JCP teaches a ‘fair and square’ lesson on pricing, marketing and image

PLANO, Texas — When JCPenney first announced its “fair and square” pricing strategy back in January with a great deal of hoopla and fanfare -- complete with a NYC media event attended by 700 people -- there was much hope that former Apple executive CEO Ron Johnson and then president Michael Francis, formerly at Target, would be able to bring some of their retail magic to the stagnant retailer.

Now, just six months later, following disappointing sales, a number of departures, including the firing of Francis, JCPenney reportedly is admitting defeat and rethinking its approach to pricing. Beginning Aug. 1, it will eliminate one of the tiers and bring back the word "clearance." To avoid the kind of confusion the company created last February when it changed pricing without properly communicating the new strategies with its customers, the company said it will tweak its advertising to make sure the changes are clear to consumers.

This change was long overdue, but even as recent as May, when the company reported a first-quarter adjusted net loss of $55 million or 25 cents per share and comps decline of 18.9%, Johnson was still standing by the fair and square model, and had this to say at the time:

"While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America's favorite store.  We fully expect that the bold and strategic changes we are making to our operations will result in improved profitability and sustainable growth over the long term."

Eventually Johnson had to admit defeat, and move forward with a new strategy that will hopefully resonate with consumers and investors.

Under the new system, Penney is keeping "Every Day" low prices that are consistently 40% lower than regular prices before the company eliminated sales. It also will keep periodic sales, but will label them as “clearance.” 

"We thought simplifying 590 unique sale events into three types of pricing would be easier, but it turns out that customers and others found the pricing a little confusing," he said. "Now we're going from 590 to 3 to 1: The first price is the right price."