In gut we trust

A couple of weeks ago I had the opportunity to hear Ron Johnson–JC Penney’s new CEO–present an outline of his transformational strategy. Short version: take a heaping tablespoon of Apple, add a dash of Target, fire the deadwood, stir, and then… a miracle happens.

To be fair, there were plenty of bold, inspiring new ideas presented–and I absolutely agree that Penney’s needs much more than a modest upgrade.

But the scariest thing was Johnson’s insistence that it was sensible to do zero consumer research and eschew any real customer analysis (in fact, one of the first things he did when he took the helm was to blow up both the strategy and the customer relationship management groups). He glibly mentioned the collective experience of his new hires and said that was sufficient to decide on the new strategy.

While reporting dismal quarterly results yesterday, Johnson and team said they were surprised how hard it has been for their new strategies to take hold and by the degree of the corresponding sales decline. Really? They were only surprised because they failed to do the analysis before they boldly swung for the fences.

Consumer research and robust customer data analytics are not the be all, end all.  As the name of this blog suggests: customer-centricity is both an art and a science.

Of course, history shows us that consumers are often not very helpful in reacting to innovative new products or programs. But history also shows us that some of the most successful brands have embraced deep customer insight and competing on analytics not only as a foundational element of their strategy, but as a major source of competitive advantage.

You may be able to thrive on gut feel when you have a superior product line, little direct competition and a simple operating model. But in most businesses, customer-centricity means developing deep customer insight, robust analytic capabilities, actionable segmentation schemes and a commitment to treat different customers differently.

For Penney’s leadership it’s time to get humble, admit you have a problem and take the steps to get back on track.


15 thoughts on “In gut we trust

  1. The Steve Jobs culture of telling the consumer what they want before they want it may have applied in a visionary technology company, but it seems to have been proven less effective in the fashion industry. Perhaps if #JCP launches the iShirt and iJean, they will find more success?

  2. As previously discussed Apple products attracted the customer and drove retail business. Traditional retailers have to know and attract the consumer to sell the retail products. Although success was hoped for there were no surprises with JCP/Johnson. It appears prior Apple success was hoped to drive JCP….but it was Apples and Penneys!

  3. Sometimes the board just falls in love with the wrong tool. An aging softline department store, led by a technology retail guru? Wrong tool? Only time will tell.

  4. Steve, thanks for this. Hearing it in first person is very helpful. As a very loyal JCP customer for many years – for myself, my wife and children – apparel, uniforms, bath/home – the shocking moves, the sheer hubris is truly amazing. It is one thing to be a change agent – for that I give the new management team great credit. To transform retail, again kudos for trying something different. Forget the references to Apple. It matters not. The day Johnson took the job it is all about JCP – the stores, the associates and valued customers. All three are getting totally messed up and will continue through Back to School and with poor results, change will happen – and swiftly.

  5. Your analysis is spot on as it has been previously. In a discount driven business, JCP now appears lost without something to drive customers to the store. As you stated, they did no research to gauge what effect their changes would have on the business.

    Worse still has been their communications and advertising strategies, if you want to call them that. Their commercials have been vapid – first the cheeky Ellen ads, and now their lame Target-esque ads announcing that it is May – as if we should suddenly say, “Oh, it’s May, Spring is in the air, I must go to JC Penney.”

    It’s as if JCP assumed that the public understood (by osmosis perhaps) that JCP overnight has transformed itself into the Apple of retailing, with a side of Target thrown in. Therefore JCP can put out some lame copycat ads on the order of Target and Macy’s and the whole world will beat down their doors and throw cash at them.

    Frankly, I’m still stuck on the lameness and awful execution of their “town square” model of the infamous store within a store (or concentric circles of Hell as I like to call it). Sadder still is the fact that Target has executed the strategy better than JCP by creating Apple Stores within select Target stores. So, Johnson and his whole cadre of executive VPs (EVPs) have been outflanked by Target on one of the few stores within a store that anyone might actually care about.

    Johnson’s JCP strategy is basically a textbook example of hubris – thus your call for humility. Perhaps Johnson and his small army of EVPs can huddle together and ask themselves why the JCP stock, which stock analyst had called to be a $40 plus stock, is now sub $30. But, that will require them to listen to the opinion of others, when, thus far, they seem to believe they know it all.

  6. I couldn’t agree more – retailers have to listen to their shoppers. Our latest analysis for the Women’s Clothing sector found that while there seemed to be short-term interest from consumers in JCP’s new approach, Kohl’s and Macy’s have been much more successful in building customer share in this category:

  7. Yep, guts can be ruts. Challenging what we think we know is nowhere more critical than in retail, and at no time more essential than today. Always appreciate your thoughts Steve.

  8. Lot’s of great points. I’d only add you can trust your gut for ideas, you can trust your customers to try to tell you how they would respond to that idea when asked, but you better pilot the heck out of that idea before rolling out nationally. I an pilot, weak customer messaging gets strengthened, executional issues get discovered and improved and sales/margin impacts get understood so there aren’t surprises in the market.

  9. I agree with much of what you say. After all, many shoppers justify their expenditures by saying “Look how much I saved”…which is easy to calculate when items are marked down repeatedly as is the case with traditional, promotional pricing. However, hindsight is always 20/20, and I would have been more impressed had you “called your shot” so to speak right after you heard Ron Johnson’s initial presentation two weeks ago. Would you have written the same blog entry on May 16 if JCP had blown away earnings estimates? Or would you have suggested that Johnson was a genius and what worked at Apple can work anywhere. Obviously, we will never know.

    1. I’ve predicted this would not pull the results that would even be judged moderately successful from the weekend just prior to 2.1.12 when I shopped the store. No hindsight or Monday morning QB here. My point was it is that much more insightful to “hear” what Mr. Johnson had to say – further reinforces how wrongheaded this entire approach has been to date. Killing strategy, crm and not leveraging research just further compounds it.

  10. The pricing wasn’t the problem…They had to run coupons and discounts because the product wasn’t worth it. Apple works because you have compelling product and customer service. Target works because you have basics mixed with a shot of compelling fashion deliveries(for their channel), in a nicer store environment than their main competitor(Walmart). JCP has neither, the product sucks and the stores are worse. Yes the stores are cleaner, but really, they were such a disaster that the act of simply straitening them up makes a world of difference. They need compelling product, They need merchants who can buy it and merchants who can develop it. They have yet to tackle that part. Getting rid of those who were responsible for that mess was a good start. Bringing in a top notch talent as a Men’s fashion director was an excellent move. They now need to bring in the merchants who will lead, perform and execute…that they still not have done.

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