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Asking More Commentary: Perspectives from Mendoza College of Business

Commentary Post - Patrick E. Murphy

Fair and Square? A marketing and ethical look at the new J.C. Penney

February 10, 2012

The new management team at J. C. Penney, led by CEO Ron Johnson, shocked the retail world with its announcement of a 40 percent reduction of all prices starting on the Feb. 1. The new strategy has received considerable media attention. But as an expert in marketing and ethics, I also find this bold maneuver very interesting.

From a marketing perspective, the price reduction is an obvious positioning strategy to move Penney from the traditional department store space it’s occupied for 110 years toward being discount house. In other words, the retailer is shifting away from the retail neighborhood of Macy’s and Dillards over to the Kohl’s and Target territory. From my point of view, both consumers’ response in terms of traffic within the store as well as in actual sales will determine the success or failure of this strategy. Since the firm’s sales were flat during the last couple years, the major changes do not appear as risky as one might think. If Penney is going to be competitive in the future, they needed to make a bold statement.

As part of the makeover, the company – which now wants to be known as jcpenney – unveiled a new logo – a red square with the initials jcp in the upper left hand corner. The square logo is intended to signal fair prices (more on that later). The color scheme is an unsubtle red, white and blue. While patriotism usually plays well to the American consumer, there is a caution here: Most of the products sold in the stores are not manufactured in the U S. Penney is using red, white and blue tags to indicate the kinds of pricing. This seems to underscore the patriotic message without reference to the actual products. The small lettering on the name suggests a modern and “with it” retailer rather than a staid and lifeless brand. However, it will be up to the court of public opinion as to whether the small lettering  is acceptable to consumers. It could very well meet with the same non-reaction that Wal-Mart’s change to “Walmart” did.

The firm adopted a somewhat curious advertising strategy to introduce the change: people screaming. The consensus about the TV ads seems to be that while they generated attention, the consumer reaction wasn’t favorable. Mercifully, the ads were short-lived, and now have been supplanted by both print and TV ads that are more mainstream.

How does this move stack up from ethics standpoint?  A two-page ad in USA Today on Feb. 1 trumpeted the fact that the company is 110 years old and that, “We’re going to treat people as we’d like to be treated,” as well as an emphasis on everyday low prices. The tagline is:  “We want to be your favorite store.”

This ad copy is going back to the company’s roots. When James Cash Penney first bought the stores, he wanted them to be known as “the Golden Rule Stores.” With the introduction of the “Penney Idea,” he essentially created one of the first – if not the first – ethics statement by a U.S. firm. The first of seven points in the Idea stated: “To serve the public, as nearly we can, to its complete satisfaction.” More than a century later, this comment seems to summarize well the current move. Even closer to the current strategy with its emphasis on a “square deal” is the seventh point that tests each policy and action with this question: “Does it square with what is right and just?” It is interesting to note that the words used to note the new price levels, “fair and square,” virtually repeat the Penney Idea’s message.

Of course, underlying the new strategy is the question of whether consumers will buy in. Will a deep discount and a century-old pledge of ethical behavior draw in the shoppers to the new jcpenney, over say, Target? The new Penney has to break its recent tired image while also capitalizing on an opportunity to boast about its century-long legacy and its longstanding commitment to promising customer satisfaction and fairness. Whether the re-invented firm is successful will be linked to both its marketing and living up to the timeless Penney Idea.  I, for one, believe that this new course is a smart move and hope that Penney can be both old and new at the same time.