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Brand Watch

4 Brand Transformation Lessons From JC Penney

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For brand owners who care about building an enduring and valuable brand, the recent JC Penney drama offers an excellent learning opportunity. Venerable retailer JC Penney opened its doors more than a century ago and generates annual revenues of nearly $13 billion from its 1,100 stores. JC Penney was a force to be reckoned with in mid-market department store retail for most of the 20th Century. And that’s exactly why the brand is stuck in its self-inflicted drama today. Like its competitor Sears, the department store format is becoming a relic–an idea that no longer serves shopper’s changing behaviors and preferences in our digital age.

Now JC Penney is a broken company and a broken brand.

And no matter how much the brand needs fixing, it won’t happen until the internal culture is fixed. JC Penney is a brand without a soul, with no higher purpose than profit taking. Customers no longer care about JC Penney– not the once loyal shoppers who valued their discount coupons, nor the potential up-market name brand shopper the “new JCP” tried to attract. Over the past two years, JC Penney same store sales have dramatically declined nearly 30%. The company’s stock is trading at roughly half of what the current hedge-fund owners paid for their original investment. Heads will roll and they did!

Let’s look at the lessons for marketers based on JC Penney’s recent attempts to transform its iconic brand:

What got you there, won’t keep you there.

Brands begin to decline long before the cash they generate does. JC Penney’s owners and executive management were heavily invested in keeping up the status quo–doing the urgent work of meeting the numbers and maximizing shareholder value, while the more important work of innovating new value for a new generation of shoppers seemed less of a priority. Sadly, once the decision was made to transform the JC Penney brand, the CEO in charge of creating the transformation of a 100 year-old brand was fired in less than 18 months. Seemingly too little, too late.

Lock onto true north before changing anything.

Penney’s ousted CEO Ron Johnson is a brilliant retail executive. He came to JC Penney from a culture that valued innovation and creativity, unfortunately once there, he and his Apple team attempted to cram it down the throat of a culture that was locked into “discount coupons” and low margins. The culture clash was a recipe for disaster.

As a result, the brand continues to drift with no higher purpose or true north that people care about. JC Penney is a lost brand – no longer knowing who it is or why it matters. Consequently, in the minds of shoppers, the brand offers no compelling idea of value whatsoever regardless of the merchandising mix or the price point.

True north is the sacred reason the brand exists in the first place. True north is not subject to the whims of the marketplace. To transform an iconic brand, the transformation begins from the inside out, not the other way around.

Iconic brands are typecast.

Just like an aging child actor, brands will always be who and what customers remember them to be. Iconic brands are typecast. By its current generation of shoppers, JC Penney is and always will be a discount department store brand. A Chevy, no matter how elegantly designed and engineered, will never be perceived at parity with a BMW. You can only stretch brand relevance so far. This is especially true for iconic brands. For JC Penney, moving up market in an Apple-esque manner has proved to be a steep ascent indeed.

Once JC Penney abruptly dropped its beloved coupons, legacy customers abandoned the brand in droves, while the up market customers didn’t easily buy into the idea of an up market JC Penney store – with devastating effects on the business. Perhaps a sub brand strategy would have been more effective means to leverage the larger up market transformation of the parent brand.

Be committed no matter what.

Revolutions are bloody and expensive. Change is painful and takes a long time. As previously mentioned, the ousted CEO was on the job for less than 18 months. That’s hardly any time at all considering the physical scale of the business. Big old boats take longer to turn around. The new store design and merchandising was only recently beginning to see the light of day in a few JC Penney stores. Whatever merchandising and product mix specifics were underway, the brand owners were not fully committed to the transformation of this iconic brand into something greater and more relevant to 21st century shoppers.

When the process of transformation eventually became too painful, brand owners became frightened – so much so, they brought back the former CEO who represented a safer option of the old JC Penney.

To have a chance at success (not a guarantee), brand owners must be all in over the long and uncertain road of transformation. This idea doesn’t sit well with owners whose primary concern is the preservation and rapid growth of their investment capital rather than the creation of highly valued brand.

Publisher’s Note: We sincerely invite the senior marketer of JC Penney to join us, Free of Charge at The Un-Conference: 360° of Brand Strategy for a Changing World. Value creation will be an underpinning theme and one that all brands must master to thrive. Contact Derrick Daye.

Sponsored byThe Brand Storytelling Workshop

Join us at The Un-Conference: 360° of Brand Strategy for a Changing World
Featuring John Sculley May 16-17, 2013 in San Diego, California
A unique, competitive-learning workshop limited to 100 participants
As in the marketplace — some will win, some will lose, All will learn

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1 Comment

Chuck Kent
Twitter:
on July 24th, 2013 said

Curious to know if you saw this morning’s NBC Today Show feature on fake sales at JC Penny (artificially inflating prices and then marking them down). Seems to speak to your notion of a lost brand… lost long before Ron Johnson came in. I think that even before brand owners address the question of ‘What is our true north?,” (which tends to get misinterpreted as “Where do we want to get” rather than “What’s our true path for our customer journey”) they need to address “What is our simple truth?” And if the truth is that your customers can’t trust you, it doesn’t matter which direction you head or who leads the charge.

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