Thursday May 09, 2013

How jcpenney Learned Some Tough Lessons on CX

In order to provide exceptional customer experiences, you must first understand what exceptional customer experience is. But it doesn't work the other way around. Understanding CX does not automatically mean you will be able to deliver. There are no foolproof methods to understanding what consumers want and expect, much less how to provide these things in a way that will garner positive reactions from your customers. A recent example is the department-store retailer jcpenney (JCP). Recently, as jcpenney has sought to update its brand and provide better customer experiences, they've suffered massive losses and are still struggling to find their footing.

jcpenney storefront

Here's a timeline of recent events at jcpenney:

June 2011 Ron Johnson, former Senior VP of Retail Operations at Apple, is named the next CEO of jcpenney, effective November 2011 JCP stock at 35.37 on the day of the announcement
October 2011 Michael Francis, former CMO and EVP of Target, is named president of jcpenney with high hopes that he will turn around the brand JCP stock at 26.12
November 2011 CEO Mike Ullman is replaced by Ron Johnson JCP stock at 31.71 on Johnson's first day
February 2012

Johnson eliminates coupons and endless sales in favor of a new pricing strategy, permanently lowering product prices by up to 40%

Johnson also announces a plan to build mini stores within jcpenney to provide a town-square like feel to the department store

JCP stock hits its peak during Johnson's tenure at 43.13 per share
May 2012 JCP reports $163 million loss in sales during its first quarter under Johnson's new pricing strategy Stock drops overnight from 33.32 to 26.75
June 2012 Francis is let go from jcpenney, citing his marketing messages which failed to resonate with customers. Johnson begins to oversee marketing and merchandising himself. Stocks dip to 24.33
October 2012 JCP steps away from its new 'no coupon' policy by sending out a $10 'gift card' to customers via e-mail JCP stock creeps up to 26.18
November 2012 JCP reports a loss of $123 million in the third quarter (27% drop in sales) Stocks reach their lowest point since March 2009, now down to 16.28
February 2013 JCP reports fourth quarter sales are 28.4% lower than in the previous year. Fourth quarter losses are $552 million. February's highest stock price: 22.47. Six days later, following the announcement: 17.57.
April 2013 Johnson let go from JCP, to be replaced by his predecessor, former CEO Mike Ullman Stocks reach a low of 13.93. JCP stock has not been so low since February 2001.


JCP stock closed yesterday at a new peak since Johnson's departure, at 17.61.

So what went wrong after Johnson stepped in? JCP was clearly looking for a change, and Johnson had a great track record. He innovated the Apple retail experience by creating the Genius Bar and eliminating traditional checkout lines, in favor of roaming salespeople with mobile checkout on their iPhones. These changes made the Apple store a fun place to hang out, bringing in higher traffic, and increasing their annual retail sales in brick-and-mortar stores per square foot to about $4406, outpacing even Tiffany and Coach. There are no easy answers to the question of what went wrong, just mountains of speculation.

During the effort to bring in a new generation of customers, jcpenney's old customers felt like they were being pushed out. I represent part of the new target market. I remember noticing the new ads put out under Johnson's tenure, and liking what I saw. But there was a disconnect, because it didn't bring me into the store. Had all of us new shoppers been drawn in en masse, there might have been a different end to Johnson's story.

Following the JCP story since Johnson's departure has made me realize that I might have liked the new JCP. The first time I stepped into a jcpenney store since my childhood was after I knew I'd be writing this article. I noticed one of Johnson's stores within the store, and thought it brought a fresh look to the universal department-store shopping experience. As much as I enjoy the occasional shopping trip, I can't stand the clutter of many stores. At jcpenney I enjoyed stepping into the mini-Sephora, without tripping over racks of clothing to find the product I was looking for.

Sephora mini-store inside JCP

As for Johnson's new pricing structure, it seemed logical to me. I understand that paying lower everyday prices can save me more in the long-run than getting a discount on a marked-up item. Plus I don't have the patience of the mega-couponers to figure out when my coupon will be combined with in-store promotions to provide me the deepest discount.

But I don't share the mindset of the traditional JCP shopper, and that's where many people think Johnson went wrong. For the bargain hunters, the more products to sift through, the more thrilling the chase. Once they find that item and combine all of their discounts, it's a great personal achievement. Their adrenaline gets pumping to see how much they can save. So even if they walked away during Johnson's tenure paying the same price for an item as they would hvae before, some of the magic was lost in their shopping experience. They didn't leave the store on the same high, and that didn't leave them wanting to come back for more.

The first customer experience lesson to learn here is understanding who your customers are and what they want. And the second lesson is: what works for one brand might not work for another.

Under Ullman's second go-around as CEO, JCP has launched a new ad-campaign, publicly apologizing to customers for the ill-received changes over the past 18 months and asking them to return to the store. The ad promises that JCP is listening to its customers, with the implication that new changes will be brought about to reflect customers' wants and needs, including reverting back to some of JCP's old policies.

The ad above was posted to their Facebook page and has received greater than 56,700 likes, over 3700 shares, and nearly 19,500 comments. JCP has done a great job of responding to each initial poster's comment, although some of the longer threads might deserve further attention. Understandably there are mixed feelings throughout these comments. Some of the old shoppers are still upset by the changes to JCP stores. Some of the new customers are upset to see the low prices they became accustomed to under Johnson's new pricing strategy shoot back up in preparation for the return to deep discounting. But many customers are sharing positive comments about some of the changes Johnson initiated, while others are happy to see old policies coming back.

St. Johns Bay brand brought back to JCPHere's proof that jcpenney really is listening. Several comments asked for the St. John's Bay brand to be brought back to the store, and sure enough I found St. John's Bay on my recent shopping trip.

Now the pressure is really on. JCP has very publicly promised that they are listening to their customers. They are lucky to be getting a second chance from many of their loyal customers, and if jcpenney doesn't react to what they're hearing, this will likely be their last chance.

A third customer experience lesson to take away is that good intentions are not always enough. Johnson has the best intentions for jcpenney, but his execution missed the mark. Johnson publicly stated that he felt there wasn't enough time for market testing on his radical changes. Although JCP was expecting a rapid turnaround, if they had eased customers into these changes, or spent the time to test sample markets, I wonder what Johnson's title would be today. The final CX lesson from this example is to let your customers guide you. If they're not happy, it's frighteningly easy for them to walk out your door.

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Stock information from finance.yahoo.com

Other sources include WSJ.com, Forbes.com, FastCompany.com, and JCP (stores, website, Facebook, Twitter, YouTube, Pinterest)

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