Running Head: CASE

Marlon Pacheco
Module 5 Case
MKT501 Strategic Marketing (FAL2014-2)
Dr. Todd Senft
Trident University

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2
Free Offers and Pricing
Case
Company Introduction
A retail store which has been established to offer several kinds of consumer goods in

product categories that have been different to each other is known as a department store.
Department stores have been selling home appliances, cosmetics, furniture, clothing, toys,
toiletries, gardening, sports goods, paint along with other product lines for example stationary,
books, electronics, jewelry, baby products, pet products, and many more. In 1846, Marble Palace
was established by Alexander Turney Stewart, who offered retail merchandise of Europe on fixed
prices (Kruger, 2010). Moreover, he offered free entrance to the people he thought would be
potential customers. Soon after Alexander, Rowland Hussey found Macys as a store for dry
goods and the chain went on.
JCPenny has been a chain of department stores in America which is a mid-range chain
with the name of company J. C. Penny and Company, Inc. the company has been operating more
than thousand department stores in all the fifty states of the U.S. as well as in Puerto Rico
(Kruger, 2010). Along with retailing conventional merchandise, JCPenny stores have also been
leasing departments such as Seattle Best Coffee, optical centers, Sephora, jewelry repair, and
portrait studios. JCPenny has been the second largest department store retailer in America and
most of its stores has been located in suburban shopping malls. However, most of the stores of
JCPenny had been located in downtown areas before 1966 but the emergence of shopping malls
the store changed its location and moved to shopping malls (Kruger, 2010).
Ron Johnsons Pricing Strategy
Ron Johnson joined JCPenny with a bold vision and at the time of joining the firm he
said that the department store n had a chance to regain its status as a leading store in the market
and the period of true innovation now has been started (Reingold, 2012). According to Johnson,

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the pricing policy of JCPenny needed to be changed so he curtly tussled pricing policy at
JCPenny which had already been dubious and offered discounts, coupons, along with heavy
promotions. Furthermore, he offered more fascinating merchandises from lines such as Joe Fresh
and Martha Stewart, at best reasonable prices (Reingold, 2012).
Johnsons Pricing Strategy Failed
Soon after the introduction of promotions, people started noticing that no sales
experiment and no coupons had been failing to attract consumers and sales collapsed in the priod
of early 2012and entering into the summers of the same year even the CEO of JCPenny, Ron
Johnson realized that a big mistake had been committed by the store. There have been several
reasons for the failure of the pricing strategy offered by Johnson (Reingold, 2012).
The first biggest mistake made by the former CEO, was that he did not test his ideas in
advance and he did not even ask his consumers that what they had been enjoying at JCPenny the
most. No survey had been done before making decisions and when he was asked to test the idea
on a limited basis he turned down the offer saying that he did not test at Apple. His pricing policy
did not include the terms like sale or clearance so it made people ore confused about sales
(Reingold, 2012).
The second biggest mistake was that he alienated core customers. Soon after removing its
beloved sales and coupons, the company focused increasingly on making JCPenny a trendy
destination for consumers and making their shopping experience delighted with introducing
boutique store within their stores so most of the loyal customers of JCPenny felt that they were
no longer the target market of the company and returning of sales did not bring those consumers
back to the store (Reingold, 2012).
Another big mistake was totally misreading the brand of JCPenny. Johnson envisioned
rows of boutique and coffee bars in the store because he wanted people to feel a bazaar shopping
experience. However, in early era of Johnson critics started to point the fact that JCPenny has

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been different than Apple store but he failed to understand any concept related to change the
store. Basically Johnson did not seem to respect or like the store and the match of JCPenny and
Johnson resulted to be a horrible one (Reingold, 2012).
Johnson could have done better
Johnson could have done much better than what he actually did but since he was coming
from Apple he was too sure about his success at JCPenny too (Reingold, Jones & Kramer, 2014).
The first mistake he made was not testing his ideas of introducing coupons and promotions
without the term sale or clearance making people too confused and dubious about the
promotions. He actually did not study the store and history of the store before implementation of
his plans since studying the nature of business and the history of any company has been
extremely important before applying new policies. Along with studying the history of the
company it is equally important to study the consumer behavior as well as surveying the needs of
customers (Reingold, Jones & Kramer, 2014). The suggestions and feedbacks have also been
very important before deciding future principles of the company. Johnson at JCPenny did not do
any of the two mentioned above which resulted in a complete failure of the pricing strategy of
the company. Moreover, he would not have introduced the boutiques within the store as it made
most of the loyal customers feel that the store no longer wanted to retain them so they left the
store and switched to another, even sale promotions did not make them feel better and they did
not come back (Reingold, Jones & Kramer, 2014).
Comparison
The pricing policies presented by Ron Johnson had much of coupons and sales
promotions but the pricing policy had now changed and the use of coupons had been reduced
making people attract than before. However, still people have been dubious about the
promotional strategy at JCPenny because they have an idea that the prices and promotional offers

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at JCPenny had been fake. It would take a bit of time to eliminate the wrong perception of people
about the store and return them to store as loyal customers of JCPenny (Mattioli, 2012).

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References
Kruger, D. D. (2010). Idaho and the Development of the JCPenney Chain. Idaho Yesterdays,
51(2).
Mattioli, D. (2012, January 26). J.C. Penney chief thinks different. Wall Street Journal.
Reingold, J. (2012, March 19). Retail's new radical. Fortune. Retrieved from
http://management.fortune.cnn.com/2012/03/07/jc-penney-ron-johnson/
Reingold, J., Jones, M., & Kramer, S. (2014). How to fail in business while really, really trying.
Fortune, 169 (5), 80.