Ellen Proves Key as JCP's No-Sale Tack Is Tested
Ms. DeGeneres has talked up the retailer everywhere, from TV spots to Twitter. On her own popular program she's done funny extended segments showing her working in JC Penney's optical department or making wardrobe suggestions in fitting rooms -- all with disastrous results. At a time when shoppers are balking at the retailer's fixed prices and lack of coupons, Ms. DeGeneres' endorsement appears to be, if not swaying consumers, at least educating them about the "new" JC Penney's.
And so far, it's not a message easily conveyed. Based on reports of weak traffic and a steady flow of negative Facebook comments, it's clear some consumers think they can no longer find a deal at JC Penney's. Value perception among mothers, a critical category, plummeted when the new strategy was introduced Feb. 1. According to YouGov BrandIndex, value-perception scores among women with children under 18 fell steadily through mid-March before rebounding dramatically. Scores are now slightly higher than they were on Feb. 1.
It may be a coincidence, but the bounce-back occurred around the same time Ms. DeGeneres featured the retailer on her March 19 show, visiting the Metairie, La., location where she had one of her first jobs. Four spots featuring Ms. DeGeneres explaining aspects of JC Penney's new approach have been in rotation since the Academy Awards on Feb. 26. A One Million Moms protest of the retailer over its partnership with the openly gay comic only served to further raise JC Penney's profile, as consumers applauded the company for sticking by Ms. DeGeneres.
"When brands hire us to figure out their celebrity strategy, we often hear ... what a coup it would be to get an "Ellen' segment," said David Schwab, VP at entertainment-marketing agency Octagon.
Daphne Avila, a JC Penney's spokeswoman, said that just two months into the strategy, education is still a primary focus, and Ms. DeGeneres has been an important asset.
"One of our biggest opportunities is making sure customers understand how JC Penney is changing," Ms. Avila said. "Because Ellen is so loved by millions, she's the perfect spokesperson."
However, according to a recent report from Deutsche Bank analyst Charles Grom, the retailer's revised pricing strategy has yet to resonate. He cited sluggish traffic and "overwhelmingly abundant" commentary about the missing coupons as the major factors.
Although JC Penney's prices are often lower than competitors Macy's and Kohl's, fixed prices make many customers feel they're overpaying. Deutsche Bank looked at a random assortment of 50 identical items across the retailers. The results: JC Penney was 9% cheaper than Macy's and 26% cheaper than Kohl's.
"The reality is shoppers like the "thrill of a bargain' even if they aren't really getting one, as our study reveals," Mr. Grom said.
In late March, JC Penney ran a half-page color ad in a number of regional newspapers. The ad highlighted the retailer's new pricing strategy, pointing out that a dress that would have been $39.99 with a discount and coupon last year costs $35 this year.
"We think the lack of promotional intensity is what the ad is attempting to address," said Michael Exstein, an analyst with Credit Suisse. "Promotions are used to create a sense of urgency in a retailer's offering, and this has been the element most lacking in JC Penney's "fair and square' pricing scheme."
"We're spending $80 million a month to help tell our story, so there will be some surprising elements that help reach our customer," Ms. Avila said. She would not say if similar ads would be used in the future.
JC Penney no longer reports monthly sales, though CEO Ron Johnson acknowledged that February sales were lower than a year earlier.
Still, Ms. Avila said JC Penney would be sticking to its guns and reiterating that 2012 is a year of "transformation" and education. "Of course there will be some questions, but we feel really committed to this strategy," she said.