Sales Strategy: J. C. Penney's Sales Strategies

Sales Strategies
For J.C. Penney

BASED ON RECENT INDUSTRY INFORMATION
FROM VARIOUS INTERNAL AND EXTERNAL SOURCES

Sales Strategies
For J.C. Penney BASED ON RECENT INDUSTRY INFORMATION
FROM VARIOUS INTERNAL AND EXTERNAL SOURCES

Prepared for
Myron Ullman, CEO
J.C. Penney
6501 Legacy Dr.
Plano, TX 75024

Prepared by
Adrienne Pham
Starlena McBride
Allison Ji
Zack Lipot
Lawrence Sanchez

Ankit Patel
Tiffany Vo

May 14, 2013

Report Contents
Content

Page
Title Page

………….…………………………………..

i
Report Figures

ii

Transmittal Letter

iii

Executive Summary

iv

Introduction

1

Discussion/Analysis

1

Alternatives
Solution
Conclusion
References


Report Figures
Figure One –
Figure Two –
Figure Three –

Fullerton Research Institute
29371 Nutwood Ave.
Fullerton, CA 92831
(714) 294­8855 [e-mail] May 7, 2013

Mr. Myron Ullman
CEO
JCPenney
6501 Legacy Dr.
Plano, TX 75024 Dear Mr. Ullman: As requested on March 30, the following report outlines possible methods to improve
JCPenney’s future sales and public image. Our research has shown that through the use of promotional sales, new PR campaigns, and bringing back the use of coupons JCPenney will be back on track and generating positive profits. The following report is based on statistics from the stock market and sales data, and will outline alternatives best suited for the company’s ultimate solution. Fullerton Research Institute is the official Californian consulting company specializing in the analysis of business strategies. Our hours of operation are Monday through Friday from 9 am to 6 pm. Please contact us with additional questions or concerns in regards to the following report. Sincerely,

Adrienne Pham
Lawrence Sanchez
Tiffany Vo
Ankit Patel
President
Research Expert
Research Expert
Research Expert

Zachary Lipot
Starlena McBride
Allison Ji
Research Expert
Research Expert
Research Expert

Executive Summary The following are recommendations to improve the sales of JCPenney based on the results of this analysis:

› Bring back the use of coupons through all mediums › Implement and advertise consistent year­round sales › Put great emphasis on seasonal sales and promotions › Revitalize new PR campaigns focusing on the consumer’s needs and interests › Implement all these recommendations to see a significant increase in sales at year­end J.C. Penney’s sales and stock prices have been declining rapidly since the implementation of
Ron Johnson’s new strategies. His approach to the company with too many new ideas and products in such short time was a shock to consumers. This greatly affected the company’s revenue and publicity. Focusing on these business strategies will help J.C. Penney to portray their company values in consumer satisfaction. J.C. Penney’s goal is to regain their customers’ trust through reliable sales and public relations. J.C. Penney has always been portrayed as a comfortable and affordable place to shop. The company must stay true to these expectations and fulfill their customers’ needs. The P.R.
Campaign and marketing strategies must change in order to bring back sales and fix the company’s publicity.

Introduction
In 2011, J.C. Penney’s poaching of Ron Johnson back in 2011 made a significant positive impact on the company’s stock by 17% at a price of $35.37 (Clifford, 2011). Not even two years later, Johnson’s marketing strategies have set J.C. Penney in a bad position. His ideas of completely transforming the store’s look and merchandise to more of a chic appearance, similar to that of Bloomingdale’s, turned off their main consumers and resulted in a large loss of revenue. This report will outline Johnson’s mistakes in marketing, and the proposed alternatives and solution for the company.
Discussion and Analysis (Lipot)
When Ron Johnson left Apple to take over as CEO of J.C. Penney, he was surrounded by a large amount of hype. He was seen as the leader to take J.C. Penney to the next level.
Unfortunately, the last year and a half have not gone quite as expected. The plan was to change everything that J.C. Penney had been as an organization in the past. Over the span of a year and a half it is appropriate to say that the campaign had a dismal effect on sales and subsequently the stock price. In fact it was such a substantial difference that you can clearly point out where the decline began just by looking at the stock.

As you can see above the stock went up briefly after the announcement that Ron Johnson would be coming aboard. However, currently the price is almost one­third of what it was at its highest with Johnson. Unfortunately he alienated both the employees and more importantly, the customers with this sudden change in approach. Our goal will be to help J.C. Penney re­align their focus back on the customers’ needs as well as to consistently improve products and services as to retain old customers and entice new customers.
Allison

When Ron Johnson became the CEO, there was already loss in sales. At the beginning of
2011, JCPenney left the catalog print media and outlet business. As a result, at the end of the same year, the sales through the catalog outlet business decreased $543 million. Even though the net loss was resulted, JCPenney kept changing the business model as it eliminated coupon. According to the 2012 Annual Report of the company, the company underwent tremendous change as we began shifting our business model from a promotional department store to a specialty department store (J.C. Penney company, Inc., 22).

The components of the sales include sales from comparable store, new stores, and catalog print media and outlet stores. The data shown below is the net sales of each component in
2011.
While the sales of comparable stores and new stores in 2011 were higher than the sales in
2010, catalog print media and outlet stores declined significantly. The loss of $535 million is

due to the exit from the catalog and outlet store business and it results the total net sale decrease of $499 million. Internet sales remained flat at $1.5 billion for 2011 and 2010.
Based on the sales data, Penney is required to consider going back to print media and outlet stores which provide discount coupons.
The shifting business model to a specialty department store results the decrease in sales through catalog outlet stores, and also, the decrease in store sales. 146 million dollars decreased due to leaving the outlet business in 2012. In addition, 4.3 billion dollars decreased in store sales, including Internet.

As a result, the total net sales declined $4,275 million while operating expenses decreased by
$844 million in 2012 according to the three­year financial statement.

This significant loss in sales led $1,310 operating loss in 2012. In 2011, there was also the decrease in sales compared to 2010 which was 2.8% as compared to prior year; however,

since there was also the increase in expenses, Penney could recover the loss with cost savings initiatives. Compare to the loss in 2011, the loss in 2012 should be recovered by the new sales strategy because Penney already gained the benefits from the cost savings initiatives. There was a large decrease in SG&A expenses in 2012 which help to increase the gross margin. The initiatives reduced the profit loss in 2012 by 603 million dollars by decreasing
SG&A expenses.

The main sections of the plan were costs of salaries and benefits which had been reduced
$386 million, and costs of advertising which had been reduced $107 million. While considering the fact that significant workforce reductions may react adversely the operating efficiency, the company notices the great loss in sales occurred while there was a significant reduction of an advertising cost. Last year, JCPenney already gained the benefits from the cost savings initiatives, so the company needs the new sales strategy focusing on increasing sales rather than focusing on reducing costs.
Also, the last quarter of the fiscal year including the holidays comprises a large percentage of the annual earnings and cash flows. As there are many factors influence on the earnings such as spending pattern of customers, weather conditions, and competitors’ strategies,
Penney should consider the new price strategy focus on the holiday season. Discussion & Analysis
(Lawrence)

When JC Penney changed its marketing strategy in 2012, immediate concerns were raised.

Three key moves regarding JC Penney’s advertising shook up conservative, public opinion:
First, the introduction of Ellen De Generes as new spokesperson; second, the new Mother’s
Day ad depicting two females as a couple; and third, the Father’s Day ad displaying two adult males as a family. One specific group, One Million Moms, posted the following comment on its Facebook page that brought this concerning issue to light. “Funny that JC Penney thinks hiring an open homosexual (DeGeneres) will help their business when most of their customers are traditional families.” (One Million Moms, 2012) All three of the above marketing strategies brought heated arguments and people debated about the modern­day definition of family. Although the impact of this controversy has not been directly related to the decrease in sales in 2012, it certainly did not help the cause, as figures have shown.
However, the introduction of ‘fair and square’ pricing strategy did have a measurable effect on declining figures and sales. From the moment ‘fair and square’ pricing was introduced, sales continued to decline. By taking away coupons and rebates, shoppers were deprived from their fundamental instinct to hunt for the best bargain. British fashion model and new face of
McArthurGlen’s Designer Fashion Month, Laura Bailey, shares this sentiment, “There is a thrill from getting a bargain, but also from the hunt, the quest.” (Wyllie, 2012) In fact in 2010, with the recession tightening consumer spending, coupons experienced the largest increase in usage in 17 years with coupon redemption surging 23 percent to 3.2 billion coupons (Lamb,
2013). With coupon use increasing, ‘fair and square’ pricing did not stand a chance. Even though consumers may not be consciously aware of it, the simple perception of walking away with a good deal reduces buyer’s remorse and validates shopper spending.

Alternative
A Public Relations campaign can be an effective method to draw constructive awareness

to JC Penney. It has the capability to reach a large audience, and it can boost the company’s image by generating positive attention.
A well­structured PR campaign can result in the target market being exposed to more detailed information than they receive with other forms of promotion (“Advantages of PR, 2008”).
Taking in the consideration of cost and the risk that the message might not get accurately delivered, a P.R. campaign is still an attractive solution because it helps build credibility with the customers.
Market researchers expressed that after a disastrous 2012, JCPenney may need to craft a
“behavioral message,” to stop the bleeding following Ron Johnson’s firing. The message must be straightforward stating what differentiates JCP from their competitors, communicating the brand’s historic value, and retelling the company recent turn of events in clear cut terms (Roth,
2013). This is exactly what JCPenney needs to and is attempting to accomplish with their recently launched P.R. campaign. “
The latest effort is a
30­second spot beseeching loyal shoppers to give it another chance:
Come back to JCPenney, we heard you. Now, we 'd love to see you” (Davis, 2013). This newly advertised commercial helps build positive awareness for JCPenney by rendering their mistakes and expressing costumer care. It indicates that the company is attentive to its customer’s needs and will take extreme measures to regain the trust of its loyal customers. It is also an endeavor to bring back the old culture of JCP which in turn is also the only drawback of this campaign. By reverting back to their old ways,
JCPenney might lose some of their new potential customers they acquired under the administration of Ron Johnson. However, the advantages of this P.R. campaign clearly outweigh the disadvantages; thus, it can help JCPenney become the profitable retail giant that it once was.
Ankit Patel

Solution

JCPenney must put all their focus in repairing the company’s ailing image and restoring their financial status. The first step, which has already been initiated, is to launch an effective
PR campaign to regain the trust of the costumers. Similar to Dominos and JetBlue, JCPenney referred to the new style of marketing and crisis response in which brands admit their fault proactively and publicly (Bhargava, 2013). This campaign broadcasts their apology and expresses how much JCP value’s its customers. It also helps lay down the new foundation of the company which in turn assists the consumers and investors to shift their opinions about the brand. In addition to this, the PR campaign must also establish a clear line of communication between JCP and its costumer’s; thus, “all the tools that make up communications—marketing, advertising, corporate communications, customer service, social media—must be on a united front” (Paul, 2013). By increasing communication with JCPenney’s customers and being attentive to their needs and wants, JCPenney can start to rebuild its image and regain the trust of its loyal customers.
Ankit Patel

Tiffany Vo
Alternative:
The reason why JCPenney have failed with Johnson is that he took away one of the driving force

of store, which were the sales and promotions.
An alternative that the struggling JCPenney must consider is bringing back their consistent sales throughout the year. They should not be alienating customers; they should be focusing on maintaining our loyal customers and bringing in new prospects at the same time. A survey by Prosper Business Development, a market research company in Ohio, found that nearly half of JC Penney’s shoppers are over 55 years old
(Stock, 2013). This is the demographic that appreciates coupons. By taking away coupons and sales, they are taking them away as well. An advantage of having these promotions sales is that it brings the customers back. To bring these customers back, JCPenney needs to urgently have great sales as a marketing campaign to show the public that they are back and are here to stay.
One of the reasons why people shop is for the thrill of finding good deals and feeling proud when that is accomplished; having sales is an advantage because it creates the buzz and excitement in shopping again as the company’s brand has suffered because of the changes. Johnson’s goal
of making JCPenney “hip” might have worked for them as a fresh brand; ironically, the “hipness” took away the excitement of shopping in a department store.
Thus, when Johnson eliminated the sales, he also took away their brand. Taking a look at competing department stores, most stores have sales throughout the year. The stores that do not have them are higher end designer
stores.
JCPenney is not a high end store and will never be one. The only disadvantage in having promotional sales is that sales are temporary and revenue reducing. Johnson’s idea of having stagnant low prices throughout the year is simply not working.
Tiffany Vo
Solution:
In terms of bringing sales back JCPenney should definitely bring back its promotional sales.

However, the company should also keep its everyday low prices. What JCPenney needs is to have consistent sales throughout the year as a special event to make shopping exciting once again. JCPenney does not need to worry about promotional sales cutting profits. Thus, by having low prices everyday and then increasing prices during sale periods, JCPenney should see some slight improvement in revenues compared to what has been occurring these past few years.
Conclusion
J.C. Penney needs to focus on their consumers rather than the store’s appearance. People know
J.C. Penney to be a value retail chain, not a high end collection of boutiques. The company needs to stay true to their values and fulfill the expectations of their audience. By showing that their consumers are priority, the company can regain their trust and enforce the chances that they will remain as loyal customers.

References Bhargava, R. (2013, May). Is JC Penney’s ad enough to repair brand damage? Ragan: Public
Relations. Retrieved from http://www.ragan.com/publicrelations/artciles Clifford, S. "Ron Johnson, Apple Stores Chief, to Lead J.C. Penney ­ NYTimes.com."
The New
York Times ­ Breaking News, World News & Multimedia
. N.p., n.d. Web. 21 May 2013.
<http://www.nytimes.com/2011/06/15/business/economy/15shop.html?_r=1&>.

Davis, L. (2013, May). JCPenney Communicators Launch ‘Apology Tour’ With Ad. PRnews:
For Smart Communicators. Retrieved from http://www.prnewsonline.com/water­cooler/2013/05/02/jcpenney­communicators­launch­apolog y­tour­with­ad/ Paul, M. & Roth, H. (2013, May). JCPenney’s PR Debacle. PRnews: For Smart
Communicators. Retrieved from http://www.prnewsonline.com/wp­content/uploads/2013/04/PRNEWS4.22.13.pdf Advantages of Public Relations. (2008).
Know This. Retrieved from http://www.knowthis.com/principles­of­marketing­tutorials/public­relations/advantages­of­publi c­relations/ Stock, K. (2013, April). JCPenney’s shoppers are older, poorer than you thought. Bloomberg
Businessweek: Companies & Industries. Retrieved from http://www.businessweek.com/articles/2013­04­10/j­dot­c­dot­penneys­shoppers­are­older­poore r­than­you­thought One Million Moms, www.onemillionmoms.org
Wyllie, Alice. (September 8, 2012). Model behavior. The Scotsman, TSMAG Edition. Pg 4.
Lamb, C., Hair, J., McDaniel, C. (2013).
MKTG6 Principles of Marketing
, 297.

References Dieterich, C. (2013). “Vornado Realty Trust selling 10 million J.C. Penney shares.”
The Wall
Street Journal.
[online]. Available: http://online.wsj.com/article/BT­CO­20130304­713650.html (March 4, 2013). :J.C. Penney Company, Inc. (2013). “
2012 form 10­k/annual report
” Available
http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol­irhome