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NEW VS. OLD CUSTOMERS

July 26, 2012

I’ve already blogged on what I think of ex-Apple executive Ron Johnson’s effort to turn around J.C. Penny (June 21st – What Does $53 Million Buy You?). Now, Ron has decided to get rid of his February, 2012 pricing strategy of month-long specials and replace it with permanent mark downs. Penney is now going to offer two options: everyday low prices and clearance sales.

The move reflects the reality that Penny needs to stem sales declines caused by the company upsetting their current customers by ending its sales and coupons in January, 2012. According to a recent story in the Wall St. Journal, “It is also an attempt to clarify for consumers what Penney executives acknowledge has been a confusing pricing strategy.” Ron, of course your customer is confused! In eight months you have had three different “pricing” strategies.

I keep coming back to this story because I think it is a classic tale of how difficult it is to change consumer “perceptions” of a brand. In my Powershift Marketing book I urge small businesses to keep focused on their customer’s wants and desires. With a new owner (Investor William Ackman) and management, J. C. Penny has decided to focus on their wants and desires, not their customer.

When things aren’t working out, it is just human nature to panic and keep trying new things. But this approach only confuses your most loyal customers. The marketing goal must be to always retain your current customer base, while you add new customers. If you anger your current base (think Netflix, J.C. Penny) before you’ve added new customers, it is a plan for failure. I bet Ron the “wonder boy” will be gone with his $53 million by early 2013.

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