August 14, 2012 | Eric Head

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.

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