twitter followers in the short-­‐term, the “tweeting with mittens” promotion does not seem to fit into an overall branding strategy. Based on the brand’s last year of trying to undo the damage done by Johnson, including returning to an older logo, reinstituting promotions, and returning stores back to their pre-­‐Johnson layout (Buss, 2013), the “tweeting with mittens” promotion does not seem to be in support of the goal. A tactic more inline with the brand’s current strategy might have been to post photos on Twitter of football enthusiasts wearing reintroduced JCPenney merchandise or perhaps images of people watching the game in football-­‐themed t-­‐shirts with the newly reinstated JCPenney logo. In that way, the brand would have still been participating in the Super Bowl online conversation while supporting the current objective. The most important lesson from the JCPenney case study is the need for a strategic approach whenever a brand is trying to modify or reinvent itself. Quality public relations management could have revealed the high risks Johnson was taking when he rapidly gutted a legacy brand with no consideration for the needs of current customers. Had Johnson opted for a more strategic approach and public relations counsel to better understand the relationships the brand had with its publics, he would have found a more effective means of altering the theory of the business without upsetting key constituents. JCPENNEY 8 References Blodget, H. (2013, February 28). To be clear: JC Penney may have just had the worst quarter in retail history. Business Insider. Retrieved February 11, 2014, from http://www.businessinsider.com/jc-­‐penney-­‐worst-­‐quarter-­‐in-­‐retail-­‐history-­‐2013-­‐2 Brownell, M. (2013, March 21). J.C. Penney’s plan to lure back its lost customers. DailyFinance. Retrieved February 12, 2014, from http://www.dailyfinance.com/on/jcpenney-­‐st-­‐johns-­‐bay-­‐joe-­‐fresh/ Drucker, P. F. (1994). The theory of the business. Harvard Business Review, 72(5), 95-­‐104. Retrieved February 12, 2014, from Business Source Complete. Edwards, J. (2012, June 15). 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customers-­‐away-­‐from-­‐the-­‐store-­‐2012-­‐6 Edwards, J., & Minato, C. (2013, March 5). The Ron Johnson disaster timeline: How the Apple guru humbled JCPenney. Business Insider. Retrieved February 11, 2014, from http://www.businessinsider.com/the-­‐ron-­‐johnson-­‐disaster-­‐timeline-­‐how-­‐the-­‐ apple-­‐guru-­‐humbled-­‐jcpenney-­‐2013-­‐3?op=1 Groth, A. (2013, April 8). Here’s Ron Johnson’s complete failed plan to turn around JCPenney. Business Insider. Retrieved February 11, 2014, from http://www.businessinsider.com/ron-­‐johnsons-­‐failed-­‐plan-­‐to-­‐turn-­‐around-­‐
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