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ND Expert: J.C. Penney pricing mistake – it’s all about bargain hunting

by Carol Elliott

June 19, 2012

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 The sudden departure of J.C. Penney President Michael Francis yesterday is being viewed by marketing experts as another sign that the department store chain got it wrong when it announced its new “no sales” pricing strategy in February.

The strategy, which emphasizes low everyday prices rather than deep-discount sale prices, is a fundamental misread of the current consumer mindset, says Carol B. Phillips, marketing instructor at the University of Notre Dame’s Mendoza College of Business.

“Our research shows that frugality has become a way of life, but there is an element to consumer buying behavior now that is qualitatively different," she says. "Bargain hunting is now like playing a game – and finding deep discounted goods on sale is part of the game. By pursuing everyday low prices, J.C. Penney may have been sailing into the consumer headwind.

“As far as solutions, I’m afraid more sales are in fact the answer,” says Phillips, who also is the president of marketing research and consultancy firm Brand Amplitude. “The key for JCP is to find a way to make those sales feel like more fun. Only certain consumers are willing to paw through racks and racks of clearance merchandise at TJ Maxx in quest of a find. If JCP can make sale shopping more fun and efficient, they may have a winning concept.”

Phillips says her research shows additional ways that consumers are looking for savings, primarily by putting an emphasis on reducing waste of any kind across the board of products. She gives the following examples:

• In food, this means purchasing only what you need and opening just the right amount for a recipe. (Sales of large cans of tomatoes are down, while small ones are up.)

• In fashion, it means buying pieces that are “classic” and “versatile,” and therefore will feel like an investment. Young adults in particular are fearless in combining vintage or thrift-store items with pricier ones to create an eclectic look for less. Factory stores are now considered as having just as good merchandise, just for less.

• Cars are being held onto longer.

• Best Buy is just the place you go to see the merchandise; you buy electronics online based on price.

Contact: Carol Phillips, 269-429-6526 or carol@brandamplitude.com