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Mizzou MRKTNG 4250 - JC Penney “Square Trade” Case Analysis

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Katlyn Whelan11/3/2015JC Penney “Square Trade” Case AnalysisEvaluate the overall effectiveness of the “Fair and Square” repositioning strategy. How well or poorly do all of the elements work together or work at odds with one another to deliver a coherent whole? What elements are missing?The “Fair and Square” repositioning strategy is a value-based proposition, where J.C. Penney (JCP) is attempting to capture more value through everyday low prices (EDLP) and alter the perception of customers to see JCP as an everyday shopping experience versus a store that thrives on deals and promotions. This issue that JCP is running into is price is not a way to createvalue, it is a strategy to capture value. A company strategy that is focused on price neglects the value creating elements of the marketing mix that really create long-term value and success of the overall strategy.Neglecting to conduct market research to assess customers’ current perception of JCP and their thoughts on the pricing change was the first critical mistake. In terms of performance, JCP knows they are positioned between price-oriented mass merchandisers, such as Wal-Mart and Target and higher end department stores like Macy’s and Nordstrom. However, the lack of information about customer perception before making brand/company-changing strategy decisions almost seems foolish. Without clear information about customer’s perception of the brand, it is difficult to know “where you are going” without knowing “where you stand.”JCP’s seemingly secondary efforts to create value along with this pricing strategy included a new logo, spokesperson, store design, and sales structure. The new logo and store design work well to promote the new “Fair and Square” pricing strategy in the visual depiction; essentially they are literally square. However, with the addition of more high-end brands and more upscale/specialty store layout it seems a little confusing for customers to increase the value of the products in the store but keep prices “fairly” low – it lowers the perceived value of those products for the customers. The change in sales structure also seemed to miss the mark, as communicating the strategy to the sales team and explaining their critical role as “product experts” in the overall plan should have been the first step – versus just taking away their This study source was downloaded by 100000790884189 from on 04-02-2021 20:41:43 GMT -05:00 study resource wasshared via CourseHero.comcommissions. Without the communication to the sales team, it is sending a message that they are valued less when in reality the strategy is relying on them more. The almost non-existent component of the strategy’s marketing mix is promotion in the form of a spokesperson. Ellen DeGeneres brings a fresh face to the brand, but without the market research knowledge of their customers – it is difficult to say whether JCP customers identified, connected with, or trusted Ellen DeGeneres enough to buy into the new JCP. Though the spokesperson may have been a great fit, the advertising campaign missed the mark by communicating why customers should dislike and discontinue participating in the complex high-low pricing models and failing to communicate and educate how their new pricing structure created value. This lack of communication probably caused the bulk of customer confusion and perceptions of lower value-perception, higher prices, and less bargains.Pricing, the largest and most critical change in the repositioning strategy, focused on three tiers – “Everyday Fair and Square”, “Month Long Values Event”, and “Best Price Fridays.” With this element being the biggest change (and purpose behind the strategy) it seems foolish that again, market research wasn’t conducted to determine how JCP customers would react andthere wasn’t more communication about these tiers to customers. Though JCP argues that high-low pricing is confusing with one price slashed to be on sale, having 3 different pricing structures in just one store can be extremely confusing for customers. Though this new pricing structure creates a path for long-term success for retailers like JCP and eliminates all the price games, the lack of communication and coherence with other marketing mix elements to create value for customers inhibits its success. What do the first and second quarter results indicate about the “Fair and Square” strategy? Are the first two quarters of results enough to validate or invalidate the changes? How would you respond to them?First and second quarter results indicate that the “Fair and Square” strategy had a substantial negative impact on JCP. The quickest change, noted in Exhibit 8, was the switch for adult womento shop for their clothing at Macy’s versus at JCP – the switch occurred right after the “Fair and Square” launch in February 2012. Secondly, the change caused shoppers to do the exact This study source was downloaded by 100000790884189 from on 04-02-2021 20:41:43 GMT -05:00 study resource wasshared via CourseHero.comopposite of the repositioning strategy in terms of purchase prices. According to Exhibit 9, Revenue Earned from Products Sold at Everyday/Month Long Value Prices (the new staple in thepricing strategy) dropped from 86.5% in 6-Months Ended 2011 to 84% in 6-Months Ended 2012.In addition the Revenue Earned from Products Sold on Clearance (the enemy in “Fair and Square”) increased from 13.5% in 6-Months Ended 2011 to 16% in 6-Months Ended 2012. The first two quarters of results do show a very negative reaction to the “Fair and Square” strategy; though, as discussed in the first question, there are a lot of miscommunicationand holes in the repositions strategy. The results are enough to invalidate the changes in the short-term based on plan commenced in February 2012. However, based on the investments made in the spokesperson, logo changes, and everything else involved in the plan I would push the strategy forward with an aggressive promotional to educate customers on why this new pricing model and the experience-based shopping brings them the most value. Marketing expenses actually dropped from $2,850 Million in 6-Months Ended 2011 to $2,599 Million in

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