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[33 comments]

'Sale' No Longer a Four-Letter Word at Penney

June 6, 2012

Attention J.C. Penney shoppers: The department store plans to run sales again. The department store chain, which had eliminated use of the term while trying to sell consumers on its new "fair and square" pricing strategy, is going back to using the word because it works.

CEO Ron Johnson told attendees at a Piper Jaffray investor conference that substituting terms such as "month long values" in place of "sale" was "kind of confusing" to the chain's regular shoppers. So, from this point forward, Penney will call a sale "a sale" and nothing else.

"They realized the word 'sales' drives consumers to stores," Alexander Chernev, associate professor of marketing at the Kellogg School of Management at Northwestern University, told Reuters. "Even if you redesign your stores, you still have to drive traffic to stores."

While Penney intends to go back to using the term "sale", there's no doubt that it will run far fewer than in the past. The company intends to run 12 a year versus "590 events" annually before Mr. Johnson took over.

According to an Advertising Age report, Mr. Johnson said the department store would continue to invest in getting its "pricing message across," but that it would cut its advertising expenditures moving ahead. "We've got a model that isn't as advertising dependent," he said.

FINANCIALS:     [NYSE:JCP] [ ]

Discussion Questions:

Discussion Questions: How powerful is the word "sale" in American retailing? Will the reinstitution of the word in place of "values" in J.C. Penney's marketing events cause an appreciable lift?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much more or less effective will J.C. Penney's events be with the use of the word "sale" instead of "values"?

Comments:

It's clear that JCP management is revisiting its promotional stance after its tough Q1 results. They added a "Best Price Friday" sale event to kick off Memorial Day weekend and are apparently considering other events, especially for Black Friday. And the June TV spots now feature the tag line, "Every Day is a Sale Day at JCP." But what, exactly, does that mean? That the "fair & square" prices really aren't the right prices?

JCP finds itself in a bind: Do nothing, and continue to watch sales collapse at a faster pace than expected. Do something reactive only four months after kicking off the strategy, and risk confusing the consumer even further. I'll say it again: It was worth getting the content and store redesign right before tackling a new pricing strategy and Target-style ad campaign, not after.

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Dick Seesel, Principal, Retailing In Focus LLC

How powerful is the word sale? In a word, very. It inspires us to open our wallets to sometimes purchases things we didn't know we needed until we saw it was on SALE. It is second only to the word free in getting consumers' attention.

The impact of the using sale instead of value at JCP will depend on the discounts being offered and the effectiveness of the communication to the potential customers. I believe Mr. Johnson over estimates the value of his new model when he states that it isn't "advertising dependent."

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Steve Montgomery, President, b2b Solutions, LLC

"Sale" is the exciting pillow talk of retailing.

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Gene Hoffman, President/CEO, Corporate Strategies International

The only retailer that can get by without "sales" is Walmart, and that is because Walmart has firmly established itself in consumers' minds as EDLP. But even Walmart has a few displays with "deals" these days.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Worst. Makeover. Ever. Botched strategy and execution; Macy's must be laughing. JCP's roots were in the Golden Rule, if they want to compete, that should inform all decisions.

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Bob Phibbs, President/CEO, The Retail Doctor

My only disappointment in this change is that it has happened so quickly. I have always thought that EDLP was boring and way too easy to pick off especially on very recognized items. Who really knows what the real retail or fair retail is for 2 liter soda or boneless chicken breasts are (at least in the NY market), but everyone knows that they can buy them on "sale" for $0.99 or $1.99lb.

I think Ron Johnson has the opportunity to see this through and hope that he finds a way around the minefield of sales and events. I think his strategy of creating a shopping experience of unique and destination brands and shops, as well as a customer service experience that can be such that it becomes part of the brand (like Nordstrom). I hope he has the time and the team to make that happen.

Charlie Moro, President, CFS Consulting Group, LLC

To argue slightly with Mr. Montgomery's comment, the word "sale" may be second to "free" in getting customers' attention, but there's one even more powerful word: "different."

Apple doesn't use sales to move product, but their product certainly does move. Whole foods and Trader Joe's don't have seas of red "SALE!" tags, but consumers shop them religiously. What do these companies have in common? Deep, meaningfully-differentiated offerings that consumers love.

But, if you can't be different, then sure, shout "SALE!" as loud as you can.

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Ben Sprecher, Business Development, Google

An HBR blog post made an excellent observation: consumers get value from a sale that far exceeds the savings. It creates an environment similar to Costco's sense of a treasure hunt -- the satisfaction of uncovering what you need at a reduced price along with the personal satisfaction (for many, not all) of the hunt/shopping.

So I applaud Penney's reaction. But 12 per year may not be enough to make a richly interesting retail environment. I would suggest more.

Doug Garnett, Founder & CEO, Atomic Direct

As consumers, we have become so used to the notion that unless it is on sale, we probably are overpaying for it. Retail has created this monster and it will be tough for anyone to break this pattern, although Steve Jobs and Apple have certainly done so. Think about it. Have you ever paid less than full price for an Apple product?

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Zel Bianco, President, founder and CEO, Interactive Edge

"Kind of confusing" indeed. All of these efforts to try and 'outsmart' the shopper simply don't work. Shoppers expect to shop and discover. The word 'sale' has been hardwired into the art of shopping. It is part of the game that has been played for centuries. A sale may truly offer the shopper enough incentive to secure a purchase. Value on the other hand is perception and opinion that is reserved exclusively by the shopper. The retailer telling you it is a value is simply marketing hype. The shopper will be the judge as to whether it is a good value and will pass judgment when and if they purchase. JC Penney's marketing events will certainly train their customers to wait until the next event to visit the store. Perhaps we'll be reading about the next attempt by implementing random 'pop-up' events?

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

How important are sales? Fundamental at driving volume, price impression and excitement. Unless you sell "one of a kind" or highly-sought-after goods (and thus *not* commodities), I believe that sales should be a key part of your merchandising strategy.

Fabien Tiburce, CEO, Compliantia, Retail Audit & Task Management Software

I guess a rose by any other name doesn't smell as sweet. There's no doubt that "sale" is a powerful word, especially set against the backdrop of a hobbled economy, smarter shoppers, stiff competition and cost-conscious consumers.

While JCP's about-face on the use of "sale" is a good move, I question whether it's enough. Using "sale" in ads may help get some shoppers to the store, but once there, it appears shoppers must still "do the math" before they figure out if they're getting a good value. So it seems price confusion will still be an issue. Remember, this is a shopper that has fond memories of a simpler time when they held a 15% coupon in their hands while they shopped. And, similar coupons are still widely available at competitors.

As a long-time fan of the JCP brand and an even longer JCP customer, I wish the merchant all the best with the new/old terminology. But going forward, one thing that may also help is if JCP actually heard from real consumers. It's apparent the retailer hears plenty from Wall Street types, but where's the voice of the Average Jane and Joe. If JCP asks consumers what they want, I venture they'll get an honest answer that may help in both the short and long term. If they're not doing it already -- and they don't appear to be doing it -- I suggest JCP execs get in the stores, start talking one-on-one with real shoppers and perhaps even form a shopper panel. In all the ongoing fair-and-square, do the math, new logo, "no campaign," return of "sale" drama, the only thing JCP is apparently hearing from real shoppers is silence at the registers.

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Tim Henderson, Editor/Writer, Independent

A 'Sale' is a valuable option for a retailer. No use limiting your options by excluding the use of a powerful mechanism such as the use of the 'sale'. But now this retailer is again handcuffing itself by saying that 12 is the limit on sales. Shouldn't the limit be what works?

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Larry Negrich, Vice President, Marketing, nGage Labs

Sales is a magic word if you know how it fits into your strategy. "Value" is what you use when you know you can't compete in price. It is sad for some of us to see such a venerable brand become so badly botched. They now "offer" no less than FOUR pricing strategies to help confuse their customers.

I say: bring back the old catalogue!

Veronica Kraushaar, President, Viva Global Marketing, LLC

For a generation, consumers have been relentlessly conditioned to wait for "sales." Department stores in particular ring up over 80% of their sales at discount. The notion that a catchy phrase and a new layout is going to alter this behavior seems a bit optimistic. Changing the model at an old-line company like JCP is a necessary and exciting challenge, but one that requires patience and endurance.

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Bill Emerson, President, Emerson Advisors

While I'm still disappointed that JCP changed out my pants to a lesser quality to keep a price point, I think what they have done here is worth taking notice -- maybe. Clearly, what they were doing in the past wasn't exactly working. Their initial quarter results showed that their new strategy appeared not to be working also.

Let's face it. JCP had trained customers for so long that if they wanted to shop their stores and really save, they had to coupon. They couponed to the level that I am not sure they even knew what promotions were active. On top of that, they allowed the customer to stack multiple coupons on top of each other over even a "Sale" price.

Now they had less going into consumers' homes to entice them. They had no coupons at all. On top of that, they changed products and quality.

So while a strategy may be in place, it certainly is evolving. A positive is that there apparently is flexibility in thinking to adapt to results quickly. The question is, is it too late for JCP?

They lost me with what they did with my pants. They may have lost others by simply not placing coupon reminders regularly in front of them. There are too many alternatives for just about everything they sell. Right now I'd put my money on the alternatives. We'll see if they can do anything worthy of getting customers through the door once again. Twelve connections versus over 500 is going to make it difficult to change a consumer that they had trained so well. In the meantime, I would assume that the consumers are doing about the same thing that I am doing -- checking out the alternatives.

'Scanner'

There are many words that have special meaning to American shoppers. "Sale" is just one. If you want to engage consumers, to come to your store, to read your FSI, to follow your commercials, to stick with your website...try "discount, rebate, budget, $ off, lowest price..." Research helped me gather these insights. Gut based strategies require research to prevent misdirection.

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Joan Treistman, President, The Treistman Group LLC

"Sale" has become synonymous with another four letter word "fair"! People wonder how you can sell it for the sale price, until they have come to realize that the sale price is actually the fair price for the product. The "sale" evolved in America because few Americans are comfortable bargaining. How many times have you heard people say they hate buying a car? They hate the process because they always feel they have gotten screwed.

The sale at retail is designed to keep the consumer from resisting the impulse to buy. Many consumers won't buy anything unless it is on sale and this phenomenon has resulted in the establishment of thousands of outlets that deal in nothing but bargains (sale merchandise). People want to be treated fairly and the odds of them feeling they have been treated fairly go up when merchandise is on sale!

Ed Dennis, Sales, Dennis Enterprises

At Apple, Mr. Johnson had the full support of his Board and Steve Jobs and a company willing to ignore Wall Street pressure and RetailWire-type pundits who were as negative about the Apple store when first launched as they are about JCP today. If he was given the three plus years he asked for to fully implement his plan, in 2015 nobody would be criticizing or laughing; in fact, they would be lamenting that they didn't buy the stock back in 2012.

Michael Tesler, Founding Partner, Retail Concepts

What is this? Changing of the language or changing of the strategy? Interesting what the next steps will be. Is this the beginning of a slippery slope back to the days of old?

Scott Welty, Vice President of Pre sales, JDA Software Group

Really!?!? Customers react to the word "sale." Mr. Johnson, your customers do not have a cult-like following of your product anymore -- it is a commodity at best.

I was pulling for JCP to stick with the plan, but now it is quickly jettisoned.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

Not as powerful as the word "free."

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Lee Peterson, EVP Creative Services, WD Partners

Bob. Nailed. It. At this point I think the four letter words JCP should concentrate on are "pray" "lost" and "loss," as in they need to pray that they haven't lost so many customers that they shift into permanent loss mode. I really don't know what to recommend to them other than hunting around for a time machine, and setting it to last year.

'notcom'

Sale, discount, free, lower price, value, and other terms are key parts of America's marketing. Not using these would hurt any retailer, since they are important to managing retail business and information.

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Kai Clarke, President, Kowa Optimed, Inc.

Overwhelming evidence and no doubt that "sale" is a critical part of the American retail lexicon. Seems to me that J.C. Penney is learning a costly lesson that an approach that worked in the case of one retail format and merchandise type does not always translate directly into others formats and merchandise. Although a change of approach may well have been needed at J.C. Penney, I agree with Richard, Charlie, and others that this may be a case of too much change to quickly.

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Verlin Youd, Principal, VPY LLC

If you're having a sale, don't get cutesy with the name. However, this says nothing about the specific value of pricing. In fact, often raising the price will result in higher sales. Obviously, that is not universally applicable, but it is a principle that is too often ignored, or people are unaware of it? Check out "Minding Your Pricing Cues" in the Harvard Business Review.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Adjunct Senior Fellow, Ehrenberg-Bass Institute

So are they just going to increase prices so they can put the word "sale" back on the item, and then decrease the price again to meet the sale price? I thought that's what they were trying to get away from. I'm surprised they are backing away from this strategy after only one quarter. I was just starting to hear women talk about Penney's. No doubt the word "Sale" works, but this will be confusing to customers.

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Janet Dorenkott, VP & Co-owner, Relational Solutions, Inc.

Mom is the purchaser of record in the home, and she's just not feeling it. JCP needs to put together focus groups of women to ask them about how they outfit their homes, and how they make selections. They'll also want to come up with a term other than EDLP to describe what they're doing, then put it out everywhere....

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Cathy Hotka, Principal, Cathy Hotka & Associates

For the record: Reports and discussion comments on RetailWire have been overwhelmingly positive on the Apple Store over the years, going back to coverage beginning in 2003.

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George Anderson, Editor-in-Chief/Associate Publisher, RetailWire LLC

"Sale" must remain at least a part of the marketing strategy until such time that Mr. Johnson succeeds in creating a differentiated product and/or shopping experience from other mid-line retailers. A tall order indeed, but one I am rooting for. Go, Ron, Go!

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Mike Osorio, Senior VP Organizational Change Management, DFS Group

I think it is time for the board of directors to make a change. This is not the time in history to be learning retail executive management on the job. And J.C. Penney is very much not the place to do the learning.

'gjarnoldjr'

Told you so. The most disappointing comment is blaming the advertising. It didn't communicate that the store did have sales, and JCP management couldn't quite understand why the consumer didn't get it. Really? So it's the agency's fault -- nice. Who approved the spots? Was research conducted to validate or invalidate the claims and ensure clarity of the communication and measure intent to purchase?

My prediction still holds, though the one year claim by JCP management was repeated to the investor community -- it lasts in current form until Back to School 2012 and then the experiment in changing the way American consumers shop department stores ends before Holiday 2012.

David Slavick, Director, Loyalty & Retention, FTD.com

This is to thank George. I am a Research Scholar from India and your articles always help take my research a little further. Thanks for your useful articles.

'sreelata79'

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