JCP Case Study Part 2

Recently we wrote about the changes going on at JC Penney (JCP) and the challenges they face in the transformation of their brand.

Now comes another interesting article by Margaret Bogenrief on BusinessInsiders.com titled “Ron Johnson Really Is Destroying JC Penney.” While I am not as bold a Ms. Bogenrief to prognosticate on the success of Ron Johnson’s strategy (I’m just an outside observer after all) I think she makes some great points. She points out challenges facing the strategy that I think are correct and in line with the observations we made earlier.

She places a proper emphasis on the product but adds the important dimension that great product is relative to the customer segment you are targeting. The key is knowing your customer and their needs intimately and then aligning the organization toward meeting that need.

But not all customer segments are equal. It is possible that a different segment is larger in terms of size or spending power. Many organizations find over time that a segment that they have served is changing or going away. They must find a way to change with that segment or move into another segment (or cease to exist). That may be the case with JCP and it would make sense for them to find a way to change.

Let’s for the time being assume that is the position in which JCP finds itself. The key question is how best to make that change. As we alluded to earlier, changing the perception of a brand is very difficult. As Ms. Bogenrief suggests, your current customers likely won’t follow you. In addition your new target will have a lot of history to overcome.

There is an alternative to the approach JCP is taking. Ms. Bogenrief hints at this when she says they have “opportunities to restructure and grow, yes, but not necessarily reinvent the retail wheel.” Keeping the JCP brand focused on the customers it has served for over 100 years and structuring the business to serve them profitably is one option. But maintaining the assumption that those customers are disappearing, that is only half the strategy.

The other half is to create a new brand that extends the reach of the organization in the direction it desires to go. Creating a new brand is not easy or fail-safe but it does protect the the existing business. It becomes more like managing the life-cycle of a product. As one brand phases out or reaches a point of stasis others are building.

This is not the approach taken by JCP. They are seeking to transform the existing brand. As we said before we will watch with interest as this unfolds. We wish JCP great success. We personally know employees and retirees who are counting on them having continued success.