05
Dec 13

JCPenney: forward to the past!

JCP has apparently taken down links to this spot. Click here to view on iSpot.tv.

Recently, I saw the above ad for JCPenney — the launch of its big new holiday campaign. Just days later, I saw an article entitled JCPenny On An Express Train To Oblivion.

That headline pretty well summed up my reaction to the commercial. It also got me thinking about JCP’s current course in context of its history.

So, for you marketing enthusiasts, here’s my JCP story. It’s loaded with the things we love about this business: drama, crushed dreams, out-of-control egos and unintentional comedy.

Chapter One: The Downward Spiral

JCP has a rich 100-year history, much of it spent as “America’s Favorite Store.” Its stores were once a hub of the community, the go-to place for great fashion and fair deals for the whole family.

For that, we can thank one James Cash Penney. The near-perfectly named founder (if only his first name was Buck) put the customer’s happiness above all else. He didn’t believe in tricky pricing or gaudy promotions to fool people into thinking they were getting a bargain. He believed in treating people as he would be treated himself. For that very reason, he named his first stores “The Golden Rule.”

Fast forward about 70 years. With competitors applying pressure via endless promotions, JCP started to adopt the same behavior. Before long, sales and coupons became the driver of JCP’s business too. Its distinct identity began to fade.

Ultimately, JCP’s sales figures began to reflect the store’s diminishing brand. Shopping habits were changing drastically as the specialty shops — and the internet — started siphoning department stores’ business.

By 2011, JCP was feeling like it was a hundred years old, and not in a good way. It was no longer America’s Favorite Store. For too many shoppers, it had become Grandma’s Favorite Store.

Chapter Two: The Great Ron Hope

Here was JCP, doing its best to keep up — air-dropping coupons on a daily basis and door-busting with the best of them — with clearly diminishing returns.

Big changes were needed. Starting with the CEO.

Influential board member and hedge fund manager Bill Ackman was enamored with Apple’s Ron Johnson. Who wouldn’t be? Before building the phenomenal Apple Store network from zero to over 300 locations, Ron had succeeded in creating the phenomenon of Target. In the world of retail, he was a certifiable miracle worker.

So out went then-CEO Mike Ullman, and in came Ron.

Ron’s mission was to bring new energy and excitement to JCP. The store needed to hold onto its existing customer base, to be sure, but it couldn’t achieve growth without attracting younger and more affluent customers as well.

It wasn’t just JCP that was ailing. With the retail landscape changing, department stores in general were feeling the pinch. So Ron was thinking bigger. He wanted to reinvent the department store concept for modern times. He pointed out that the Apple Stores didn’t sell anything you couldn’t buy online, yet they were always mobbed. Why? Because they offered an experience that couldn’t be duplicated in cyberspace. JCP would have to do the same.

He started by swapping out the cobwebbed logo for a fresher one. He reimagined JCP as a collection of specialty shops under one roof, each staffed by product experts. He envisioned a series of amenities to delight customers and keep them in the store longer — like free wi-fi, free back-to-school haircuts for kids, a coffee shop and in-store experts to help and advise with everything JCP sells.

Ron unveiled his plan to a large group of retail analysts and journalists at a New York City event. They validated the new vision in a big way — the stock instantly jumped 24%.

As he did at Apple, Ron built a prototype store that dropped the jaw of everyone who entered. It was beautifully designed, with spacious aisles. It was populated with alluring displays of brands people love, as well as up-and-coming brands they’d be loving soon enough. All at low prices every day.

Some of the world’s most respected designers, like Michael Graves, Jonathan Adler and Terence Conran, were enraptured by Ron’s approach. They created exclusive products that would only be sold at JCP, enthusiastically buying into Ron’s vision of what a department store could be.

Chapter Three: The Fatal Flaw

Fast forward another year and a half: Ron Johnson gets run out of town.

JCP’s losses for 2012 totaled $992 million. Tantalizingly close to a perfect billion.

How was that possible? If Ron had such a brilliant plan, the support of the board and the endorsement of Wall Street, why did he fail on such a spectacular scale?

Put simply: he did too much too soon. He scared away the old customers instead of bringing them along for the ride.

It’s a story of “the best of intentions.” Inspired by the retail philosophy of James Cash Penney, Ron believed that respect for the customer was the key to success — and manipulating prices to create a false sense of bargain was not respectful. But he changed the pricing policy before he could change the stores (which would require a 2-3 year effort).

It might have been Ron’s only mistake, but it was a doozy. It sent customers running in the opposite direction, and the mass exodus sent JCP into serious crisis mode.

Chapter Four: JCP Gets The New Coke Treatment

Until now, this story was about vision and reinvention. This is where it turns into a story of egos, turf protection and questionable taste.

The board still backed Ron, but it thought he was stretching himself too thin. The plan was for Ron to concentrate on getting the stores right, while a heavyweight marketer would come in to lure customers back. Temporarily, that would be Sergio Zyman.

If you’re in the business, that name should ring a few bells. Or maybe those are warning sirens.

Sergio was the mastermind behind New Coke, which remains one of the greatest marketing disasters of all time. Adding variety to his disaster portfolio, he also led the marketing effort behind Hilary Clinton’s 2008 run for the presidential nomination.

But advertising is a funny business. With his flamboyance and oversized ego, Sergio has managed to spin his experience into a major success story — counter-balancing those black marks with some well-known successes.

At this time, I was part of a group known as The Bureau, which handled the brand advertising for JCP. At Ron’s direction, we had just completed a new campaign whose purpose was to bond with JCP’s longtime customers and surprise them with the brands they would now find in-store. The ads debuted on the Academy Awards show last February.

The morning after the Oscars broadcast, The Bureau had its first meeting with Sergio. Very bluntly, he told us that our current approach wasn’t working — despite the fact that the campaign was approximately 10 hours old and had been widely acclaimed in the press.

Though his thinking seemed nonsensical, it wasn’t hard to understand where Sergio was coming from. The board was paying him big bucks to take control in a crisis situation. He could hardly go back to them with a minor tuneup — he was expected to deliver a whole new engine.

Sergio informed us that research would now be our guide. Given his political experience, he had people who could return results in less than a day.

Of course, the most important thing about research is the conclusion one draws from it. And Sergio was very good at drawing conclusions — sometimes before he even saw the research results.

The first test was a good example. Sergio had us create a “big sale” ad in the format of our newly-launched campaign. This would be tested against one of JCP’s most successful crowd-generating ads of the past — a tastelessly colorful, all-type ad with an urgent voiceover spouting a repetitive “30% off! Sale ends Friday! Buy now!” type of message.

Surprisingly, our re-imagined ad actually outperformed the old one in the test. Victory! We had just proven that we could effectively drive people into the store and simultaneously build a stronger JCP brand.

But the glow of victory lasted about a minute. And this is where JCP’s journey into the past started to pick up steam.

Despite its good test results and the widespread critical praise, Sergio declared that the current ad format wasn’t “hard-hitting” enough. He directed us to kill the new logo, eliminate the new campaign theme line, change the music, and add a voiceover to read aloud all the words that appear on-screen.

Having enjoyed this brief visit to the dark side, our little group gracefully asked to be relieved of our duties.

Chapter Five: Building A New Old JCP

Shortly thereafter, Ron Johnson and JCP parted ways.

Now another new JCP would begin to take shape — looking suspiciously like the old one. The new CEO would be Mike Ullman. Yes, the same fellow who was CEO before Ron was hired.

In 2012, board member Bill Ackman said that JCP had been “chronically mismanaged” during Ullman’s reign. Now Ackman was saying “Mike is the right guy at the right time.” Amazingly, just months later, he would again push for Ullman to be replaced, successfully executing the rare “double flip-flop. (He later resigned amidst the mess he was creating.)

With The Bureau gone, Sergio latched onto a real ad agency — Y&R in New York — to accelerate JCP’s journey back in time.

Chapter Six: A Perfect Storm Of Mediocrity

In a sane world, the new marketing chief (Sergio) would get together with the new agency (Y&R), get direction from the new/old CEO (Ullman), take a long hard look at what JCP was doing — and decide what was worth saving and what needed fixing.

With so many things in disarray, it wouldn’t be wise to throw the baby out with the bathwater.

Yet JCP decided to do exactly that. Then they threw out the bathtub as well. All traces of Ron Johnson had to be erased, and the effort began to get back to the way things were before Ron darkened JCP’s door.

The plan was simple. JCP would get back to the business of doorbuster sales and bombarding customers with coupons via mail and email. They’d bring back some of the store brands Ron had killed. They’d re-embrace that old grandmotherly logo. And with the guidance of Sergio Zyman, the marketing would catapult the company forward to the past.

The first order of business: running an apology commercial admitting that JCP had messed up and was going to change.

Now there were so many forces at work, mediocrity loomed as the inevitable result.

The board was freaking out over huge and growing losses. The marketing chief had to demonstrate a visible break from Ron’s ways. The new/old CEO had to restore the good old days. The new agency had to curry favor with Sergio and plant its own long-term seeds of success. And in the midst of it all, JCP’s marketing department had to seize its opportunity to reestablish the influence it had lost under Ron.

Job #1 was getting bodies into the stores. There would be no tolerance for any of that “brand-building” mumbo-jumbo.

What followed were a series of commercials from the Official Retail Advertising Handbook. They may well have driven a few more people into the stores, but they also helped JCP melt into the woodwork.

It was the perfect time to add a new player.

Chapter Seven: New Blood For Old Ideas

So long, Sergio. Hello, Debra Berman.

Debra, fresh from the world of Kraft Foods, was brought in to take over Sergio’s role as chief marketer on a permanent basis.

“We’re in a position where we want to make sure people reconsider us again,” she said.

Hmm. Isn’t that a case of double-reconsideration? What she probably meant was “consider us again.” Whatever, it may be a little late for that — especially after Sergio blazed the reconsideration trail with his apology ad.

In referencing the diversity of JCP’s audience, Debra said “Shame on us if we don’t connect to the culture. It’s a culture of deal making and running out and getting offers.” In other words, her plan was to drop JCP right in the middle of that zone of zero differentiation.

She’ll be an asset during the trip back to 2011.

Debra activated her plan by dismantling Sergio’s plan. Y&R’s tenure turned out to be one of the shortest in advertising history, as Debra fired that agency and replaced it with three new ones.

With all that creative firepower, her first effort can be seen at the head of this article. It’s the ad that kicks off JCP’s big holiday campaign. In Debra’s own words, this ad is about “working a big deal and singing about it.”

We’ll see what kind of tune they’re singing when the holiday sales figures are revealed.

Chapter Eight: The Incredible Shrinking Brand

Every good marketer talks about the importance of the brand. Great brands are born of smart thinking, creativity and consistency.

In its recent history, JCP has had flashes of smart thinking, moments of creativity — and absolutely zero consistency.

JCP has now seen a parade of logos and ad campaigns. It’s also seen a parade of marketing leaders who either fail to understand the importance of the brand or aren’t capable of building one.

Given JCP’s brand convolutions, it should surprise no one (inside or outside JCP) that the brand has become so dangerously thin. The question is how they deal with this.

Since Ron Johnson left the building, every action taken by JCP has been to return to the pre-Ron days of 2011. It’s all about coupons, direct mail, nonstop sales, door busters and bringing back the bargain brands.

While there was a fatal flaw in Ron’s plan, there’s an equally obvious flaw in this one.

If JCP successfully journeys back to 2011, it will put itself right back on the same cliff where it started — with an aging customer base, desperate promotions and diminishing returns.

Transporting itself to the past might well be a good strategy for JCP. But 2011 probably isn’t the year they should be aiming for.

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  • http://www.tumbleintopeace.com cbee

    It’s a story of a brand that got lost in its past.

  • Moeskido

    What a sad story. Jobs was correct when he said something to the effect of “you grow up and you find out that the people making decisions are no smarter than you are.”

  • Dan

    Ken,
    You think Ron Johnson will be up to anything again? Some retailer should carry out his vision. I feel bad for him puts huge dent in his amazing reputation.

  • ksegall

    Ron is alive and well, and has a lot of interesting paths open to him. But don’t hold your breath waiting for him to try again with a big, established retail chain. I expect he’ll surprise us by doing something very different.

  • Gary Deezy

    Fascinating!

  • aardman

    I think of them as bargain-hunter hobbyists. They live for the hunt of that elusive coupon, that mythical sale that pops in and out of existence with no warning. For the archetypical JCP shopper pre-Ron and now post-Ron, this is their hobby. Other people collect stamps, some play paintball, JCP customers hunt down bargains. Ron Johnson wanted to free them from what he thought was the big inconvenience of chasing down deals and discounts, but in fact his customers enjoyed the pursuit. No matter that the old JCP would raise prices just before the sale began so that the discounts were an illusion, it was the thrill of the hunt that lured them to the stores! There’s no fun in everyday low prices. If they wanted that, they’d go to Walmart.

  • Tom

    By now Ron’s plan would probably be chugging along… The small minded warm bodies who run the joint deserve to fail. It’s sad to watch all that money burn like this.

  • orenthal

    My complaint with Observatory is that the always-compelling posts are too far and few between. We want more, Ken. The book tours, the talk shows and the partying with Kanye are getting in the way of servicing your loyal Observatory clients.

  • DHLondon

    Another great post – with a fascinating trail to follow ℅ Forbes and Youtube. Thank you, Ken. I agree with orenthal too – more posts please..!

  • Nameless Coward

    Fascinating indeed. Reading this story makes me think 1st years marketing and media students would do better.

  • Dmitri

    I’m glad to hear Ron is doing well. I felt sad about what happened to him. I really wanted to to shop at the JC Penny’s he was creating.

  • Arch

    Hi Ken – Another excellent post on the hits and misses at JCP. Keep up the good work.
    Ron may argue that he had no choice but to fix the pricing strategy first before he could wow customers with changes within the JCP store fleet. Having a pricing program with integrity would convince merchants that their brands would not be de-valued in a promotional enviornment. It really was a catch 22 situation. I think Macys gets away with it because their reach is so wide.
    I’m somewhat puzzled that Ron and JCP hired Sergio considering his iffy background. I think your work was amazing and made an impact. Unfortunately, customers had already fled to other merchants by then. But I think the marketing strategy had been corrected.
    I believe the best brands are usually the ones that the most simple ones. At this point, JCP has no brand integrity and I wouldnt be surprised if they close-up shop in the near future. Their existence – sadly – is not required.
    I corresponded with Ron often during his tenure. He will remember me as the passionate consumer who sent him a book on the Cadbury family for christmas. Tell him I said hello.