There's a lot of talk about JCP's failed pricing strategy, but is it really the pricing that's off?
In order for a pricing strategy to be effective, there needs to be congruency among four elements of that strategy. These elements are:
- A clear brand promise.
- Marketing messages that attract customers who desire what the brand offers.
- Sales scripts that communicate the value.
- Pricing that reflects the value.
Let's see how JCP stacks up against these.
Before you answer the following question, let's make sure that we're on the same page about what a brand promise is. To me it's the result the customer can expect from dealing with the business. In this case, JCP.
Can you tell me what JCPenney's brand promise is? Nor can I. I can surmise what it has historically been, but I can't say that I know what it is now. Why?
JCP's strategy, when first announced, was three-pronged:
1. Adding brands not available in other stores.
2. Modernizing the look of existing stores.
3. Establishing everyday prices.
The only part of the strategy that has been effected thus far is the everyday pricing. That does not give us, as consumers, a sense for where the company is headed, what offerings we can expect or what the 'new look' will be.
Without that information we have no way of knowing what JCP's brand promise is.
Further evidence of the lack of a clear brand promise is JCPenney's marketing messages. Their focus on a 'square deal' in their ads doesn't indicate that JCP's leadership has a clear direction. If they have one, then why are they continuing to focus on price (square deal) instead of the look and feel of the JCPenney experience?
JCP's leadership seems to overlook is the fact that we, consumers, don't buy anything unless we feel that we're getting a 'square deal.' When's the last time that you bought something knowing that you were being ripped off?
Having made these observations, I can't say that the poor quality of the marketing messages surprises me. How can the marketing folks be expected to create effective marketing messages without a clear brand promise? I do this for a living and I won't begin to develop marketing messages for my clients until we've established that brand promise.
Like the marketing messages it's nigh on impossible for sales clerks to distinguish the value for interested customers when they don't know the brand promise. How much easier would it be for them if they did have brands that couldn't be found elsewhere or if they could feel the difference in atmosphere of their surroundings?
Establishing pricing should be the last step in the process. Until you have a clear understanding of:
- Who your ideal customer is.
- What it is they value.
- How much they value it.
how can you possibly establish a price? All three of the above are developed when a company creates:
- A clear brand promise.
- Marketing messages to attract those customers.
- Sales scripts to support your brand and marketing claims.
... much less the pricing.
What can we learn from the JCP experience? Two things:
1. That there has to be congruency between the four elements of a pricing strategy - brand promise, marketing messages, sales scripts and pricing.
2. That there is a sequence - brand promise, marketing messages, sales scripts, then pricing - that must be followed in order for the strategy to be effective.
Unfortunately JCP's leadership violated both of these rules. If you want to avoid the pain and turmoil the folks at JCPenney are experiencing, make sure that you use the sequence outlined above in developing your pricing strategy. Your customers will reward you handsomely for the effort.
Dale Furtwengler is a professional speaker, author and business consultant. His latest book, "Pricing for Profit," is dedicated to helping organizations break the bonds of industry pricing.