Memorandum

To: Board of Directors
JC Penny

From: 82-277-7355
CEO, JC Penny

Date: April 30th, 2015

Topic: JC Penny Action Plan

To my Board of Directors,

I am very excited and thankful for the opportunity to be apart of such a great company and I look forward to working with each of you as we strive to improve the JCP brand. There are a few topics that I would like to discuss in detail and I hope that my insights and recommendations will allow you to see the overall vision that I have for this company.

Recommendation: Historically, JC Penny was a brand that families had grown to know and love as they searched for good quality items at a reasonable price. Back then; the positioning statement of the company was on the dot as it targeted that core customer. After Ron Johnson introduced the new pricing strategy, the positioning statement began to change and it was no longer clear who our target customer was. People began to assume that because of the recently updated stores and the new brand introductions, JCP was abandoning its core customer and beginning to target the younger, and more stylish audience. Because of Johnson’s mistake, my goal is to help not only pick the right segment, but to pick that segment, stick with it, and then give them exactly what they are looking for and have been missing for the past couple years. I recommend that we return to our previous customer segment (the families on a budget) and bring back the idea that JCP is still a place that they can find high quality items for a discounted price. Additionally, I propose that we move more aggressively into online sales, allow our customers to use coupons again while offering additional sales, and to explore niche markets (such as maternity/Big&Tall).

Our customers: Because I believe that our target customer should once again be the families on a budget, I wanted to go into further depth as to why they previously shopped at JCP, why they stopped shopping at JCP, and which competitors they ended up going to because of Johnson’s changes. The exhibit on the following page lists each of these reasons.

Our main competitors, who are listed in the exhibit above, benefited a lot from the changes that were made to our company. While most continued with their high-low pricing strategy (Wal-Mart excluded), Johnson’s “Every Day Low Pricing” (EDLP) strategy failed to compete. Our customers no longer trusted that they were getting a good deal when shopping at our stores and did not want to take the time to “do the math” to see if JCP was really cheaper than their competitors. Our customers were more willing to purchase an item at a store such as Macy’s simply because there was a sign saying “50% off” rather than purchasing the same item at our store at an everyday low price. The EDLP Strategy no longer created a sense of urgency or excitement for our budget shoppers and being good quality at a low price was no longer affiliated with our brand.

While Johnson, believed that these new changes, and the changes that were made in stores would catch the attention of the younger crowd, the very opposite happened. The younger and stylish customer was used to JCP being a family name and didn’t adopt it as being the new place to shop. They knew JC Penny as a place that their mom or grandma did their shopping and where they could find something cheap. There may have been new brands introduced to the company and new pictures on the walls of skateboarders and pretty teens, but the younger generation was not convinced that the store was really for them.

Action Plan: In order to implement the changes mentioned and to invite our core customer back through our doors, not only will we need to reverse our strategy back to being high-low, a lot of market research will need to be done. While Johnson failed to ask what the customer wanted, we will dive deep into the customer’s wants and needs in order to perfect our store and then keep it that way. Exhibit 2