What JC Penney Can Teach Internet Marketers

It's been said that a smart person learns from their own mistakes, but a brilliant person learns from other people's mistakes. JC Penney has been in the news recently for the drastic changes it's made in marketing, the inner turmoil that resulted from a lack of communication to staff, falling sales and now the firing of the CEO and rehiring of his predecessor.

Just as you can reverse engineer success, you can also reverse engineer failure to see what went wrong and what you can learn from it. Here's what happened over the past 18 months at JC Penney and what we can learn from it:

1. JC Penney alienated their own customer base. No, we're not referring to the hiring of Ellen Degeneres as their spokesperson. Frankly, that may be the one bold move they made that paid off in their favor, considering the goodwill and positive publicity they received for hiring the much beloved comedianne and talk show host.

Rather, we're referring to ditching their core customer base of middle-class adults 30 and older in favor of both younger and more upscale markets. The younger market has their own outlets they're loyal to, so why would they want to switch? That's a question JC Penney failed to answer. Worse yet, the younger market already thought of JC Penney as “the place where their parents shop,” and thus not where they wanted to spend their money. And worst of all, loyal JC Penney customers felt betrayed and alienated by the new targeting of a more upscale and urban market who might be willing to pay more – they just didn't want to do it at JC Penney.

Lesson learned: Do not alienate your own loyal customer base in search of a new market that doesn't want you. Know who your customers are and what they want and give it to them. It's like that old adage – dance with the one who brought you, or you'll end up dancing alone.

2. JC Penney ditched sales in favor of “everyday low prices.” As far as we know, there is only one big store that has made this marketing model work, and that's Walmart. Even Walmart's closest rivals like Target hold weekly sales.

JC Penney might have learned from other's mistakes. In 1989 Sears implemented a “no sales – everyday low prices” policy. Initial results were good but quickly tapered off. People no longer came into Sears to grab something while it was on sale and maybe buy other items while they were there. Without an incentive to visit the store immediately, it was easier to put purchases off – many times indefinitely.

We as marketers know this: If you place something on limited quantity or on sale, it sells. In fact the biggest day for conversions tends to be the last day of a sale, and often the last hours of that last day. This is also why we hold dimesales, because it gets people off the fence and making a purchase.

Retail is slightly different than selling a downloadable product. After all, if we say our product is on sale until Friday at 5 pm, the customer knows they can get that exact product at 4:59pm on Friday without problem. But in retail, stores run out of the size or color of a particular item, so because of the scarcity factor shoppers tend to purchase as much at the beginning of a sale as they do at the end.

Those sales get customers in the door and purchasing other things. No sale? No urgency. They can buy it next week, but often it gets forgotten instead.

Lesson learned: No matter what you are selling, sales work. They convert. They get people off the pot and taking action. It might not be the way we would like the world to work, but the fact is it's human nature to procrastinate, especially when parting with money. That's why dimesales, incentives, limited quantities and deadlines work so well, and one of the reasons why JC Penney's store revenues are down a mind-boggling 25%.

3. When it was crystal clear that the “no sales” model wasn't working, they used a bandaid instead of a chopping block. The smart thing to do would have been for the CEO to publicly slap himself upside the head and admit the “no sales” model wasn't working. Instead, they added a mix of “sales” with their “no sales” policy. It's hard to imagine anything more confusing to customers, and with confusion comes inaction.

Lesson learned: When you make a mistake – and you will – admit it and fix it, as quickly as possible. Don't try to hide the mistake, don't try to make it look like you knew what you were doing all along. People aren't stupid. And most of all, don't confuse your customers or you won't have customers for long.

4. To make matter worse, JC Penney discontinued many of its best selling products because they wanted to go higher end. WHAT??? There is simply no way to justify discontinuing products customers want so that you can project a new store image that customers obviously don't want. This is skewed thinking at best and just plain nuts when it comes to making customers happy and enjoying a healthy bottom line.

Lesson learned: Don't be an idiot. If you have a product that is selling well, don't pull it. Period.

5. JC Penney's web sales dropped 33% in 2012. That's one THIRD. Combine that with the 25% drop experienced in store sales and it's catastrophic. Can the company rebound? Possibly. But as Albert Einstein was fond of saying, “You cannot fix a problem with the same level of mind that created it.” Sales were already down when JC Penney fired CEO Mike Ullman and hired Ron Johnson as his replacement. And so now they have fired Ron Johnson and hired someone brand new, right?

Wrong. They hired back Ullman. Why? “Because he knows the people in JC Penney.” Sure, so does everyone already working there, and so far none of them have been able to help steer this ship back on course. So again: Why hire back the same CEO who was at the helm at the beginning of JC Penney's fall? Perhaps they were thinking of Steve Jobs, who was fired from his own company and then rehired when Apple was in the dumper. Sorry, but Ullman is no Jobs. When he stepped down in 2011 JC Penney was already struggling and in trouble. There simply is no good reason for bringing Ullman back, other than it was the easy way to go.

Lesson learned: Forget easy. Sometimes you have to make the hard decisions. Sometimes you have to be bold, and when that doesn't work, you have to be bold again. Hiring Johnson from Apple was indeed bold, but it didn't work out. So instead of looking in a new direction, JC Penney chose to look backwards. Perhaps that's somehow fitting for a 100 year old company, but it in the real world of business and marketing it simply does not make sense.

Never try to fix a problem using the same thinking that got you into the problem in the first place. Mastermind. Get some fresh ideas and perspectives. Get a coach. Do whatever it takes. Continue to look forward, not cling to your past in a last desperate attempt to stay afloat, because at best that's all you'll do – barely stay afloat.