A Case Study in the Making

JC Penny is going through a branding transformation. It will be interesting to watch how this all transpires.

Many are banking on CEO Ron Johnson to bring some of his former Apple magic to the more mature retail giant. Johnson has adopted a strategy and is sticking to his guns even though the going has been a little rough so far. Johnson enlisted the help Michael Francis, of Target fame, as CMO but his tenure only lasted 8 months. Now they are reporting significant losses.

In Anne D’Innocenzio’s report for the Associated Press she attributes JC Penny’s 2nd Qtr losses to their attempt to wean customers off of discounting. She mentions their attempt to “break the vicious cycle of discounting that has soiled the brand.”

It is reminiscent of the problem US automakers were facing with rebates and 0% financing a few years back. At the time of the government bailouts many were hoping that bankruptcy would give GM and Chrysler an opportunity to re-establish their pricing independent of costly incentives.

While the case study will have to wait until the dust settles there are already some interesting things for marketing professionals to consider.

1. Committed leadership is essential to of a transformation but it is also no guarantee of success. We are glad to see that Johnson is standing firm and that his share holders are giving him the time too let his strategy take root. All too often the plug is pulled before a strategy has time to fully take effect. It is a bit of a gamble because the strategy could ultimately fail but you will never know if you don’t give it a chance.

2. Great marketing depends on a great product. Apple has a product that people love. It is not a given that Johnson can take all the other strengths that make Apple what it is and turn JC Penny around without that kind of product as a foundation.

3. Discounting has a cost to the brand that should be carefully weighed against short term gains. That bankruptcy for the auto companies and significant losses so far for JC Penny are seemingly necessary to break the discounting habit should give marketing professionals pause before they unwittingly take their brand on an ever growing discount strategy.