While JC Penney’s New Pricing Strategy Leads to Criticism It Still May Work

Struggles at JC PenneyPoor JC Penney.  The once proud retailer has certainly struggled in the last few years leading many to wonder what the future holds.  The problems started a 2012 when a new management team was brought in to boost sagging sales.  Their big strategy was built on the relatively simple idea of convincing customers that JC Penney was a store that offered a wide variety of products at good prices.  Unfortunately, they faced an enormous hurdle as many customers only thought of JC Penney as a place to shop for bargains.  In other words, it is not a retailer that comes to mind for general shopping only when there are good deals.  So in an attempt to change customers? perception, JC Penney essentially abandoned sale pricing and instead tried to lure customers with advertising that promoted everyday low pricing and very few sales.

The result was a disaster.  A large percentage of their customer base, who considered themselves bargain hunters and enjoyed the feeling of believing they were getting a fantastic deal, stopped shopping and overall sales dropped dramatically.  This resulted in the new management team being fired.  A new management group entered and promptly returned to the old strategy of offering regular sales.

Yet today the bargains customers are perceiving may not what they seem.  As discussed in this Time story, the pricing strategy that entices customers through advertising by suggesting extremely large discounts may not actually be what it appears.  The reason has to do with product list price or, as the story calls it price anchoring, which is the product?s full price before any discounts.  But as discussed in this story, the list price set by JC Penney on some products may be outrageously high, and even much higher than recommended by the product?s manufacturer.  Even more, the hike in list price appears to be aimed at products that are likely to be in demand at certain times of the year, such as a bump up in jewelry pricing right before Valentine’s Day.

While this may appear to be unwelcome publicity for JC Penney, this strategy could work if consumers remain driven by the notion of obtaining a bargain.  Also, this strategy is by no means restricted to just JC Penney.  Several other retailers have also been accused of the doing the same.

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