JC Penney has announced the end of its sales, at least as we know them. No longer will JC Penney endlessly have weekly, bi-weekly, or one day sales. The first steps of Ron Johnson, the company’s new chief executive, are to get rid of the nonstop promotions at the store and move to three kinds of pricing: everyday, monthly specials, and clearance.
Penneys has been running commercials which feature frustrated customers missing big sales and screaming, “No!” The commercial ends with “Enough. Is. Enough” written exactly that way across the screen.
Long ago, big chain retailers, including Penneys, began an advertising strategy of one-upmanship. They competed for customers by offering the biggest discounts and the wildest sales. They taught customers to wait for the next sale before buying. They trained customers to feel good only if items were purchased at a reduced price. Their efforts have worked.
Today many customers don’t want to buy anything at regular prices from these stores. Doing so makes them feel uncomfortable. If they buy an item at regular price now, they are certain that it will be on sale next week. Thus, they wait for a sale at most big chain retailers.
The exception is Walmart. Walmart has sold its customers on the concept of everyday low prices. Walmart shoppers are convinced that they are getting the best deal any day that they shop the store. After all, Walmart has price drops. Customers think that Walmart management is watching out to give its shoppers the best price everyday. They think Walmart customers do not need to wait for a sale.
Walmart management found the weaknesses of the one-upmanship strategy. They recognized that any store can always have a lower sale price on a temporary basis. They saw that it takes a great deal of expense in labor and advertising to maintain this strategy. Most importantly, they realized that this strategy loses customer’s everyday business.
Walmart management did not want customers to wait for a sale to buy. They wanted customers to come to Walmart everyday to purchase. They wanted customers to feel comfortable with the price on an item. They wanted customers to buy everything at Walmart instead of shopping around for the best deal.
Customers have been trained by Walmart that they save money everyday shopping there.
As for the sales strategy, today’s consumers are suspicious of sales. They are tired of hearing about the biggest sale, the last big sale of the year, or the sale to end all sales. Every week they are subjected to more sales. They know it’s a game.
Today’s consumers are more interested in getting an item that meets their needs. They wants the item to do what they want it to do. They don’t want to use their time searching for the best price. If they are interested in price options, they can check online.
For profitability, it’s a good time for J C Penney to change its strategy.
Are you copying the big chains in your promotional strategy? If so, check out the profitability of that strategy. Giving away less leads to more profitable customers.
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