Part 8 | Pricing Decisions case 21.2 JCP Switches to EDLP When Ron Johnson left Apple to become CEO of JCPen- Price isn't the only part of JCPenney's marketing mix ney in late 201 1, he discovered that the department store had that's being overhauled. The company now has a new logo, been running 590 different promotions every year, counting a red-outlined square with the initials "jep" in one corner, sales, discounts, coupons, clearance events, and other price updating the image and echoing the "fair and square" pricing reductions. But years of competing on price-like so many approach. The retailer is also renovating its stores to reflect of its competitors-hadn't done very much to boost JCPen- a "town square" layout of 80 to 100 boutiques and adding ney's revenue or profits. Worse, research showed that cus- new designer product lines to call attention to the company's tomers were shopping at its stores only four times a year. transformation. For customers who want to shop or browse "We haven't given the customer enough reasons to love us," without going to a store, JCPenney continues to promote its he remembers thinking. extensive online offerings as well as its apps for cell-phone Digging deeper into the company's history, Johnson users. Instead of weekly sales fliers, it mails monthly cata- learned that the founder, James Cash Penney, was well logs featuring merchandise for men, women, children, and known for his "fair and square" dealings with customers. the home. The products, not the prices, are the stars of these That became the starting point for the company's switch to magazine-like catalogs. everyday low pricing. "People are disgusted with the lack "We want to be the favorite store for everyone, for all of integrity on pricing," Johnson explained, referring to the Americans, rich and poor, young and old," the CEO says. To retailing industry's reliance on price promotions to attract do that, JCPenney will have to convince customers that its customers, especially during holiday shopping periods. everyday low prices are fair, compared with the bewildering Starting in 2012, JCPenney set the price of all merchan- barrage of coupons and sales that other department stores offer dise about 40 percent lower than the regular price charged to bargain-hunters. It will also have to make its department in 201 1, a "fair and square" everyday price. This new price stores as appealing as possible, with brand-name products that policy didn't entirely eliminate price reductions. For exam- customers recognize and want to buy-from JCPenney.20 ple, the retailer planned 12 "month-long values" sales to bring customers into its 1,100 stores every month. It also Questions for Discussion publicized its first and third Fridays as the days when slow- 1. What is JCPenney doing to influence the target market's moving products would be marked down for clearance at the evaluation of the value of its merchandise? "best" prices. JCPenney began using its Facebook page to . How do you think competitors should respond to JCPen- prove how "fair and square" its everyday low prices really ney's everyday low prices? Explain your answer. are by contrasting the "before" and "after" prices of specific 3. Would you suggest that JCPenney reveal the markup it items. uses to arrive at its prices as a way to convince customers that its everyday prices really are low