JC PENNY FAIR & SQUARE PRICING STRATEGY Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

JC PENNY FAIR & SQUARE PRICING STRATEGY Case Solution

Problem Diagnosis

A new pricing scheme had been put in place by Ron Johnson, the CEO of JC Penny in February 2012. However, the first quarter results did not come up to expectations. Therefore, as he was getting near to release the results for the 2^nd quarter of 2012, he was considering a number of dramatic changes to be made to the brand image and the business model of the company. The central theme of the repositioning strategy was the switching away from the existing high low pricing strategy of the company. The objective behind the new pricing strategy was to simplify the shopping experience for the JC Penny customers and make it more straightforward for the customers of the company to shop.

This strategy was a massive shift from the current high low pricing strategy of the company. However, the first quarter results of 2012 had showed that the new strategy was not able to achieve that had been projected. Therefore, this case deals with the analysis of the fair and square pricing strategy and to evaluate that whether this strategy was misguided or it was simply the matter of execution of the strategy at the right time. Ron Johnson had to consider a number of things and he had also planned many changes to the new pricing scheme. This case emphasized on whether these changes were enough to save the company or not.

Case Analysis

A number of issues have been evaluated in order to develop a set of strategic alternatives for Ron Johnson. Finally, the recommended strategy has been designed for JC Penny.

Evaluation of Fair & Square Repositioning Strategy

The Fair and Square pricing strategy is a value based proposition where the objective of Ron Johnson is to capture more value from the everyday low prices (EDLP) and to simplify the shopping experience of the customers and change their perceptions of the stores about just thriving on the basis of promotions and deals. However, the issue with this strategy is that price is not a way to capture or create value from the customers. Another critical mistake made by Ron Johnson was that the company did not conduct a market research to grab an understanding of the customer perceptions about the new pricing strategy. The secondary efforts of this new pricing scheme consisted of the sales structure, store design, spokesperson and the logo. The new store design and the logo work out well for this strategy as they are literally square.

However, as the company would also be the number of the high end brands along with the specialty store layout which is quite confusing for the customers as the store also wants to keep the prices fairly low, thus it lowers the perceived value for the customers. The new sales structure is also ineffective as the management did not take any step to explain the sales team about their critical role of sales experts. As there has been no communication with the sales team therefore, they are sending the message to them that they are less valued whereas the success of this strategy depends on them. Another flaw in the strategy is the nonexistence of the promotion component of the marketing mix in the form of a spokesperson.

Ellen DeGeneres is a completely fresh face for the brand, therefore, without any market research it is quite difficult to say that whether the customers would trust or connect with Ellen to buy products under the new scheme. The spokesperson might have proved to be effective, but the lack of the communication with the customers about how the high low pricing method was complex and the new pricing scheme created value for them created confusions among the customers and less bargains, negative perceptions and higher prices for the customers......................

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JC PENNY FAIR & SQUARE PRICING STRATEGY Harvard Case Solution & Analysis