Why Trying To Apple-fy Your Brand Won't Work

As JCPenney CEO Ron Johnson has discovered, trying to force a brand into an Apple-shaped mold doesn't ensure success.

Rule #1 in trying to generate a successful business is to realize you need a unique and appealing benefit for the customer. Ideally, the benefit is supported by a sustainable advantage that delivers superior value versus your competition.

Sometimes the advantage comes from the product itself. Advantage can also be generated via ease-of-use or accessibility. Additionally, there are times when the advantage is created via the image of the brand; not necessarily the product (e.g., high-end cosmetics and clothing).

We’ve had a recent example of a leader of a high-profile organization who obviously ignored a lot of this kind of thinking. For a very long time, up until a year ago, JCPenney was known as a retail outlet that offered merchandise that was a cut above the mass merchandisers like Walmart but provided real value and supported that benefit promise by very frequent sales of items of good quality. Among department stores, its uniqueness was that it was positioned below Macy’s in terms of status, but above the mass merchandisers so it occupied a very appealing position over the years.

On the other hand, JCPenney stagnated in the 2009-2011 period with competition closing in on them; Target from below and Macy’s from above. Hence, the board decided to bring in a new CEO, Ron Johnson, previously of Apple.

At Apple, Johnson’s claim to fame was being the father of the Apple retail outlets which were a raging success, selling leading-edge, premium priced products in a very simple but contemporary setting. Unfortunately, when he arrived at JCPenney, he immediately concluded he needed to turn JCPenney stores into something akin to an Apple store. He eliminated all notion of a sale and secondly, began forming independent boutique’s within each JCPenney store. Each of these boutiques was focused on a fairly well-known name brand such as Levi’s.

This rapid and dramatic change at JCPenney totally baffled JCPenney’s loyal customers. He was trying to take JCPenney upscale while their shoppers wanted a respectable but low-price alternative that offered some terrific deals each and every week.

As you’ve been reading, the results have been a major catastrophe for JCPenney. Sales are down over $4.0 billion versus a year ago and the stock price is off 55%. While the holiday season is typically a major boost for retailers, for JCPenney, same-store sales for the recent holiday season declined 32% versus a year ago.

Believe it or not, Johnson continues to believe his strategy makes great intellectual sense. While he has recently moved to reinstate some couponing and weekly sales, he remains committed to the in-store boutiques. Rumors are now circulating that the JCPenney board may be on the verge of firing Johnson.

So what’s the learning from all of this? There are three key points that I take away:

1. Your strategic benefit needs to be unique and appealing.
There is no doubt that a year ago, JCPenney was in trouble. Since retailing is a business where you can isolate a few stores in a small geography and test your way to a successful new benefit that provides uniqueness and appeal, it is dead obvious that Johnson should have tested his ideas. He risked everything by immediately launching a national plan that made no sense to consumers.

2. Changing strategy on an established brand is very risky.
No matter what the category, if your current strategy is well known to consumers, it is a delicate job to move those consumers to a new way of thinking about your proposition. Ideas need to be tested thoroughly and most importantly, you need to investigate the potential loss of consumers just as importantly as you test for the gain of picking up new consumers. Obviously you want to minimize your losses and maximize your gains.

3. Keep it simple.
Strong strategy/benefit statements are one sentence and describe very clearly the advantages you will provide that distinguishes you from your competition. The benefit needs to be unique and appealing, and very simple. In the case of our JCPenney example, it’s not quite clear what the new consumer benefit was that Johnson thought he was delivering to consumers.

The principles above are not complicated. On the other hand, what is hard is to realize that with each new business you need to humbly start at ground zero and objectively apply these principles to the new situation.

—Bob Herbold is a retired chief operating officer of Microsoft and managing director of The Herbold Group, and author of "What's Holding You Back? Ten Bold Steps That Define Gutsy Leaders" (Wiley/Jossey-Bass). Bob blogs about leadership at bobherbold.com.

[Image: Flickr user Nick Wheeler]

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3 Comments

  • Jacquelinorlando

    I have been observing the change in the Penney's near me and I really like what I am seeing.  I like the every day fair pricing so I don't always have to get there for a sale price.  There is a mixture of marked down goods and a constant stream of new fresh goods.  The displays are appealing.  Last Saturday there was a line at the checkout registers and the sales clerks said that sails have been greatly increasing since the first of the year.

  • Alex M

    "Believe it or not, Johnson continues to believe his strategy makes great intellectual sense. While he has recently moved to reinstate some couponing and weekly sales, he remains committed to the in-store boutiques."

    Believe it or not, the in-store botiques have performed well - even with comparable merchandise to the year ago period and traffic off materially. As with many in the financial press, you've concluded that the pricing debacle (the real issue) and the merchandising/presentation strategy are one in the same; they are not.

    JCP has a long way to go in driving traffic, but we're starting to see a return to sales (two in the past two weeks, with the current one being $10 off $25); the company is working to transform home, where sales have been abysmal - well before Johnson set foot in the door. I'll be the first to admit the pricing strategy failed miserably, and management is tweaking it (could certainly argue they should move faster); remaining committed to in-store shops makes perfect sense considering the financial success of the early launches.

  • John McHugh

    I think it's probably a little too soon to declare Ron Johnson's plan for JCP a disaster. If there's one thing about organizations going through massive change (such as JCP) it's that things always get worse before they get better. The knee jerk reaction from the street is that this is a failure, but I think the long term view will prove to be quite the opposite when it's all said and done.

    Has anyone actually been to one of the new JCPenney stores? They're actually pretty great.