Will Penney’s new campaign make cents to consumers?
Business has been on the upswing at J.C. Penney.
While the disastrous tenure of former CEO Ron Johnson still creeps into conversations about the company’s attempt at a turnaround, most of the current focus has been on Penney’s improving sales. The chain’s same-store numbers were up 3.9 percent in Nov. and Dec. when many of its department store brethren were in negative territory.
A Dallas Morning News article revealed that Penney was looking to build on its recent momentum with a new tagline “Get your Penney’s worth” scheduled to launch on Sunday.
The new slogan is tied to a new campaign where Penney will offer some of its basics as part of a one-cent sampling program.
The program is not just limited to items Penney is looking to clear out. Instead, it will include items from popular private labels such as Penney’s Arizona line. Penney also plans to do its own spin on BOGOs with buy one and get a second item for a penny deals.
As The Dallas Morning News article points out, Penney’s new campaign and merchandising approach takes a page from grocery retailers. Mary Beth West, chief customer and marketing officer for the chain, said grocers often back up advertising of a promoted item with prominent secondary displays in the store.
“We’re doing the equivalent of an Oreo display,” Ms. West told the paper. “We know that clothes that are featured on mannequins sell.” The chain’s stores will include a rack of the promoted item behind each mannequin to encourage purchases.
Penney’s new price promotional plan fits with an increasingly aggressive stance under CEO Marvin Ellison. Recently the company announced a test of major appliance sales at a small number of stores. While not universally hailed, many saw value in the test considering Mr. Ellison’s background at Home Depot.
Speaking of the test, Mr. Ellison said his former employer and other home improvement chains would not be Penney’s chief rivals should the decision be made to move beyond a pilot. His response (via The Dallas Morning News) left little doubt that his main target would be Sears and its struggling retail business.
“We’re a mall retailer, and we’re going to compete in the mall, ” he said.
- J.C. Penney planning to sell items for a penny as part of its new marketing – The Dallas Morning News
- J.C. Penney Christmas Sales Sparkle Compared To Industry Results – Forbes
- J.C. Penney testing the sale of major applianes in 22 stores – The Dallas Morning News
- Will Penney’s appliance test put a fork in Sears? – RetailWire
Image: J.C. Penney
Discussion Questions
DISCUSSION QUESTIONS: What is your assessment of J.C. Penney’s new campaign and overall approach under Marvin Ellison? Where do you see the greatest opportunities and challenges for the chain over the next couple of years?
Poll
BrainTrust
Joel Rubinson
President, Rubinson Partners, Inc.
Bob Phibbs
President/CEO, The Retail Doctor
The campaign looks like it has legs and yes, people will get the message. They are not as dumb as some might think. Ellison is doing a good job and their largest issue is shaking the old “tail” of Penney’s. They are a totally new business and they need to erase the old Penney’s from the shopper’s mind and especially get press people to ignore their past and LOOK FORWARD.
Why would occasional or non-shoppers at Penney’s think to shop there? I believe this campaign addresses that semi-cognitive nudging and sometimes that’s all it takes. I think this is definitely worth a shot.
Penney’s four years ago saw sales fall $4 billion after a disastrous attempt to become trendier. Yes sales are up but the connection with pennies in particular implies cheap. My grandmother saved pennies.
For those with a long memory (meaning that we remember J.C. Penney before the Ron Johnson era), this is something of an echo of Penney’s Anniversary Sales. J. C. Penney occasionally ran “second item for a penny” during these events and as a Black Friday doorbusters. It’s the equivalent of “buy one, get one free” and is a good tool for selling key items bought in depth at a cost where you can still make money at 50 percent off.
The campaign will drive sales, traffic and sampling of private label goods — all important tactics for J. C. Penney in the short term. But pay more attention to the strategic steps that Mr. Ellison has taken in the past six months — especially in areas like IT, omnichannel and logistics. These won’t be as visible as new marketing and promotional tactics but will pay dividends in the future if Penney can keep its sales momentum moving.
It’s nice to see a test-and-learn sensibility taking hold at J.C. Penney after its post-Johnson-era over-corrections. I’m particularly bullish on its upcoming store layout overhauls and merchandising upgrades. As for the penny campaign, it does seem more straightforward and clever than Penney’s past promotion-paloozas.
Finally we can say positives about Penney’s. It has taken a long time but it appears business is on the upswing. Customers will understand this program. More foot traffic will be in the stores. More foot traffic means more business. Let’s see how it goes and keep our fingers crossed that this will be the first of many positives.
Ad campaigns are nice, but in a world where advertising is deemed “creepy” then its role in fixing J.C. Penney is limited.
That said, how relevant is a “penny” to Millennials? About as much as a mall, I figure. How will it convert to Spanish? Is that a relevant idea to a range of different cultures?
I feel this message is a bit of “from ditch to ditch.” From “no sale” to “a penny” is not very compelling. It’s early, hopefully the BIG FOOD CMO can get retail and quit using Oreos as a relevant example in selling mass fashion.
Ellison has yet to really make his mark. Ullman’s imprint remains in place. It’s too early to tell.
I thought J.C. Penney was best set for holiday in malls near me. But that is akin to being the best looking horse in the glue factory. Meaning that its total store count is a profound sea anchor on profitability. Until he sorts out the real estate portfolio, J.C. Penney is uncompetitively burdened.
I think Johnson did J.C. Penney a great favor. His unintended consequence was to right size the revenue. Ellison is blessed by comps that can give him air cover for another holiday or two.
As Bernie and Arthur might say, “retail ain’t for sissies!”
Today’s consumers, and especially Millennials, are great bargain shoppers. A bargain, however, means good quality for what they consider a bargain price. If J.C. Penney intends to keep them coming back after the boom during the holidays, they better meet expectations.
How much of that holiday traffic was due to Sephora? Do we know? It’s hard to vote on a campaign when you don’t have all the facts. The campaign just looks like another way to discount their way to sales. Is it going to be profitable? Jury’s out for me.
And that’s my 2 cents.
It’s an illustration of the “let’s try everything, something will work” strategy. That’s not a particularly strong hand to play, but when you’re playing five-card stud with three or four cards, it’s about the best you can do.
Penney’s challenge(s)? Gee, let’s see: it’s a traditional business model — mall based middle market department store — is declining in each of those three criteria, and it’s beset by competitors. Do we need to list another problem?
Penney’s is winning not just because of sales growth but because of margin growth as well.
Q4 results showed a 3 percent sales growth combined with a 0.3 percent improvement in gross margin and a 2.4 percent improvement in SG&A.
A good part of this is attributable to private brands such as Arizona, JCP Home and Liz Claiborne. Sourcing costs are lower and e-commerce competition is blunted because the brands aren’t available elsewhere.
One could argue that J. C. Penney is borrowing ideas from grocers in feature, display and private label strategies. Momentum should continue, with comps estimated by the company to rise 3 to 4 percent this year. That would be an enviable number for grocers.
This is a change, and for J. C. Penney it could only mean more positive approaches to sales, customers and products. Moving in different directions with new marketing approaches like this only means improved placement for Penney’s in their retail space in the mall as well as from their customers.