INDIAN INSTITUTE OF MANAGEMENT INDORE

POSTGRADUATE PROGRAM

Retail Management
Group Assignment

Case:
J.C.Penney’s “Fair and Square”
Pricing Strategy

Submitted to:
Prof. Subin Sudhir

Submitted by:
Group 12, Section A
Chahat Doulani 2022PGP106
Hrithik Barua 2022PGP615
Rayudu Surya Teja Srinivas 2022PGP311
Rishav Goyel 2022PGP543
Syed Abdul Khayyum 2022PGP408
Ujjwal Chaudhary 2022PGP430
Vipul Parihar 2022PGP433
Case facts:

J.C. Penney is a department store chain established by James Cash Penney in the year 1902. In 2012,
J.C. Penney was reported to have 1100 stores, with 41 million square feet of retail space, and to service
more than half of the American population. The company saw its major rivals as discount retailers
like Walmart and Target, which catered to the lower end of the market, and upscale department shops
like Macy's and Nordstrom's, which catered to the middle class.

Industry Situation:

Macy's and other department store chains have adopted omnichannel strategies in response to the
general decline in department store revenues caused by the rise of online shopping and other new
retail channels. Penney's consumers only shopped there an average of four times per year, and the
company's sales per square foot ($156) were far lower than those of its rivals and specialty stores.

Radical Changeover:

After being appointed CEO in November 2011, Johnson devised a four-year plan to address the issue.
The plan included several separate but interrelated elements that reached across the entire company
and were meant to revive the "Golden Rule" cited by the founder, J.C. Penney. The plan included the
following changes:

1. Fair and Square pricing strategy: After Ron Johnson joined the company in 2012, they switched
to a "Fair and Square" pricing approach from one based on high-low pricing and coupon
discounts. The first tier of the company's "Fair and Square" pricing approach involved a 40%
price cut across the products. Second, every month there is a "Month long values event" where
prices are reduced by an extra 20-29%. Third, around 20% of the store's inventory is liquidated
on "best price Fridays," which occur every first and third Friday of the month.
2. New Logo: To better convey the company's new " Fair and square" philosophy, it has updated
its logo to simply depict jcp within a box.
3. New Brand Spokesperson: While the decision to choose Ellen DeGeneres as the
company's spokesperson first drew criticism on social media, good feedback from young
people has subsequently surfaced. However, Mothers, a demographic widely seen as an
important target for most department retailers, have been hit hard since they no longer see
much value in the increased prices.
4. New Store design: J.C. Penney has a new retail strategy to revitalise and redesign its product
offerings and merchandising. They initiated supplier partnerships with major brands such as
Martha Stewart to develop unique product lines. In order to make the shopping experience
more akin to that of a specialised shop, they reorganised the congested racks and shelves into
"stores-within-a-store" arrangement. Ten thousand square feet in the store's "town square"
would be set aside for freebies like hot dogs, ice cream, and back-to-school haircuts for kids.
It's clear that the goal of this tactic is to remind shoppers that, in contrast to static e-commerce
sites, department stores offer a dynamic and engaging shopping environment and, it's a great
spot for spending quality time with loved ones.
5. New Sales Structure: Johnson intended to build a group of experts on his products in the style
of Apple's Geniuses. He quit to get rid of sales commissions since the aggressive sales culture
wasn't consistent with the company's new "fair and square" positioning.
Impact of this changeover:

The market is dominated by high-low price methods employed by most retailers. Customers who were
previously indifferent to price are now skilled at waiting for sales and shopping around to locate the
best deals of the week. With a growing number of barcode scanning apps for mobile devices, shoppers
may instantly locate the best price for an item in nearby stores and on the internet. Successful EDLP
pricing at Walmart would allow shoppers to stop waiting for discounts and sale
periods to make any purchase.

Despite these benefits, J.C. Penney's advertising efforts were unsuccessful because shoppers viewed
shopping at J.C. Penney as a novelty because they could utilise their accumulated coupons to get a
discount on their cart goods. Customers were sent the message that there would be no more games
or entertaining activities at J.C. Penney. Previously, customers were regularly kept in the picture and
the brand was promoted using cash coupons. Unlike Apple, they don't have a unique selling
proposition, thus the only way to increase sales is to lower prices. This obligation would prevent
JCPenney from undercutting competitors’ prices even if they were able to do so. The biggest
discounts they used to provide will no longer be available.

However, the pricing approach was met with tremendous resistance from customers, as shown by
their July 2012 stock drop, the lowest in four years. Thus, they adjusted the strategy to improve
customer reach. They renamed "Best Price Fridays" to clearance deals and eliminated "Fair and
Square". The new price match guarantee program accompanied the changes.

Recommendations:

1. The "fair and square" method is an innovative pricing strategy, but it was met with lukewarm
reception from customers since it was too ahead of the market at the time and influenced
customers due to the emergence of e-commerce. Simply, deflating the perceived value causes
customers to value the actual product less.
2. Customers knew they could get the same products at substantially cheaper costs during sales
at other stores, so the company should employ the price match strategy rather than the daily
best price.
3. Due to customers' widespread awareness of the “Fair and Square” program, they have
information about the best price at which the store is willing to sell, hence, the company
should not revert to high-low pricing. Therefore, it is suggested that the pricing be
optimized, and the coupons be rolled back to make the customers feel like they are winning
again, which in turn encourages them to return to the store.
4. Develop private brands, home, and beauty items, and explore niche markets like millennial
men's apparel, etc. to add value and differentiation.
5. Restore the sales commission system to boost employee morale by giving them a sense of
importance in earning profits for the company.
6. To maintain differentiation and fair pricing, JCPenney should provide unique products and offer
omnichannel services.