Ron Johnson was central to the creation and success of Apple’s retail stores. It’s no surprise then that JC Penney would hire him to fix its broken retail strategy in 2011. He replaced former CEO, Mike Ullman, and after just 2 years on the job, the company fired him and brought Mike back. Many of his decisions were aimed at improving customer experience, and though they had been successful at Apple, they just didn’t seem to work for JC Penney.
What went wrong? We’ve got a few ideas. Four, to be exact. But more important than the mistakes themselves are the lessons we can learn from them.
Lesson #1: Know Thy Customers
Johnson implemented a ban on discounts. He believed in creating a fun retail experience that made people want to show up in stores and shop, so he got rid of coupons in favor of full-but-fairer pricing. Sound familiar? This is very similar to the Apple customer experience model. The problem with this strategy is that JC Penney customers were nothing like Apple customers. They really liked coupons. In an effort to target a younger audience, Johnson ended up alienating the company’s older customers who were used to heavy discounting.
The first lesson here is, know your customers. Understand their wants, needs and expectations from your brand. Customer loyalty is what keeps your business growing, so it’s important to target new customers in ways that don’t alienate existing ones. Perhaps a gradual move toward fewer coupons would have been better than an all-out ban right from the start. Johnson did recognize that, and went back on the decision later, but unfortunately it was it too late.
Lesson #2: Know Thyself
Johnson introduced the company’s third logo in 3 years. Constant rebranding is very confusing for customers and causes them to lose brand familiarity. As a result of this decision, many of JCP’s former customers began turning to a competitor – Macy’s.
JC Penney also shocked its customers with what seemed like an endorsement of homosexuality in a Mother’s Day ad campaign that featured two moms and later, a Father’s Day ad with two dads. The company received a lot of flack for this failed experiment because it was such a huge departure from JCP’s longstanding values.
The moral of the story is, know who you are. Understanding and staying true to your brand culture is essential to attracting and retaining a solid, loyal customer base. Yes, it’s okay to innovate, but do so in a way that lets you learn from smaller failures. And in case you’re wondering what that means…
Lesson #3: Leave room for small failures
Johnson didn’t test the pricing plan with shoppers. Instead, he took a strong stance against discounting so that he could get newer brands on board, but his drive toward quick results completely backfired. He made huge changes, all at once, so that any successes or failures associated with them would be proportional in size. As Forbes reports, there was no middle ground:
Within weeks of his January 2012 presentation to investors about the future of Penney, the company had new advertising, new pricing and a new logo, and was announcing a new fleet of designers who would be creating collections for it.
Mr. Johnson put the plans on pricing, marketing and merchandise into place without doing any small-scale tests.
The lesson here is that it’s okay to fail. But small failures are much better – and easier to bounce back from – than big ones. Johnson’s big failures were so big, he had a hard time regaining customer loyalty even after admitting he was wrong. Without customer loyalty, Johnson had little ground to stand on, and the board was forced to find a replacement.
Lesson #4: Know – and engage – your employees.
Johnson fired 10% of his corporate staff in April 2012, including all of the top executives and thousands of middle managers. He also got rid of commissions for retail employees, which, no doubt, hurt morale.
Firing top execs all in one sweep doesn’t leave room for you to build trust with existing employees. Johnson no longer had the networks of established executives to lean on. Though he was able to change the stagnant culture of the company by firing old leaders and replacing them with new ones, he lost his potential to form alliances with those who understand the existing culture and could support him in the changes he wanted to make.
Painful lessons from JC Penney
Though Apple is a great example of a company that creates awesome customer experiences, it’s not a one-size-fits-all model for all companies. Johnson’s biggest mistake was failing to understand the JC Penney culture – its brand, its customers and its people. Unfortunately for him, the result was negative, but fortunately for the rest of us, there are quite a few positive lessons to take home.
