Penney didn't fail to listen to its customers. They, like all of us, wanted to hear the truth. The company failed to deliver on it, and now it has announced that it'll go back to lying ... because that's what customers want?
There's an old saying that "retail is detail," and that's where the company failed. It did loads of things wrong, from trying to make the stores look like Targets and declaring Apple-like pricing, to creating advertising and merchandising that was visually lifestyle-rich, and utterly bereft of any substance or utility.
But Penney heard its customers on the issue of sales.
The inanity of retail pricing is no secret, especially in women's clothing, and it's inculcated generations of consumers with suspicion and distrust. Sale pricing isn't as much a benefit as a requirement that allows people to buy merchandise for what it's actually worth, or closer to it, since the math behind retail costs is a well kept secret.
Consumers like sales because they don't like regular pricing. We've all learned to wait for sales when possible, and rue the days we miss them. I have friends who have informally mapped the discount schedules at their favorite retailers (what a great idea for an app, actually). They turn it into a game. But to believe that customers want sales as a guide to determining retail strategy is to get the facts backwards. The sales are what cause customers to need a guide in the first place.
JC Penney set out to change this dynamic. The idea of a no-sale store is incredibly powerful. It's a riff on the concept of "everyday low prices," which we know resonates with people, and it is well-positioned for a mobile world in which price comparisons are constant and utterly transparent. Brands that can present prices that are explained and supported with facts and experience can usually maintain them; it's why many luxury brands have succeeded over the years. Expensive stuff was actually made and/or serviced better. You don't need to reduce prices when you communicate truth with your regular pricing.
Penney got it right when it was founded over a hundred years ago as a store called "The Golden Rule." Fairness, honesty and truthfulness were central to its original purpose. But when it announced its re-embrace of those core values a year and a half ago, things started going horribly wrong. It didn't walk the talk, instead announcing the no-sale idea without proving by example what it meant.
Sure, merchandise assortments changed. Stores started looking different. Its communications got all high-concept. But it never delivered on the facts and actions to substantiate its new value proposition. Without sales or other promotions, it came across as if JC Penney was charging more for giving its customers less.
To say now that it failed to listen to them is just not true. Companies have always listened to customers, albeit imperfectly. The challenge is to decipher what they're actually saying, since customers can express desires and opinions, but not how to fulfill those needs. The crowd can't describe things that haven't been offered or suggested to it, and therefore can't dictate the details of business strategy. Customer feedback is vital, but so are judgment and ability.
That's the job of visionary leaders. No customer told Akio Morita what a Walkman should look like, specified the size of hamburger standards to Ray Kroc, or hinted to Coco Chanel that pants would look good on women. Visionary leaders understand needs, and then invent new ways to meet them. This is where CEO Ron Johnson failed. He gave Penney's customers a wonderful big picture answer without delivering any of the details that would make it meaningful. We'll never know if the no-sale strategy could have worked, because the company failed so miserably in its execution.
To celebrate its return to the bad 'ol days of unreasonable pricing and promotional stunts as a victory for customers is to misunderstand this history. And, by the looks of the latest apology ad, Penney is already well on its way to repeating it.