Act with Certainty

The ForeSee blog for CX professionals and the Voice of Customer community.

Not Buying It

Flying back from a client visit recently, I came across an article that really demonstrated the importance of understanding the true drivers of customer experience.

Retail in general is a very competitive landscape right now. The margin of error is very, very small, yet some companies just don’t understand how important the customer experience is to their current and future success. In the article, St. Louis Post-Dispatch reporter Kavita Kumar, writes about how J.C. Penney’s recent stumble is…(gulp)… driving customers to competitors.

With big names at its helm (like CEO Ron Johnson, formerly of Apple and Target), Penney’s is trying to reinvent itself in the retail space. And a main part of their strategy was changing the pricing and promotion structure, drastically reducing the amount of coupons, special discounts, and sales offered in favor of every-day low prices.

You can’t tell by the article how much strategic thinking went into the decision, but I’m assuming there was an extensive amount. If there wasn’t, and it was just an executive thinking they needed to do something different to shake things up…then shame on them. If they did in fact spend money and budget on research, it was completely wrong. They simply didn’t do it the right way.

Either way, they completely missed the mark. After they launched the new strategy, I think they discovered pretty quickly that it wasn’t working with consumers – they just weren’t buying it. If the executive team had truly understood what was important to the consumer they might have made a different (better) strategic decision to move the company forward.

JC Penney Missteps: not understanding the true drivers of customer experience

JC Penney’s “new” pricing strategy: is it really what the customers want?

To do that, though, you have to understand what the true drivers of the customer experience are before making a huge overhaul or major strategic and/or tactical decision. In this case the issue is pricing—or so JCP thinks. The problem is everyone complains about pricing – it’s human nature to do so. So, is pricing as big of a factor as we think? If the J.C. Penney’s team did research and they found that the number-one complaint was pricing, ForeSee’s scientific methodology might have demonstrated that while price is usually the lowest scoring element, for many companies it is also the lowest impacting element in the customer experience.

In fact, we actually have research on J.C. Penney’s from our Top 40 and Top 100 studies done last holiday and over the spring. In our research, we looked into JCP’s in-store and online customer experience and found that price was not the top priority element. In our study, Merchandise (appeal, variety, and availability of products) ranked as the top priority element in need of attention. Now, this was a panel study—it would be more informative if it were done in J.C. Penney’s stores and on its website with a large enough sample to be able to segment by what people bought, first time visitors vs. repeat customers, etc.

The bottom line is that Penney’s doesn’t know what they should improve just by asking people “what should we improve?”  They needed a customer experience methodology to help prioritize improvements. Quite possibly they wasted money – and precious time – focusing on an area of their business that isn’t a true driver of the overall experience and financial performance.

If they simply would have listened to the voice of their customers, through credible science and statistical rigor, before they went public with the new strategy they would have understood that changing pricing and promotion strategy was not really something that made sense from the consumers’ perspective. Instead they could have spent time and dedicated resources and budget to decisions that could be already driving the bottom line in a positive direction rather than scrambling to shift strategy yet again in order to compete and thrive in today’s retail environment.

With falling sales numbers, dissatisfied customers, and bad press, J.C. Penny’s is becoming the poster child for what NOT to do if you are a retailer. Where the margin of error was thin before, it’s completely gone now and the company needs to right the ship before it’s too late.

A Penney for your thoughts…



ForeSee | Eric Head

About the Author

As Senior Director, Sales Eric leads ForeSee’s business development efforts in the Midwest, Northeast, and Mid-Atlantic regions. With more than 20 years’ experience managing advanced technology products and programs, he has played a key role in the company’s strategic growth, including helping ForeSee expand into the European market as well as launching ForeSee’s offline business. Prior to joining ForeSee, Eric was director of automotive programs for Internet Operations Center, a leading regional Internet applications service provider. There, he brought new Internet and e-commerce applications and solutions to the automotive industry. Eric earned a B.S. in marketing from the Miami University-Oxford and an MBA with distinction from the University of Michigan Ross School of Business.

Read more posts by Eric Head

Comments

  1. @Bobbleheadguru

    JC Penney is making several major changes at one time. It appears they are trying to limit the number of SKUs and sell jeans like Apple sells iPads.

    This appears to be a high risk/high potential reward strategy… that will not payoff for months or even years. In the satisfaction data, the numbers may drop before they gain traction as there will be turnover as some customers leave and (hopefully for them) and many more “first time customers” arrive.

    Recent data may already be obsolete as JC Penney has changed so much week to week.

    Eric… have you stopped by a JC Penney lately? What do you think?

    Reply
    1. Eric Head

      Thanks for the post BG! You are exactly right that this is a high risk/reward approach by Penney…with the reward being they earn the right from consumers to stay in business. It’s true that recent public data may already be obsolete due to the on-going change – all the more reason for JCP to have a scientific instrument in place to monitor the EKG heartbeat of the consumer!

      I have been in a Penney store recently…and the environment is nothing like any Apple store I have ever been in. If the goal is to be the Apple brand of department stores, then I think it will be a long tough road for JCP. Brand perception can be a very difficult thing to change, however it’s not impossible. Brand Loyalty is a natural outcome of creating a good consumer experience – an if JCP can figure out the true and impactful drivers of their collective consumer experience, then they have a fighting chance for long-term success.

      Reply
  2. B Weiss

    I agree that price wasn’t necessarily the best place to make big strategy changes, but wouldn’t the Foresee data suggest that with the low impact score, the switch to every day low price would have a minimal impact on cSat?

    To JCP’s credit, this shift is similar to a website redesign, and foresee knows better than anyone else that redesigns always result in a cSat dip initially, but the goal is that when things normalize, you’re better off than where you started. Redesigns hurt because they introduce a mandatory “re-learning” process where you’re effectively taking all your high scoring repeat users and turning them into first timers while they relearn your site (or business).

    Big changes take time, and I’d argue that it’s still too early to judge JCPs transformation.

    Reply
    1. Eric Head

      You make some great points, B Weiss – thank you for weighing in! If we were working w/ JCP in an ongoing fashion, in theory we may see a low score / minimal impact pairing for the “Price” element…this is something we see all the time w/ our Retail clients. It typically tells us that while consumers (or specific segments of consumers) might want lower prices, a different pricing strategy may not change their level of satisfaction or future behavior.

      We have also found that sometimes fundamental changes in the business that change the Value perception (e.g. changing the marketing & promotion tactics) can cause elements like “Price” to increase on the impact scale. In other words – a component of the customer experience (like Price) may not need fixing because it isn’t a true driver of the experience…but you attempt to fix it anyway…and in doing so make it a more impactful item.

      You raise an excellent point on what we call the “relaunch effect.” Sometimes change – even if it’s for the better – needs some time to play out to determine the long-term effect. There are also so many variables at play in this environment (e.g. seasonality, shifting consumer segments, merchandise cycles to name a few) that will necessitate time to figure out what’s working and not working – I totally agree that it’s too early to judge their seismic transformation.

      But it’s never too early…and hopefully not too late…for them to make sure they have some powerfully scientific instruments in place to keep tabs on their customer experience.

      Reply
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