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VOL. 37 | NO. 25 | Friday, June 21, 2013
Seventeen short months after the former Apple retailer extraordinaire was tapped as CEO of J.C. Penney, Ron Johnson was fired in spectacular fashion for a 55 percent drop in stock and sales declines as high as 20 percent in a single quarter.
This certainly wasn’t the legacy he intended to leave for this outdated brand struggling to connect with its “next generation” of customer.
What went wrong? After all, Johnson was credited with making Target trendy and Apple stores a monstrous success. The simple answer is arrogance.
He misread what the brand’s most loyal customers wanted and, more importantly, failed to validate his assumptions with proper research – marketing 101. Time Magazine reports that when Johnson was asked about the possibility of testing, he responded “We didn’t test at Apple.”
Johnson’s ambition was to make J.C. Penney a destination, much like Apple stores. Apple sells high-end products you can’t easily find elsewhere – products for which “early adopters” are willing to pay a premium. J.C. Penney’s customers are quite different.
Mistake No. 1: Johnson assumed customers would prefer everyday low pricing vs. the “price it high and discount it often” strategy upon which this retailer has historically relied. It turns out J.C. Penney customers are accustomed to the pricing game, seeing their savings as recognition for their bargain-hunting skills.
Mistake No. 2: Shifting most apparel lines to garments aimed at younger buyers would attract a new target audience without alienating the existing mature customer. In reality, the older demographic felt abandoned. No matter how many new customers the brand gained, it wouldn’t be enough to offset the loss of its former customer base for a very long time – too long for the brand to survive financially.
Mistake No. 3: “House” brands aren’t cool and should be abandoned. Apparently, they carry more “brand equity” than Johnson ever realized – likely due to their sheer tenure with the retailer.
Mistake No. 4: A reinvention of the store experience is necessary, creating a mini-mall of dozens of specialty shops with coffee bars and food stands throughout. While in theory, the specialty shop concept may not have been completely off target, CEO arrogance interfered with financial practicality as Johnson attempted to bite off more debt than the brand could chew.
Shortly after Johnson’s departure, his predecessor – Myron Ullman – was reinstated. To communicate the changes afoot, Ullman’s team deployed an ad campaign called “We’ve heard you, and we’re listening” – pleading with customers to return. A mere two weeks later, the campaign’s message switched to “thank you for returning to our stores.” It’s doubtful customers did an about face in less than a month, but the sentiment was a good one.
Lesson learned: you can’t turn a brand on its ear without consumer feedback and be surprised when you alienate your core.
Lori Turner-Wilson is an award-winning columnist and Founder/CEO of RedRover Sales & Marketing, www.redrovercompany.com. You can follow RedRover on Twitter (@redrovercompany and @loriturner).