JC Penney's New Pricing Strategy J.C. Penney

JC Penney's New Pricing Strategy J.C. Penney was founded in 1902 by James Cash Penney, and by 1907 he had purchased full interest in three locations, moving his company headquarters from Wyoming to Salt Lake City in 1909. By 1912, there were 34 stores in the Rocky Mountain State areas. By 1928 Penny's had opened 1000 stores and by 1941 had 1600 stores in all 48 states. Penny's began national advertising in 1956, offered in-store credit cards in 1959, and acquired The Treasury discount stores in 1962.

By 1963 it issued its first catalog, expanded to Alaska and Hawaii, acquired Thrift Drug and by 1969 was a major feature in most American cities. By James Penney's death in 1971, the company had revenues of over $5 billion and peaked with 2,053 stores in 1973 jcpenney.com; Mattioli, 2012). Retailing in the 21st century demands far different strategies than ever before. Retailing has changed, both because of globalism and the changing desires and expectations of the consumer.

Stakeholders, the media, and the government have caused retailers to be more transparent in their production and manufacturing techniques, and demand more moral and ethical behavior, more sustainable and eco-friendly practices and technology. Today, the market is such that retailers grow only by taking away from competitors, not usually by growing their own brands. This has resulted from a shift in retail thinking from "The Consumer is King," to "The Consumer is Dictator," with market power ingrained in almost every marketing channel globally (Reingold, 2012).

With a new CEO, tightening belts on acquisitions and personnel, on February 1, 2012 Penny's began a new pricing strategy, "Every Day" prices on most days reflecting what used to be sales prices, "Monthly Value" for certain items in place of sales, and "Best Price" the first and third Fridays of each month -- tied to typical paydays. Prices would not end in a 9 or 7, but in whole figures (e.g. $15.00 rather than $14.99) (D'Innocenzio, 2012; Reingold).

In addition to new pricing, Penney's will created 80-100 branded stores within stores (Martha Stewart, etc.) and offer complimentary services and promotions. The central focus of the new strategy was the realization that about 75% of everything sold at the store is usually sold at a 1/2 off (50% SALE). This is, however, different than everyday low pricing via Wal-Mart.

The prices will not be rock bottom discounts, but will try to convince customers that there is no need to shop for the closeout or absolute least expensive shopping experience when there are "pretty good prices" every day (Girard, 2012) While this is certainly an innovative and new approach to retailing, the company must still work through a number of issues prior to realizing its needed success in this tier. Most of the products Penny's offers are homogeneous and rather similar to products sold by most similar retailers.

Thus, the only way to convince the consumer to purchase their product is to lower price. And, if competitors lower prices on very similar items, Penny's must follow suit. The Company is trying to differentiate some of its products by using highly visible brands (Martha Stewart, etc.) and a more boutique approach to the overall store mentality. However, while Penny's has been around for a century, it still is considered a more mid-level or working brand than Nordstrom's, and others.

The company seems to be saying -- we want to use price as a way to convince clients to purchase more, but there is a discrepancy within this strategy. If price is being used as a tool -- everyday pricing being low, then why move the psychological experience to the even number when that tends to connote more upscale, or premium pricing ($10 for an appetizer at a nice restaurant as opposed to $8.99 for a value meal somewhere).

Price establishes value, if customers perceive Penny's as a tired or older brand, then they will be unable to reconcile which price is which for which value. It seems as if Penny's is in a position in which it must change or die. In fact, the company's 110-year history is a negative rather than a positive -- consumers think it is "tired" and have forgotten that it was.