JCPenney's Failure: Understanding What Motivates Their Customers

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When JCPenney came out with their February 2012 catalog, our marketing department spent a few hours combing through their new brand and approach. We were so impressed that we kept the catalog for a long time (though I couldn’t find it this morning). At the time, I thought their new approach was brilliant.

The Psychology of Sales

The premise seemed simple enough: how can you make the shopping experience easier? Get rid of coupons and sales and just have good prices all the time. People love deals, but it’s really a mental hack. Every sale and discount has to be subsidized by higher prices elsewhere, so the net result is that as a group, consumers don’t actually save any money. In my mind, sales are a lot like gambling: when people win, it creates the illusion that they’re coming out on top. Of course, there are a couple billion dollar casino hotels that prove their patrons are, in fact, not winning, but losing on average.

JCPenny February Store

The second prong to their attack was to revamp the sales experience to revolve around designers. In-store boutiques gave stores the great local boutique feeling and an environment where shoppers could get to know the collections of individual designers.

So what went wrong? The store looked great, the brand creatives were beautiful, and the new direction was refreshing and exciting.

JCPenny Sales System

A Simple Rebrand Gone Wrong

At the end of the day, JCPenney didn’t understand what motivated their consumer. If you started from the premise that people want shopping to be simple, it’s easy to see how JCPenney arrived at their rebrand. But the truth is that their consumers don’t want simple, they want games. In March, NPR’s Planet Money ran a story comparing JCPenney’s sales to drugs. For their loyal customers, it was about finding the right deals at the right time, so they could all feel like they were beating the system. JCPenney customers don’t want a simple shopping experience, they want the casinos; they want the sales game. As one customer in Planet Money’s story said: “I come home and I cry over it, and my husband’s looking at me, like, ‘What’s wrong?’ I said, ‘Penneys doesn’t have sales anymore. I need my store back!’ ”

JCPenny Stock Decline

It doesn’t matter that the prices were in actuality better, it doesn’t matter that the experience was simpler, or that they were pulling people in with a boutique experience. In retrospect, JCPenney’s rebrand wasn’t so much a refresh as a pivot: an effort to change customer groups and focus on younger consumers while moving away from the deal-hunting crowd. Loyal customers were alienated and the younger consumers JCPenney hoped to attract still viewed the store as a low-end, non-hip store.

Car companies facing similar challenges to JCPenney have been solving these kinds of problems for years by launching new brands. Honda launched Acura, Toyota started Lexus and Scion. Car companies have known for a long time that trying to change your brand is a lot tougher than just starting a new one (Cadillac got lucky).

If JCPenney had followed the lead of car companies, they would have started a new brand and store to focus on low-prices in a boutique environment. At the end of the day, the pivot they tried to pull was too much too fast.