When JCPenney announced it was hiring Apple Store executive Ron Johnson as its CEO in August, 2011 , its stock jumped 17.5 percent in one day. Now, 17 months and a disastrous 25 percent drop in sales later (28 percent in the most recent quarter), the retailer fired him. In the wake of his dismissal, stock prices spiked more than 10 percent from the lows it had fallen to, Marketing Daily’s Thom Forbes reports.
Johnson’s ouster is not surprising. What is, though, is that The Bureau, the advertising agency that faithfully executed his severely flawed strategic input, will be the next casualty, this May.
Equally surprising are the facts that Johnson’s successor will be his predecessor and that the man who played a major role in the store’s marketing downfall will continue to shape its future marketing.
Apple Stores and oranges
When Johnson moved to JCPenney, he apparently brought his Apple Store marketing model with him. But what works for a one-category brand that restricts outside reselling and fixes prices doesn’t work for a multi-category department store chain that competes with others, usually on price.
As Sarah Mahoney noted at MediaPost’s Marketing Daily,
Johnson joined Penney from Apple in November 2011, and embarked on an ambitious rebranding effort, renaming the company JCP. That included a shift away from its promotional pricing strategy to something he called “fair and square pricing” – no more sales, no more coupons. Despite a charming ad campaign starring comedian Ellen DeGeneris, shoppers stayed away in droves.
The store’s subsequent backtracking, including re-instituting sales and promotional events, [even reinstituting price-off coupons and calling them “gifts”] just gave consumers more to hate. “In a century where consumers are more marketers than fool[s], speak to each other before they speak to the brand, and have access to more digital information each day,” writes Robert Passikoff, president and founder of Brand Keys, in an email to Marketing Daily, the shift came across as a “strategy hoax” and an attempt to bamboozle its most devoted shoppers.
Walking the plank
Voltaire once said, “In this country it’s a good thing to kill an admiral every now and then to encourage the others.” That seems to sum up Johnson’s personnel policies regarding senior marketing executives.
Having brought former Target CMO Michael Francis on board as president, Johnson made him walk the plank eight months later. “In the past six months,” notes Advertising Age, “Sissie Twiggs, VP-media for digital marketing; Lisa DeStefano-Orebaugh, VP-strategic marketing; and Greg Clark, VP-creative marketing, have [also] left the retailer.”
And, according to Ad Age reports, their ad agency may be next to go.
From the fire to the frying pan
Penney announced it was replacing Johnson with Myron E. (“Mike”) Ullman, the CEO Johnson replaced. “Ullman’s return is intriguing,” Mahoney writes, “since the retailer languished and struggled under his leadership” – to the extent that Johnson was brought in to turn things around.
But the main influence in reshaping JCP’s marketing is former Coca-Cola merketer Sergio Zyman, who played a large role in putting JCPenny into its present disastrous shape.
Zyman’s main claim to fame – or infamy, perhaps – was his role in what Ad Age calls “one of the biggest marketing blunders in history: New Coke.”
For much of his tenure at JCPenney, Zyman was working behind the scenes with Johnson. He was credited, if that’s the word, for Penney’s “Yours Truly” Oscars telecast campaign that left millions of American movie fans scratching their heads.
One of the first items on Zyman’s to-do list is replacing the agency that created and produced it for him.
Tom Suiter, from The Bureau, said “The ‘Yours Truly’ work we did for the Oscars was done on a project basis,” with the contract expiring in May. “We recently made a mutual decision with Sergio Zyman that The Bureau doesn’t offer the type of creative and services he needs going forward,” he added.
Neither, according to Ad Age, do other small agencies – including Mother and Peterson Milla Hooks – that Johnson worked with. “Execs said that Mr. Zyman is keen to work with a big, integrated agency that can serve as a one-stop shop,” Natalie Zmuda reported April 10. “During his tenure at Coca-Cola, which he left 15 years ago,” and where he brought forth his historic New Coke blunder, “Mr. Zyman had relationships with a number of shops, including McCann Erickson, Leo Brunett, BBH, Wieden & Kennedy and Berlin Cameron.”
Re-education doesn’t sell
Perhaps the biggest lesson to be learned from Johnson’s tenure is that it’s easier – and much less costly – to work to change consumers’ brand and product preferences than to try and re-educate them into changing lifelong shopping patterns.
“Johnson misunderstood the role of advertising in retail,” Ellis Verdi, president of ad agency DeVito/Verdi and a former National Retail Federation board member, told Marketing Daily.
He tried to use advertising to change a behavior that had been ingrained for years. You can’t re-educate consumers that way. Consumers control their perception of value, not retailers. They need to feel like they are getting a deal, and they’re not just going to take the store’s word for it.
Or, as we put it about a year before JCPenney hired Johnson,
Re-educating masses of people is a major expense and a major effort (just ask the Red Guard, who tried it in the People’s Republic of China) that no advertiser can either afford or accomplish. When the audience isn’t buying your product, the problem is the product, not the audience. So fix the former, because there’s no way you can afford to, or will succeed at, changing the latter.
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