JCPenney Discovers the Importance of Research the Hard Way

In revamping its pricing structure to a system of “month-long values,” JCPenney tried to erase the word “sale” from its vocabulary. Unfortunately for them, a lot of customers hang on to that word for dear life. As a result, the company is bringing back the word “sale” in the hopes of stopping the steep business decline it saw in the first quarter.

“We’re moving away from the word ‘month-long value’ because no one really understood that, to calling it what we intended to do, a sale,” said CEO Ron Johnson during an investor conference last week.

“They realized the word ‘sales’ drives consumers to stores,” added Alexander Chernev, an associate professor of marketing at Northwestern’s Kellogg School of Management.

The word “sale” also brings the shopper satisfaction, which is important when asking people to spend their money with you.

The recession has made bargain hunters of most of us. JCPenney’s point was that coupons and discounts don’t matter if you get a low price every day (with the occasional bonus thrown in). But for shoppers, the exhilaration of getting a deal is part of what makes a sale a retail event capable of sending shoppers into a state of madness. (See: Black Friday.)

JCPenney didn’t do their research first, which is a problem for any business program. Had it gotten a sense of what customers think, the retailer would’ve discovered that sales and coupons aren’t a blight.

But more than that, they would’ve seen that changing the customers perception about pricing is a mountain too high to climb. Economic times are tough and sales are everywhere.  We feel clever, more financially savvy, when we get a deal. That feeling is part of what makes handing over our hard-earned money not just OK, but enjoyable.

Anyways, shoppers were confused, the retailer admits it didn’t do a good job of explaining the pricing, and the “sale” is coming back to JCP after the huge February 1 unveiling of this pricing system and its marketing campaign. Investors and JCPenney execs are hoping that sales — to shoppers — come back as well.

[image: Bloomberg News]